The CPA community is diverse when it comes to how practices manage themselves and
the services they offer clients. When it comes to personal financial planning, the diversity is sometimes as unique from practice to practice as ice cream from escargot.
Some firms do no financial planning, many dabble and help clients only if they come begging, and others are pro-active financial professionals and understand that there may not be a more valuable service that they can possibly offer to their clients. The resources that each of these needs are different.
When I think of resources for the financial planner, it makes me think of the resources that would create leverage, scale and profitability for a wealth management business. But after my 30-plus years of hanging around CPA financial planners, I've learned that many perceive their needs for resources as knowledge-based resources. Resources that demand attention include research on tax matters or mutual funds, or cool software that can enhance your ability to get the job done more quickly and accurately.
Seasoned financial planners' knowledge is not the only resource needed - it is impossible to know everything that there is to know about financial planning. I believe that it is more important to know where to get the knowledge needed on a particular issue when you need it. Sure, knowledge is important, but more knowledge isn't what will make the difference between a great PFP business and a practice that also does some financial planning. Client engagement and assisting with getting their entire house in financial order is the only way to foster success.
THE ROLE OF AN SME
Keep in mind that the financial planner role is different from the CPA role. As the CPA, you are expected to be the subject matter expert. As the financial planner, you are expected to be the personal financial head coach or orchestra leader. As such, you should be accountable to see that any allied professional on the client's team is competent and doing their jobs well in pursuit of helping your client achieve their goals and objectives.
If you do not offer financial planning, how do you handle client requests for advice? Do you give them three names, and tell them you are indifferent as to which firm they choose? If yes, then you may as well ignore the question. In my discussions with clients, they seem to dislike the three-name contest and are frequently not interested in having three meetings that frequently turn out to be a beauty contest. They asked you for a reason. They trust your judgment and want your professional opinion regarding the help that they want. If you are a naysayer to PFP services, you should get to know some trusted local advisors that you can refer clients to with confidence, and develop a pre-established plan of communications with the advisor so that you are kept in the loop.
Moving on to the dabblers, the resources you need to graduate from dabbling to great success in financial planning are readily available and waiting for your use.
Let me define dabbling: The dabbler is one who occasionally engages a client on PFP matters, and almost never pro-actively reaches out to clients who may benefit from that service. The problem with dabbling in PFP is the same as it would be for dabbling with Form 990s for not-for-profit tax compliance. You can't possibly be any good at it unless you experience many of the challenges that the practice area evokes. The dabbler does not promote PFP, and does not pro-actively identify issues that are clearly visible in the course of accounting and tax preparation.
A good example of that is the wealthy client who appears to own all of their investment or bank accounts in joint name with a spouse, or anyone else for that matter. This is evidence that a proper estate plan may not be in place, because if there were, it is likely that the client would be using trusts or some form of protected entity. This is even more meaningful in the event of rental real estate where there may be more than one owner in property not titled to a protected entity like an LLC or asset protection trust. All CPAs should recognize this in the course of tax prep, yet dabblers just go on their merry way without addressing these issues for clients.
CHOOSING THE RIGHT APPROACH
The dabbler needs to take one of two tracks. First may be to get out of delivering planning services entirely. It is dangerous to dabble in this area. It is so complicated and interrelated that it requires dedication, focus and knowledge. The second choice is to take it more seriously. To take it more seriously, there are many starting points.
One approach for the hands-on control freaks out there is to carve out time to get it done. This means that you'll be working more, eliminating other client work, and delegating or hiring to do the traditional work that you may have to leave on the table to devote the time to PFP matters.
Your most valuable resource will be tied to marketing and client diagnostics. You need to know who among your clients could benefit from PFP services. Then you need to pro-actively reach out to them about issues that you may have recognized from a 1040 review and get them to come in for a first PFP meeting. The more successful firms have engaged administrative assistants to set these appointments, further leveraging partner time. Bar none, your most valuable PFP resource is your existing client list. They already know you, you already know them, and presumably there is a trust factor in place that may be hard to replicate with a new prospect.
START WITH CRM
To harvest this efficiently, a solid customer relationship management system is a mandatory resource. Your CRM system could be customized to be the backbone of your planning division. Having a system that consolidates financial data in one place that reminds you to call clients or to set meetings will differentiate you from the average financial planner. After all, the No. 1 complaint of dissatisfied clients is that their advisor reaches out to them too rarely.
A good CRM system will also manage your marketing and communications plan. Are you chuckling yet? I haven't seen many CPA firms that even have a marketing and communications plan. Yet for those that do, their clients know about the firm's planning capabilities and that the firm wants to do that work for them. Those without a marketing and communications plan hear this line from clients almost daily: "I didn't know that you could do that for me." Don't let that happen to you.
Once clients know that you want to help with planning matters, you should focus on your knowledge resources. The financial planner has a unique advantage over someone entering the financial planning profession from a financial sales career or a completely unrelated profession. From the accounting degree to the rigors of the CPA Exam, plus your time in the trenches ticking and tying or doing tax returns, you've built one heck of a technical base. From there, however, it is not necessary to master every topic inside the financial planning process as you would your tax software.
In each area of the planning process, from risk management and insurance through estate planning, there are professionals who devote their entire professional life to these topics. What makes you think that you could ever be as competent as one who devotes all of their time to a particular subject matter? It is best to surround yourself with subject matter experts who can deliver the knowledge and service that you need to successfully orchestrate a comprehensive planning solution for clients. The use of subject matter experts can be accomplished in one of two ways.
SETTING IT UP
The first way is to house the expertise in your office. The office where subject matter experts are all in-house is frequently referred to as an ensemble office - an ensemble of professionals that are needed to orchestrate the complexities of your clients' financial life all under one roof. This method is prohibitive for the small practice or the start-up financial planning division of even a larger CPA firm.
For smaller or newer practices, it is critical to assemble a team of subject matter experts from your local area or market niche. This is so important, yet rarely functional beyond mere referral relationships with allied professionals. Your collection of subject matter experts that are independent from your office is frequently referred to as a loose ensemble. And I believe that it is important for your loose ensemble to perform as well together as the Boston Symphony Orchestra. This sometimes happens by accident, simply by working together for years, but it can happen on purpose and relatively fast if you develop the system for exactly how the team will interact, communicate and service client needs.
I advise a simple agreement or a term of engagement memo that outlines each party's responsibilities to the other. Examples of the responsibilities outlined in this agreement would include copying each other on all correspondence, the introduction of additional subject matter experts, and invitations and/or debriefings from all client meetings. A great team wins championships and the hearts of clients. Financial planning is not an individual sport.
Technology would be the next big category of resources that can help make a planning business great. There is far more to the technology resources needed than your choice of financial planning software. Examples of the technological resources needed beyond your financial planning software are CRM, paperless archiving, aggregation software, and client-facing portals and Web sites.
The paperwork burdens from compliance, along with the inherent complexities of the planning process, drive most advisors crazy. A paperless imaging and archiving system will ease some of this burden. Paperless for financial planning should offer automated application filling, straight-through processing to custodians or other vendors, and compliance-approved archiving.
Tech resources for your clients are also important. As a small practice, competitive forces dictate that your client-facing technology needs to be as good as the behemoth direct marketers of financial services. That would include a Web site that does more than offer electronic brochures of your firm. It should include a portal that allows clients to look at holdings and even a way for them to get access to important documents, such as wills and insurance policies, that you can archive for them. I like client-facing systems that have a two-way mirror, allowing the advisor, the client, or one or more of your subject matter experts to also access the system.
BRANDS AND PROCESSES
The last category of resources necessary to build a great wealth management practice would involve systems and processes. Most CPAs have terrific systems and processes for their accounting practice. You have engagement checklists, routing sheets or online workflow, and levels of review to ensure quality control. These systems were probably built after years of testing in the trenches.
But for financial planning engagements, scalable systems and processes are very rare in CPA firms. Even though financial planning is a relatively new area of service compared to the centuries-old CPA profession, there is no excuse for having undocumented systems and processes for everything from client engagements and quality control through your frequency of meetings. Good systems and processes can help to ensure consistency and completeness of client engagements.
Having a scalable, documented system for the delivery of advice will add efficiency and streamline your delivery process. Many planners find the actual planning part of the engagement to be very time-consuming. It is the creation of these systems that stalls most practitioners from advancing, either due to lack of experience in the planning business or to lack of time to get it done.
There is no need to create financial planning systems and processes from scratch. But understand that the acquisition of good systems and processes is rarely 100 percent turnkey. You can acquire great systems from several of the industry's coaching programs, a broker-dealer or a well-established RIA firm. The systems and processes that you develop for financial planning should be customized to be consistent in look and feel to the systems and processes that your clients are accustomed to from the accounting side of the practice.
Acquiring the best resources in each of these categories does not have to be expensive. You can partner with other firms and get many of the resources you need - except for the time part. Schedule your financial planning time into your calendar for each week, and respect that appointment. If you don't know where to start, start by investing your time in a business plan. A great business always starts with a clear vision of what you'd like to do, who you want to serve, and how you will find the clients to do it for. Except in your case, you already have the clients to serve - it's just a matter of letting them know that you are open for business.
John P. Napolitano, CFP, CPA, PFS is chairman and CEO of U.S. Wealth Management in Braintree, Mass.
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