As the economy slowly inches back toward a recovery of sorts, several of the nation's top broker-dealers and financial services firms are revving their recruiting engines and driving them toward the CPA market in hopes of increasing their partnerships with accounting firms and practitioners.
Whether their respective programs entail training CPAs as advisors, or providing financial planning expertise to clients of accounting firms, broker-dealers and wealth management concerns are vying for increased penetration into the CPA and tax professional arena.
Conversely, practitioners looking to add wealth management to their roster of client services face a thorough due diligence process to sort through myriad offerings of financial services companies and decide which one best aligns with their firm's culture and strategy. Those offering financial planning services say that the criteria should include products and services, the compensation structure, training, technology and back-office support.
"Our recruiting efforts never really slowed down that much," revealed Roger Ochs, president of Dallas-based broker-dealer H.D. Vest, which has a network of 5,200 advisors from the accounting and tax community. "We continue to make investments and tell our story to CPAs and other tax professionals."
Ochs said that Vest plans to bring on 450 advisors this year, and a further 650 in 2011, with the "sweet spot" being small CPA firms and sole practitioners.
"With 77 million Baby Boomers retiring over the next few years, clients of CPAs and tax people are looking for advice. CPAs have been offering financial advice for years, they just haven't gotten paid for it. But you have to remember that the advisor business has a high attrition rate and CPAs already have a full-time job."
Ochs said that Vest offers CPA advisors a number of training programs via its Financial Institute, as well as offering distance learning. "I think what you're seeing in the wirehouse business is that many of those firms are trying to go upmarket to the high-net-worth individuals," he said. "That leaves a void for the people with between $100,000 and $1 million to invest, and not a lot of people are chasing them, so often they don't know where to go. I think that's where we fill an important role."
Vest's cross-town competitor, 1st Global, which currently supports a network of between 1,110-1,200 CPA advisors, targets firms with between four and 10 partners.
"We're looking at firms that may be the No. 2 or 3 independent firm in their community," said Lynne Mabry, 1st Global's executive vice president. "We're always in a recruitment mode; we try to own the top-of-mind in the CPA market."
Mabry explained that the decision process among CPAs to add financial planning may have slowed down for a year during the economic crisis, but as a result, there's been pent-up demand, with clients asking for help and CPA firms looking at mining different streams of income.
"We derive our marketing plan on the quality of the client base of firms. We look at it and say, 'You should be doing x amount of financial planning over the next three-to-five years,'" she said. "We're not in this business to affiliate with firms that want to dabble in it. We're here to build an enterprise-level practice and holistic wealth management - not pick up that extra IRA rollover. We like to say we turn numbers people into 'people people,' those that can transition tax clients into wealth management clients."
Michael Abramowicz, vice president of advisor recruiting at Illinois-based Genworth Financial, said that the concern has set a recruiting goal of 300 planners in 2011. "When the economy was down, the industry got a little banged up, but there's definitely a renewed interest in broker-dealers. There's two ways a broker-dealer can grow - either increase productivity with your existing partners or add to the advisor count. We currently have 2,000 advisors, 85 percent of whom are performing tax and accounting work. Of that number about 75 percent are CPAs."
Abramowicz said that new advisors are invited to the home office for an overview and a practice assessment of what they want and their interests - whether a fee-based business or selling insurance products. Genworth then compiles a six-month development track for them.
"If someone, for example, wanted to grow their practice 35 percent, that's automatically tracked and they receive reports on their progress. We give them personal service. Our business development teams are spread out all over the country. We're not working in their practice, we're working on their practice."
Rich Engebretson, vice president of the WealthStar Alliance unit of insurance conglomerate Aviva USA, explained that his program takes and aligns a CPA firm with an estate-planning professional. Or the CPA can opt for the WealthStar platform to perform wealth management services themselves as a registered investment advisor. "Our goal last year was 50 CPA firms, and we cut it off at 50. We'll have another 65 to 70 before the end of this year," he said.
Engebretson, who founded broker-dealer Trusted Advisors before selling it to the MONY Group, was brought aboard at Aviva to develop the WealthStar program. The company currently deploys its in-house software program to analyze client tax data to mine wealth management opportunities. "If you have tax clients who do pensions or IRA distributions of $40,000 or more, the CPA should be looking at those clients from a wealth management perspective," he said. "We're not a broker-dealer. In essence, we make the CPA the quarterback bringing in the expertise from us."
"We're building the [CPA firm] program and we're at the point where we have to turn people down. We're very selective - we don't need it to grow to more than 300 firms. It's more important to work with the right firms," he added.
New York-based Oppenheimer has a network of some 1,600 financial advisors, but just 30 work with CPA firms, according to managing director Michael Parness.
"We take the time to understand their business and what they do," Parness explained. Like WealthStar, Oppenheimer pairs a CPA firm with a financial advisor offering a turnkey wealth management program.
Currently the company's sweet spot are firms that bill between $2 million and $25 million.
"We want to talk with forward-looking CPAs and CPA firms. Oppenheimer has top-down support from the CEO and offers the firms educators from the senior ranks. We have a professional development group and talk to [the firms] about training them on how to communicate with their clients," Parness said. "We don't favor certain financial products, so we create a level playing field in that respect. We provide all the reports and marketing materials."
Parness said that for the program, Oppenheimer looks for seasoned advisors with anywhere from 10 to 15 years experience and at least five years with Oppenheimer: "Our reputation is an extension of the CPA firm. The last thing we want to hear if something doesn't work out is one of our client asking us, "'Hey, what were you thinking?'"
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