Taking the PFP practice of most CPA firms to the next level should be easily accomplished for any firm with a good client base, a good leader who is a good communicator and a business plan incorporating some of the best practices utilized by many of the nation's top financial advisors. But you would be amazed at how many CPA firms cannot take the next step.
To the surprise of many financial services executives, however, the CPA community at large has been slow to adopt wealth management. And for those who did, my experience and travels tell me that the average production or revenue for CPA financial planners is far below the average for full-time advisors who are not also running a CPA practice. That said, there is substantial room for improvement for both the fledgling and the successful CPA PFP practices.
To start the process of taking it to the next level, first define your vision of the next level. As most good CPAs would counsel business clients to be as specific as possible in business plans, I find it amusing that most CPAs don't even have a business plan for the PFP division.
Many speak in generic and often unreasonable visions regarding exactly how the PFP division shall become as or more successful than any other department or service at the firm. A clearly articulated business plan can be a big help. The plan should cover all of the key components.
? Who are your clients?
? What specific services will you provide i.e., investment advisory, financial planning, insurance advice, estate planning, business succession and exit planning?
? Who will deliver these services?
? What is the marketing and communication plan?
NO EASY MONEY
While I believe that adding PFP to an accounting firm is a superior model than the traditional services-only firm, it is no field of dreams. Many CPAs learned the tough way that it takes a lot more than simply getting licensed and thinking that clients would beat a path to your door and replace their incumbents to utilize your new division.
When thinking through your ideal clients for the PFP practice, it is necessary to have a good handle on exactly who your accounting and tax clients are. I mean knowing them from the demographic criteria that you determine as desirable in PFP clients. These criteria are both quantitative and qualitative.
The quantitative criteria can be issues like income, net worth, investable assets, business value or any other criteria that you believe is important to your firm.
The qualitative factors deserve equal or greater attention. Qualitative criteria include issues like the client's attitude toward your services. Is your client one who questions every bill and takes their time to pay? Does your client provide referrals and talk you up as a valuable member of their team? Do you enjoy the time that you spend with this client or is sitting with this particular client the hardest part of your day? What does your staff think of this client?
PFP leadership now needs to be clear about exactly what services they provide for clients. Will you actually prepare comprehensive financial plans, put your advice in writing and charge for the time that you spend on the plan as you would any other firm service? I am surprised at how many firms I meet that do not offer comprehensive planning. Many CPA PFP practitioners act like brokers or agents and simply give lip service or incidental advice on the clients' entire financial picture while chasing assets or insurance sales.
BILLING AND SERVICES
My sniffer tells me that there may be several problems with not addressing your client's entire financial situation for a fee. First is that as the CPA PFP, you have not differentiated yourself from the pack of sales-based types of advisors. The second is suspicion. When is the last time that your CPA firm did anything for a client for free? I find that clients are a bit suspicious when you tell them that this extremely valuable and time-consuming planning process will cost them nothing, and that you'll make your money through other means whether it's fees or commissions. This is out of character, and unlike anything they've previously heard or seen from you. The third problem with not doing comprehensive financial plans may be liability. If your client thinks that you are their financial planner, then they may reasonably expect that you are delivering comprehensive plans and looking into all the matters covered while testing for the Certified Financial Planner for Personal Financial Specialist exams. Charging a separate fee for the financial planning engagement gives you the opportunity to document the PFP engagement with an engagement letter; a best practice in place for many very successful PFP firms.
Will you offer asset management services, insurance services and get properly licensed to offer securities through a broker-dealer? I find that many firms have paid little to no attention on this. It seems as if firms bring their own bias as to how clients should pay for financial services, whether it be fee-only, fees and commissions or commission only. This decision has often been made without the needed context of the firm's client demographics and the support available through third parties.
YOU NEED A LEADER
Who is the person that will lead the charge and deliver the service? Firms who launch PFP without a clear leader for that division frequently fail or deliver low value to firm stakeholders. Another common problem is when a firm appoints a busy partner as the leader and same person who will deliver the services. This is often problematic because frequently the leader chosen is also expected to bill 2,000 plus hours per year from traditional CPA work. You can't get to a successful PFP practice with a leader who is too busy and unable to devote near full time to the endeavor.
The chosen leader should be held accountable for designing the business plan, implementing the tactics needed to reach the firm's objectives and deliver a service that clients will rave about. If your leader accepts these responsibilities and has the flexibility to devote the needed time, this partner is highly likely to deliver meaningful profits to the firm.
If you are a sole practitioner, the process of leading this division for your firm may be more challenging due to inherent time constraints.
The best practices that I've seen for solos include:
? Hiring staff and delegating some traditional accounting work.
? Selling, firing or devising service plans for smaller clients that demand less of your time.
? Working with a PFP partner/associate.
? Engaging a coach for your firm to help get out of the starting gates and achieving your objectives.
For larger firms, the core issue is the same. The leader needs the time to lead and must shed some of their former responsibilities. If your firm is big enough, you may even hire a talented leader right out of the gate or acquire a PFP practice with a successful business and a good staff.
When I have polled firms over the years, overwhelmingly the biggest challenge that many perceive is their lack of experience and specific product or planning knowledge. This is a classic CPA response. After all, we were trained to know code sections by chapter, paragraph and verse. In the world of financial planning, that's impossible. I've been a CPA/ PFP practitioner for nearly 30 years, and learn something new with every day that I work with clients and advisors. Most CPAs are smart and resourceful. When confronted with an unfamiliar issue for the first time, the typical CPA is not likely to wing it, but more likely to devote the extra time needed to get an answer that is in the best interests of their client. The reality is that the biggest challenge for a CPA PFP practice trying to go to the next level is their lack of a marketing and communication plan.
COMMUNICATION IS KEY
CPAs will openly admit that they did not decide to offer PFP services so that they could become a sales person. CPAs want to be the trusted advisor who has respect and admiration from their clients. But the problem in many firms is that their PFP division are the best-kept secrets in town! Clients often do not know that you can do this for them. Just think back to last tax season and recall how many clients you noticed had changed advisors or brokers during the year. Many of these will frequently tell you when finally solicited that they were simply not aware of your PFP offering, even though you may have told them once or twice. Perhaps even more damaging is the firm whose staff is in the dark about the PFP side and cannot communicate the value of these services to the firm's ideal planning prospects.
What is needed is a plan that allows for regular and continuous communication with your clients about PFP matters. Even the AICPA/PFP handbook from two decades ago stated that CPA/PFP practitioners need to be good communicators and persuasive enough to get clients to do things that they may not otherwise do without your guidance and wisdom. A sample of some of the regular and continuous marketing and communication plans that work include:
? Regular newsletters about PFP matters.
? Questions in your firm's tax organizer about PFP matters.
? Specifically asking your best clients if they are willing to hire your firm to oversee their entire financial lives beyond accounting and tax.
? Client events where you deliver education, camaraderie and or entertainment that is relevant to their needs and likes.
? A PFP Web site and print collateral.
? Training staff to recognize PFP issues in client's lives.
? Seizing the opportunity to speak with clients about PFP issues that appear in need of attention when you are with them for other accounting or tax matters.
? Making sure that all clients, referral sources and other CPAs know about the offering and who may be an ideal client for this service.
CONCLUDING
The last part of the PFP business plan is probably the most important. The last part is implementation and accountability. Having a good business plan that never gets implemented or adapted to your experiences with clients would be the same as delivering a plan for a client who decides not to follow your advice. A big waste of time for everyone!
A PFP practice is never too good to move to the next level nor is it ever too late to make this division shine.
Back in the 1980s, my CPA firm grew extremely fast because of its well-executed PFP business plan. We started by growing billings for PFP and then began to attract new clients for traditional accounting work and PFP because of our firm's reputation as "not your typical CPA firm", and as a firm that is most interested in helping to improve a client's financial future in addition to dutifully accounting for last year's results.
John P. Napolitano, CFP, CPA, PFS, is chairman and CEO of U.S. Wealth management in Braintree, mass.
