Industry data projects that by 2010, nearly half of all CPA firms will, to some degree, be providers of financial services to affluent clients.This represents a dramatic leap from the situation today, when only 19.4 percent of CPA firms are currently providing financial services to this client base. The opportunity is there, but to tap into it, firms must expand their capabilities and services, which increasingly involves building alliances with insurance and benefit companies.

A quick snapshot of the services vying for share of mind of the affluent market is instructive. Full-service brokers (at 43 percent) represent the lion's share of providers servicing the affluent. They are followed by certified financial planners (18 percent); registered investment advisory firms, or RIAs (8.6 percent); investment managers (7 percent); and another 23.4 percent are represented by other service areas. To this mix, we need to add mutual fund representatives, banks, lawyers, insurance agents, and online advisory and brokerage services.

In short, a large field is competing for a piece of a relatively small - but lucrative - market.

Recognizing the competitive marketplace, our firm has made a concerted effort to ally itself with CPA firms.


Quite simply, we recognize that CPAs are perceived by the affluent market as their most trusted advisors, who enjoy the best relationships with them. From a practical standpoint, firms like ours have always been open to fee sharing, a relationship seldom embraced by money managers or law firms. CPAs are our best partners.

We began our alliance with the accounting profession in 2001 with a beta test with a large regional firm. Buoyed by its success, in 2003, we rolled out our alliance with a partner with 10 offices - which eventually grew to 20 offices by 2005 - and later that same year, started a second alliance with the Chicago office of a national accounting firm. The national firm has opened a second Chicago office, while a third beta test with a regional firm went live in 2006.


While we have found that alliances produce the best results, there are other options. A CPA firm can certainly hire and build a division, but recruiting is difficult, the process is slow, and there probably are not any internal systems in place.

A second option would be to buy an insurance or benefits agency, but it's an expensive market, there are liability issues to consider, and quite frankly, most producers are uncomfortable working for a CPA firm.

Consequently, what's left are two better options. The first, depending on the depth of the customer base, is to enter into a long-term alliance. The advantage is that it gives the CPA firm more control, it gives producers the time they need to learn the culture so that client relationships are seamless, and the alliance partner will be committed, sharing the same goals.

It allows the CPA firm to greatly expand its services to advanced estate planning, more sophisticated finance strategies and wealth transfer options. Best of all, it's low-cost and can be started quickly. It's really a win-win for both parties.

A fourth option is to build a more informal alliance, whereby the insurance or benefits firm can work with the CPA firm on a case-by-case basis, bringing in specialists when needed. However, this can prove confusing to the firm and to clients, and the commitment may waver based on the level of business.


The bottom line is that alliances allow CPA firms to expand their service to a level that can meet the needs of almost any client.

Be client-focused. After all, clients are really looking for advice, and high-wealth clients prefer one-stop shopping, where they can have face time with the right advisor who can bring solutions to the table. They also want to minimize risks, so alliance partners can introduce institutional priced products, and, more important, offer recognizable solutions showcasing products and carriers that will be familiar to the client, creating an atmosphere of trust and confidence.


Like any relationship, alliances require some effort to work. It's easier with some partners than with others, but there are important factors to consider.

* No. 1: Communication. The best way to get an alliance off on the right foot is to develop an internal communications strategy. This will include the creation of a sales strategy, setting management reporting systems, sharing success stories, education, and installing in-house champions who can nurture the relationship. Our advice is for the accounting firm to train the firm to recognize opportunities, not to concentrate totally on sales.

* No. 2: Compensation. It's no surprise that disagreements over money are bound to arise. The key is to develop a budget, since the alliance must have revenue and expense allocation of the firm's annual budget. The revenue budget must be allocated among all the partners and managers. Make sure that a monthly variance is communicated to all the partners.

* No. 3: Trust: There must be a two-way trust, built on shared objectives. The firm must be ready to make a significant investment and time commitment to the set-up and design of the insurance alliance.

On the other hand, the insurance agent must be willing to invest a significant amount of time in the training of the partner/manager group. Both parties must recognize that an alliance is "big business," designed to build value for the firm.

* No. 4: Compliance. Like any business relationship, there are compliance issues to be considered, and these should be handled by an expert. Issues include licensing, disclosures, and whether or not a firm can pay partners a commission.

Howard E. Sharfman is president of Schwartz Benefit Services Inc., an insurance and benefit consulting firm that concentrates on wealth transfer strategies, and consults on business succession planning and employee and executive benefit programs.

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