Independent tax advisors who carefully build their businesses by earning the trust of their clients over the course of time might consider opportunities to expand into similar new channels of business. Not surprisingly, wealth management frequently emerges as a logical area for potential business expansion, in no small part because successful independent tax advisors already possess a detailed view of their clients' financial matters. Moreover, there is satisfaction derived from helping clients holistically plan for their future.
While there is opportunity for independent tax advisors to add wealth management capabilities to their client service offerings, it's a step that should be approached carefully and methodically. The commitment involved with heading in this direction requires an additional set of professional skills and the ability to manage new layers of regulatory oversight.
All too often, the most successful independent tax advisors with limited financial services experience are “left-brain-oriented” individuals. They are meticulous as well as analytical, and they sometimes see situations in black and white.
Although tax advisors similarly operate in an industry with rigorous ethical demands, financial advisors deal with more “gray” areas. Unlike tax and accounting, there isn’t one way to construct a portfolio or plan for possibilities in a world filled with investment uncertainties. As such, being an effective financial advisor can be as much of an art as it is a science.
Additionally, helping an independent tax advisor become a good independent financial advisor often means helping the advisor translate complexities for their clients into simple concepts, without getting lost in the weeds.
To overcome these types of challenges and to set tax advisors on the path to becoming full-service independent financial advisors, I offer several recommendations:
1. Find the right firm with which to partner. This is your first important decision. The broker-dealer/registered investment advisor plays several roles in supporting your practice as an independent financial advisor, and is a key ally in facilitating your transition into the wealth management space. Important issues to be aware of are:
- Investment solutions. It is the broker-dealer/RIA who will provide an array of sound investment products that can match your clients’ needs and help meet their goals. These solutions do not have to be extensive or esoteric. I have found that tax advisors – who are generally more inclined to take a conservative approach – often prefer recommending products that are simple and straightforward. A good partner firm will offer the right mix of commission and fee-based solutions for you and your client, and help you effectively communicate to the client how these products meet their needs.
- Coaching and support. Beyond helping navigate a wide array of investment solutions, the broker-dealer will be an essential partner in providing ongoing educational opportunities and business consulting for your wealth management business. This includes support in the areas of business development, operational efficiency, human capital, business management and succession planning. Seek out a partner firm that has an existing commitment to serving independent financial advisors who come from a tax advisory background, and that understands their particular business needs.
- Values and culture. Most importantly, be sure to choose a partner that fits well with your values and culture. After all, when you begin your journey as a financial advisor, you put your reputation on the line, and maybe that of the tax practice you already built. It is important to choose a broker-dealer with core values that will help you enhance your reputation.
2. Communicate with your client base and segment them accordingly. Not all of your clients will be interested in your financial services offerings. However, all of them should know about the full range of services you offer.
With that said, the first step is to communicate to your clients about your capabilities in a clear and concise way. I have met with large groups of advisors offering tax and financial guidance whose clients are not familiar with the financial services they offer. Keeping the full breadth of services you offer a secret will not help you build your practice.
On the other hand, only a portion of your tax advisory clients will be interested in financial planning or wealth management. Carefully analyze your client base and segment it in a way that allows you to actively market your services to those who will be receptive to your outreach.
3. Acquire good administrative support. The additional paperwork and required record-keeping that comes with being a financial advisor can drain your time, unless you have the appropriate human capital in place. Whether your assistant is licensed or not, having adequate administrative support is critical to running your business efficiently and keeping you focused on client-facing activities As such, hiring administrative support is almost always a worthwhile investment in the future of your wealth management business.
4. Create a written business plan. Lastly, that which gets written gets done. A written business plan is essential to maximizing your potential. A good partner firm can help you create a business plan and point you in the right direction, step by step. Articulate your goals for the next three to five years, define all the services you will offer, and outline the resources you will need. This will help you actively bring this aspect of your business into realization.
The process of expanding into wealth management requires a lot of work for the independent tax advisor, but the benefits are well worth the effort.
Given the increasing number of retiring financial advisors, there is a need for skilled practitioners with a passion to help people achieve their financial objectives and realize their dreams. I believe independent tax advisors represent a well-equipped pool of qualified talent.
In addition, clients will enjoy the convenience and comfort of working with a tax advisor who can take the knowledge of their finances to the next level of holistic planning and wealth management advice. For them, the benefits are very clear.
Gregg Ruvoli is president of Cetera Financial Specialists LLC, an independent broker-dealer with
