Looking for the Wealth Magnets of the future
Succession issues, the inadequate pipeline of next-generation planners entering the field, and the rising pressure to develop staff are top of mind for many of this year’s Wealth Magnets, the top CPA financial planners as measured by assets under management — though many are already working on solutions to these problems.
In the 2018 Wealth Magnets survey, the only issue they mentioned with the same frequency was the need to puzzle out the implications of the Tax Cuts and Jobs Act for their clients. Of course, they’re also struggling with the perennial issues that face planners — dealing with uncertain markets, managing client expectations and keeping them on track, maintaining the proper level of independence and objectivity, and so on — but the larger issue of who will staff their engagements, support their clients, and eventually succeed them at their firms looms largest over the profession.
To see the full list of the 2018 Top 150 CPA Firms by AUM, click here (registration required).
The next generation of planners
The war for talent has been an issue in the larger accounting profession for several years — and fortunately, firms have been formulating solutions to it.
At Southfield, Michigan-based Plante Moran Financial Advisors, for instance, John Lesser reported, “We are working with local universities to develop a wealth management concentration that prepares graduating students to sit for the CFP exam immediately upon graduation, and we continue to focus on the training and development of our internal staff to facilitate our internal succession plan process.”
Other firms, such as Redwood City, California-based Wipfli Financial Advisors (which recently changed its name from Hewins Financial), add an internal approach. “We organically address our succession needs by setting up a team-based client experience structure,” explained the firm’s Gretchen Halpin. “Young advisors are connected to and mentored by senior financial advisors; their participation in the client experience builds confidence in client-facing situations, but more importantly it builds a connection and relationship to the firm outside the primary advisory relationship.”
The impact of tax reform
As accountants, the Wealth Magnets are particularly attuned to the tax issues related to financial planning — and the tax reform enacted last December has certainly caught their attention.
“The passing of the TCJA has created many opportunities but also many challenges for accumulators and retirees alike, and without proper advice and strategies, clients could be in for a big shock next April,” said Davin Carey, of Oxnard, California’s Carey & Hanna. “We are proactively running simulations of client ‘current’ versus ‘optimal’ scenarios, helping clients understand what deductions they’ve lost but also what opportunities are out there to gain from.”
Tax reform is an area where CPAs have something of an advantage over other financial advisors, and in some cases that advantage is literally built in to the firm. For instance, according to William Sneed, Asheville, N.C.-based DHG Wealth Advisors made a point of collaborating with the tax experts at the Top 100 Firm it’s affiliated with: “To address planning for tax reform law changes, our financial planners work closely with tax professionals at Dixon Hughes Goodman LLP to provide ongoing training, bringing the synergies of all our finance professionals together to help our clients,” he explained.
Clients and the market
As tax preparers noted that this filing season brought a flood of questions about the TCJA, changes in the market have highlighted the need to keep clients on track, while also finding new investment approaches.
“Volatility has returned after years of not having any; valuations in securities have also increased while volatility has been very low,” noted Peter Traphagen of Traphagen Investment Advisors, in Oradell, N.J. “Investors need to be properly allocated for the return to more normalized returns so that they don’t make the wrong financial decisions that will affect long-term objectives.” His firm is exploring a range of alternative asset classes to provide client diversification.
John Darrah of Honkamp Krueger Financial Services in Dubuque, Iowa, noted that increased volatility in the markets called for increased client communication, and added that relatively low interest rates pose challenges for retirees. “We look to diversify income investments beyond the traditional treasury and corporate markets to achieve higher income,” he explained.
Markets aren’t the only things clients need to be educated about. “Fee compression is an important issue facing financial planners today. Clients may not understand how to save and invest, but they will remember an online article they have read telling them that they should pay the lowest possible fee,” said Andrew Paoni of Sikich, in Naperville, Illinois. “We are actively trying to help the client to understand how fees can equate to value. ... If the client pays us a fee but we can in turn help them pay down debt, create better savings habits, or retire successfully, or achieve another goal, they can see the value in it.”
Being a fiduciary
A key component of the value Paoni is describing lies in putting the clients’ interests first — an issue that has been much discussed recently, with the proposal and later delay of the new Fiduciary Rule.
“I believe one of the most important issues in our industry is truly defining who’s a fiduciary and how best to define a client’s best interest,” said Nick Clay of Johnson City, Tennessee-based BCS Wealth Management. “We are working hard to stay ahead of the curve regardless of law changes. We are always on our client’s team and looking for ways to continue to serve them that have their best interest at heart.”
“I simply don’t understand how so many advisors and planners continue to operate in a non-fiduciary capacity or, even worse, as a fiduciary in one instance and as a non-fiduciary or broker in another,” said John Marchisotta of Pivotal Planning Group, in Jericho, N.Y. “I am often asked how we plan to deal with the fiduciary rule. My answer is always very simple: ‘We are a fee-only fiduciary at all times; you should try it sometime.’”