[IMGCAP(1)]When it comes to creating a strong financial planning practice, unfortunately many CPA firms have failed. Allow me to define "failed" before you send the militia out to get me. I say "failed" in the sense that many CPA firms have made a half-hearted effort at building a PFP practice -- something that felt like moonlighting to clients, staff and partners alike.

The firm likely did not have a champion and they tried to digest every part of the business -- from asset management through marketing and communications, and they choked from the burden that it created. Even those who chose a partner failed for a number of reasons. Some may be due to cultural differences with their choice of partner, or simply from keeping their PFP services as the best-kept secret in town. Clients, staff and the business community at large often are not aware of the financial planning services offered by select CPA firms -- a formula that is likely destined for failure.

 

SHOULD YOU MAKE THE EFFORT?

With the growth in core accounting and tax services and the high pricing structure now prevalent amongst the larger firms, smaller and midsized growth-minded firms have been able to grow their core business of accounting and taxation materially. The good news is that these firms have been able to stay ahead or maintain their core revenue stream, making the PFP department a distraction for many smaller firms that are not committed to doing it correctly.

Creating a strong PFP practice, on the other hand, is something that is not easy. But for those who have done it, the rewards of deepening client relationships include creating additional revenue for the firm and the satisfaction of helping clients at a higher level of service.

Strong is defined in many ways. For purposes of this discussion, I'd like to define strong as a PFP practice that has a robust service offering and a corresponding service model, a service model that goes materially deeper, with better communications than the traditional PFP service provider. In the end, it is the clients who will define whether your firm's PFP department is strong or not.

Another part of being strong is being strong financially. A PFP department whose revenues lag those generated from traditional taxation or A&A work is generally not strong. A PFP division should rival the tax department in terms of revenues within a few years. After that, a well-run PFP practice should begin to outgrow traditional work from both a revenue perspective and as a client attraction tool. Every CPA firm offers accounting and taxes, yet very few CPA firms have a strong, visibly sustainable PFP practice.

 

LOOKING FOR MODELS

Now that we know the difference between strong and weak, let's talk about how to get there if you choose to do so, or how to evaluate another PFP practice that you may want to introduce to your clients.

This discussion is best started by helping you to evaluate other firms, and understanding what makes them successful. Whether you intend to introduce clients to them, partner with them or adopt their service model, starting with the end in mind is a good thing from a planning perspective.

A strong PFP practice will have several important characteristics. The strong firms have a leader focused on PFP who is capable of building a strong business. The strong firm will also have subject matter expertise, a good marketing plan, have great client relationship skills, perhaps a niche market or two, a qualified staff and a solid succession plan. The successful firm also has a business plan for themselves with a deliberate course of action -- in other words, they are willing to practice what they preach.

As you are evaluating firms that you may use for your clients in need of service, consider these aforementioned factors and ask specific questions about these matters.

For the CPA firm looking to build a strong PFP practice, the playbook is not very different in terms of the services and methodology needed to build a strong PFP business without a CPA firm. The unique distinction that most CPA firms have is a stocked pond of clients who may be in need of PFP services. Of course, that is not true for all firms, and the main impediment for some firms may be that they do not have the right clients.

When we talk about a strong leader, we are looking for someone who has led before with success and one who will make the time to lead. In the CPA world, the leader must be dedicated to PFP and not dragged into traditional billable hours or other roles within the firm that will detract from this very important role. This may require two steps backward before the future brightens up. The firm may have to hire someone to replace the billable hour gap for the partner-in-charge of PFP, and that partner-in-charge is not going to reach their old revenue stream right out of the gate. For sole practices or very small offices, your choice is a bit murkier. You can't stop the traditional work, and must find a way to reduce your traditional work load to free up time to lead a strong PFP effort. This is very difficult to do without a strong partner and good coaching to support your efforts to grow the PFP side.

The topic of subject matter expertise has always been a sticky one for CPAs. The CPA is trained to be the subject matter expert, and with PFP that is far more difficult. The interdisciplinary nature of PFP work and the vast amount of subject matter expertise needed requires that the CPA look at their role a bit differently than in a tax matter. As a strong PFP leader, your role with respect to subject matter expertise starts with your issue-recognition skills and then your guidance with respect to the integration of outside or inside subject matter experts who may be needed in any given client situation. Those who try to master the various subject matters can spend their lives studying and reading, rather than helping clients.

A good marketing plan is imperative. Most firms, even those with arguably successful PFP departments, frequently suffer in this area. Their PFP department is often something that most clients or centers of influence don't recognize as a core offering. Even the sound of a marketing plan freaks out some CPAs. They'll be the first to tell you that they didn't become a CPA or PFP leader to become a salesperson. I agree, but good marketing is not selling. It is simply letting your ideal clients, referral sources and your community at large know what you can do and who would benefit from a relationship with your firm.

Good client relationship skills are more than being available for your client when she has a question. Good relationship skills start with understanding what is important to your client from a non-financial perspective and helping them to pro-actively anticipate needs and issues that may respond to changing circumstances. A frequent reason cited from clients changing advisors is a lack of communication. A strong PFP business will have a communications plan so that your clients never feel ignored. This includes timely notices, a regular newsletter dominated by personal, non-technical interesting stuff about you and your team, regular calls, and several meetings per year. This is time-consuming, so client selection is of paramount importance.

Few CPA or PFP firms truly have a niche focus. For many, this lack of focus hasn't hampered growth. Also true, however, is the fact that as you move upmarket to serve wealthier PFP clients, having expertise in a niche can help distinguish you from many other PFP providers who serve anyone with more than $x million. Your niche market should come from within from an enterprise perspective. If your firm has more than a few "A" clients in a specific industry, perhaps you can invest more time in that marketplace and learn more about the industry to better serve your clients.

 

THE RIGHT STAFF

Any strong service business needs qualified staff. Under-leveraging the firm's leader is another error many PFP firms make. As the CPA financial planner may need to hire someone to replace the traditional work void, the strong PFP business needs staff to leverage the talents inherent in CPA and PFP leadership.

Right from the start, the leader needs a solid, full-time assistant. This person will prevent the partner from performing $20-an-hour work and be able to execute the tactics needed for marketing, communicating and servicing certain client needs. Beyond this assistant, the strong practice has other professionals. First may be a young planner who is credentialed or working on it. Beyond that, depending on your clients, the strong firm will begin to build an ensemble of professionals from different disciplines for serving at a higher level to wealthier clients. This ensemble can come from your payroll or be a loose ensemble of subject matter professionals with whom you work well.

Make sure that someone is ultimately accountable for all moving parts of the plan. In my view that is the job of the PFP practitioner -- making sure that every moving part and professional is working properly in accordance with the clients' needs today and as situations change.

In summary, a strong PFP practice must practice what it preaches. The PFP practice that has a business plan, complete with strategy, tactics and accountability, along with a dedicated staff, instills clarity and confidence in everyone from staff to clients. The business plan should start as we did this article, with the end in mind. Then your plan should document the tactics that you intend to execute in the most crucial areas. It should articulate the services offered, and the service model an ideal client can expect. It should have a marketing and communication plan. And your business plan should have financial forecasts and projections to estimate the investment it will take to get out of the gate or make staffing decisions for a mature practice.

The strong business plan will include clear language and financing for a succession plan for the most key individuals. That succession may be called upon unexpectedly in the case of premature death or disability. But it also needs to function in terms of a planned retirement date or career change by a key person. Communicating to clients that the firm has a succession strategy in case their planner does not wake up for breakfast is a strong message. You may not think they care, but they do. It also tells them that you have conviction in your advice and heed it yourself.

John P. Napolitano, CFP, CPA, is CEO of U.S. Wealth Management in Braintree, Mass. Reach him at (781) 849-9200.

 

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