[IMGCAP(1)]In the early days, a lot of CPAs casually decided to offer personal financial planning services. For many, it was a decision that they slowly regretted as the real business issues such as service, marketing and communication, compliance, time and other natural road blocks that may be seen in any startup endeavor arose.

But had they started this the right way — as they would direct any of their own business clients as they start a new business or division of an existing business, their financial planning practice would look and feel different.

The first step in starting such a practice is to start with the end in mind. What do you want this practice to look like in three years, five years, at your retirement? How do you want your clients to feel? Who will you serve? Who will do the work? How will you get the word to clients about this valuable new offering? How will you let them know that you can help? Once you’ve developed thoughts about these important questions, you are ready to think about your structure.



If you have a good handle on what you want to do, you will be better prepared to tackle the issue of structure for your firm. Sadly, many practitioners still enter the financial planning world to make a few extra bucks. In my less-than-humble opinion, this is the worst reason in the world. The best reason, on the other hand, is to better serve your clients and save them from the messy and confusing financial services world where they struggle to differentiate a life insurance salesperson from a money manager or an estate planner.

The conversation about your structure is changing as we speak. We have changes in terms of the fiduciary rule and required disclosures, to say nothing of smart and educated consumers with unlimited educational resources via the Internet and competition from today’s robo advisors and Watson-like technology services that will revolutionize what advice looks like. We are entering the golden age of advice — and the only thing that any human can do better than a machine is to build relationships and an understanding of the families that you serve to deal with the changing circumstances that are sure to find every family.

Your ideal structure is best selected based upon the current reality of your client base. If your firm is a small practice cranking out hundreds or thousands of 1040s, then a broker-dealer or insurance model where commissions generate a large portion of the revenue may be OK. You will experience tremendous pricing pressure and an increasingly more sophisticated expectation from your clients regarding your deliverables. In light of the fiduciary rule and the awakening of the consuming public, it is very possible that a commission-based structure may become the least desirable form of providing services to clients. So do not set your sights on obtaining every kind of securities and insurance license out of the gate — you may not need them.

If your firm has many high-net-worth clients and business owners, then you’re very well-positioned to offer high-end wealth management services, which is beginning to look like any other professional service offering with integrity and few to no conflicts of interest, with “comprehensive” and “proactive” as important ingredients.



To sell products for commissions you need licenses. For securities products, you need a Series 6 or 7 and a 63 or 66. For insurance, you’ll need the insurance licenses for whatever types of insurance you plan on selling. For advice, you may or may not need a Series 65 or 66, and that depends on your state and the professional credentials that you currently hold. Many states waive the Series 65 or 66 requirement for CFPs, CPAs, JDs or PFS holders.

This is obviously a primary source of confusion and frustration. Broker-dealers want you to get a securities license. Insurance companies want you to get an insurance license. And a true advisory firm may tell you that you need none of the above. But just because you may not need a license to offer advice — you do need to be registered. You must be registered as an investment advisor or affiliate with an existing advisor. Do not make the mistake of offering advice without registration. The rules may allow incidental advice without registering, but those are not true comprehensive and proactive financial services — they truly are merely incidental to the practice of public accounting.

Decide early on whether your firm will be a seller of financial products or a trusted advisor to your clients. The latter means that you are taking on a proactive and holistic role as a wealth manager. This means that anything and everything in your clients’ financial lives is under your supervision. Think about the components of a financial plan: cash flow, debt management, risk management, investment management, retirement planning, tax planning, estate planning and all the stuff that falls in between, such as college funding, family governance, elder parents or children with special needs. The advisor who succeeds in the next generation of advisory firms will be able to professionally perform or oversee the delivery of services so that your clients’ entire financial house is in order and will stay that way forever. I find the tools offered by the PFP division of the American Institute of CPAs to be the best for guiding the scope, nature and extent of any financial planning engagement.



The next decision is how to launch. There are many models out there where a financial advisor basically comes to your office as needed or as often as they can with the hopes of intercepting anyone who walks through the door for financial planning services. These types of advisors often have relationships with many CPA firms at once, and they go wherever the action is based upon the demand from clients. Again, this may work, but would you do that with any other service offering that your firm delivers? If not, then why do it now?

Any CPA firm serious about offering PFP services needs a leader, someone who is going to lead the firm from top to bottom. This will obviously take time away from traditional billable work, and in the first year it should be material if you want to give the division its best shot at success. This leader should make the decision on how to render service, whether it be outsourced or delivered by an existing firm employee or a new hire. In the long run, it is better to build a staff internally that will serve the firm’s clients.

Once you’ve chosen your service model, decided on who will deliver the service and set P&L expectations for the first year or two, you are ready to be sure that this division is properly capitalized. Funding the growth of your financial planning division out of early revenue from services is a losing proposition. Don’t even get started if you do not have the financial wherewithal to start this as professionally as you would suggest to a client when they are starting a new division. We are not talking about huge money — but you do need a budget for Web sites, employees, unbillable time, events, letterhead, etc.

A professional marketing and communications plan, including a good Web site, may be the most significant step in the early success of the offering. What good is building a great staff or service model if no one knows about it?

Once the site is launched, begin communicating with your clients in a way that is similar to how you communicate traditional news or service issues. Even your best clients who love you will need to see and hear this message regularly. Beyond the messaging, it is your actions that will define just how serious a player you are, and become the ultimate arbiter of whether your clients will give you the privilege of overseeing their entire financial life. Follow through on issues that you know need attention, like the compensation agreements with key employees of client companies or helping to complete their succession plan.

If you have partners, they need training. They need to be trained on the specific nature of the services, how to communicate these to clients and to become familiar with the deliverables. A good idea would be to perform the comprehensive financial planning engagement for each CPA partner so they can see first-hand what the service entails. Less than this effort will give partners permission to talk about the financial planning division (or not) in any way that they want, instead of having all partners and associates clearly articulating the offering.

In the first six months, there are a few things that you can expect. You can expect engagements to take much longer than they will in subsequent years. Even if you hire an experienced planner to manage this offering, it will take that planner time to adapt to the service model that the firm chooses, along with developing an efficient working relationship with the partner in charge of that particular client.

A common mistake that many CPA planners make is that they start their services with the lowest end of their client list, thinking that they’d prefer to start on easier ones with more margin for error. Instead, you should start at the top. Your best clients are often the ones that would want more of your time and service, and they surely will have the most need for proactive and comprehensive advice. The first few engagements may take you longer than anticipated, dropping your realization rate to a point lower than you need to profitably serve this business. But that ethos of doing a professional job the right way will serve you well in the short and long term, ultimately delivering tremendous value to the clients and the firm.

John P. Napolitano, CFP, CPA, PFS, MST, RLP, is CEO of U.S. Wealth Management in Braintree, Mass. Reach him at JohnPNapolitano on LinkedIn or at (781) 849-9200.

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