It has been a natural progression for CPAs to gradually evolve their practices to include both tax and financial planning."There's a natural link between tax prep and financial planning," explained Stephen Parezo, media manager for multidisciplinary practice firm Fiducial. "In doing a client's taxes, you get to see their whole financial picture. You can see if they're making contributions to retirement plans, and get to see what kind of stocks and other investments they have."

Mark Merenda, president of Naples, Fla.-based Smart Marketing, agreed. "The people in other financial disciplines really envy CPAs," he said. "Financial planners, lawyers and insurance professionals love the idea that someone has to come see them once a year. In a relationship business like financial services, the biggest obstacle is the first one - 'I don't know you.' So when you have already established trust, it's a wonderful first step to becoming their full-time advisor on all financial matters. It gives CPAs a real competitive advantage."

Merenda said that he offers his clients tips based on his observation of human motivation. "The greatest single human motivator is fear of loss, and the second - a distant second - is greed," he said. "Some years ago, a utilities company sent half their customers notices that said they could save 20 percent a month by insulating their home. They sent notices to the other half that said they were losing 20 percent a month by not insulating. The 'losing' notice got four times the response that the 'saving' notice had."

Brea, Calif.-based CPA Rod Clarida has seen his own practice evolve from a tax and accounting service firm to a full-fledged financial services provider. "It's a natural for CPAs, because we've already got an intact base of clients to start with - we don't have to make cold calls. They already know us because we see them at least once every year, and in some cases multiple times."

"A second link is that we already know a lot about each client's investments and financials based on doing their taxes. We're already doing tax planning for them anyway, so the next step is getting a little more information for investment planning, and the big step is they already trust us," he said. "Every client that comes in here has put their faith and trust in me for years, and knows I'm not doing something for my own best interest. But if I put on a seminar or cold call and make recommendations, they think I just want the commission."


There are a number of axioms that the financial planning community follows that Clarida believes operate against the best interests of the client, and which accountants don't need to follow. "They tell you that you have to 'close the deal,' if not immediately, they say to set up another meeting on your calendar. We don't feel the pressure to do that because we know they'll be back. In some cases it might take two or three years, but I don't rush them and they appreciate it."

He explained that depth is another issue. "We can take the small client that the financial professional would consider a waste of time. We might not make much setting up an IRA or 401(k), but when the 401(k) matures, the client will bring it back to me to invest. I've gotten million-dollar accounts from cases where the father dies and the mother didn't know what to do with the money. The children recommend me because they like what I've done for them."

Another myth of financial pros, according to Clarida, is that you have to get "all" of their money. "I say just give me some of it and let me show you what I can do. If I can't do better than their present advisor, then I don't deserve to handle it. It gets back to the whole issue of trust."

Dan Meehan, a tax partner at Northeast regional firm J.H. Cohn, sees clients depending more and more on CPAs for overall financial advice. "It's an evolving situation, and a lot of CPAs have decided to get further credentials in this area so they can provide top-level professional advice and facilitate some of the execution of clients' financial plans."

Meehan, however, said that Cohn doesn't do that. "We've developed relationships with financial planning firms, and those firms in turn recommend clients to us."

Meehan said that for firms that do engage in financial planning, it makes sense because at least once a year, you will receive the opportunity to evaluate all sources of income. "It started a while back when people turned to CPAs for advice, say, on investing in tax-free municipal bonds. It became obvious to the CPA tax preparer the benefits of a portfolio that would minimize the tax burden. The CPA is in a unique position because of his ability to meet with the client and discuss sources of income and ways to get the most tax-efficient return."


Richmond, Va.-based Peoples Income Tax chief executive Chuck McCabe intends to concentrate less on bank products and refund anticipation loans, and increase his focus on the middle- to upper-end markets, with greater emphasis on financial planning. "We don't see the lower end as a long-term growth area," he said.

The company has subsequently become a mortgage broker and an insurance agency, and is partnering with other companies. "A sole practitioner can become an insurance agent and a mortgage broker, but a larger company or a C corporation like ours needs to outsource to make it work," McCabe said.

Orlando, Fla.-based CPA Allan Boress covers a broad spectrum of clients. "I market myself as 'Allan Boress CPA,' but I also have a Liberty Tax Service franchise," he said. "My Liberty Tax Service covers the low end, of course, but it also pulls in some sophisticated accounts. I was shocked, because if the customer walked into a typical tax service, the preparer would have no idea what to do."

Boress said that he works in conjunction with a financial planner. "Most financial planners are not business people -they're technicians, just like accountants," he said. "Accountants like doing accounting and if the business grows, it happens by accident. Financial planners want to do financial planning, and having a relationship with a CPA firm allows them to use tax work as a platform to do financial planning."

For Matawan, N.J.-based CPA Salim Omar, financial planning is a blend of what he's already doing for his clients: "I prepare their returns and answer questions. Financial planning just takes it a step further." Omar is a registered representative, a registered investment advisor, and an independent agent for a number of insurance companies. About 40 percent of his tax clients have become financial planning clients.

"Once you have the relationship with a client and you're their trusted advisor, the CPA is in the right place to talk about financial planning," said Omar. "Tax and accounting are full-time operations, and so is financial planning. The challenge is to do them both. If one person tries to do everything, things start falling through the cracks, so we're getting another financial planner."

That type of client relationship leads to a natural progression into estate and gift planning, said Meehan of J.H. Cohn: "It helps us round out the overall financial picture for the client. A lot of people are reluctant to face the need for estate planning, but the reality is, the sooner it is discussed and planned for, the more tax savings can be accomplished and the easier it is to implement."

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