There are hundreds of CPA firms that claim to provide wealth management services to their clients. For those that truly do, hats off, as many do a fine job.But for the majority of firms that I encounter, they're dreaming if they think that what they are doing is remotely close to wealth management.
With uncertain economic times and at a time when a significant portion of the population will live well past the age of 65, there now exists a great opportunity to achieve remarkable success for your wealth management division.
I let the cat out of the bag with the last sentence ... the "why" you should build a wealth management business. It would be for the remarkable success. But don't start counting the money yet, because the first success you create will not be immediately profitable:
Your first success will be client satisfaction.
FIRST, A RELATIONSHIP
Clients who need wealth management services want a relationship with someone whom they trust, someone who listens to them and understands their needs, and who leads them to accomplishing their goals. They absolutely love to be handled with the kid gloves of their warm, fuzzy CPA financial planner.
For me, the fun part of the equation is the compelling answer to the "why" question. Who in their right mind loves doing hundreds of tax returns for three months while working 80 hours per week? If you are that guy, please send in your resume now. If not, it is time to consider building your wealth management career - the fun as a wealth manager is endless.
What services do you provide for your clients that they absolutely love and can't wait to get done? Do they show up with their tax info full of hope and willing to spend hours with you? Well, a visit to the tax guy isn't quite as feared as a trip to the dentist, but let's face it, fellow CPAs, we aren't far behind.
For the fiduciary and the stakeholder in you, you will learn to appreciate a wide range of services that clients want, appreciate and for which they are willing to pay a significant premium. Most of them are willing to pay that premium to you because they are currently paying it to someone else, or should be hiring an advisor, and they want and trust you. And by the way, how cool would it be to ditch time sheets? Not many respectable wealth managers bill by the hour.
As a fiduciary, I'm talking about you; you as the fiduciary for your stakeholders, shareholders, employees and clients. Are you doing everything in your power to maximize the revenue and profits of your business? How would you tell a client that their chief executive officer is doing a horrible job at growing the business, managing profits and delivering valuable services to their clients? Services that every survey in America says that they want from you? I don't think that CEO would last, unless the owner of that company has a problem with growth and satisfied clients.
Are you offering your clients the services that they need and exposing their current vulnerabilities without this high-level guidance? How would the board of directors of your best client react if the CEO reluctantly admitted to the board that there are lots of profitable lines of business that your clients would like to buy from you, but you don't want to be bothered?
I don't think you have to memorize Good to Great by Jim Collins or Raving Fans by Ken Blanchard to understand that happy clients make for a better business.
A great myth I hear in the industry is that CPAs find it is tough to attract and retain good staff. I disagree. Just give your staff some meaningful work, instead of 80-hour tax-prep weeks, and they'll love you too. In my discussions with burned-out three-year veterans of small-to-midsized CPA firms, their negative issues were very clear: repetition, no life in tax season and empty promises. The empty promises were often about the absence of more challenging work opportunities, and wealth management was often held out as the carrot. Enough about the why - let's move onto the "how" part of the business.
THE PATH TO SUCCESS
There are many different roads to choose from when it comes to how to build a great wealth management business.
But first, let's agree on where that destination lies. A successful wealth management business is vastly different from a successful financial planning practice. We all know what financial planning is. According to the Financial Planning Association, "Financial planning is the long-term process of wisely managing your finances so you can achieve your goals and dreams, while at the same time negotiating the financial barriers that inevitably arise in every stage of life. Remember, financial planning is a process, not a product."
Many CPAs sell the advice as a product. They charge fees for guidance and lead the client to take action to accomplish their objectives. "Lead" may even be too generous for many; they tell clients what to do with little follow-up or monitoring to see that it is actually happening and still on track.
Wealth management, on the other hand, is the transformation of a financial planning engagement into a pro-active and holistic relationship for an indefinite period. This means that the wealth manager will not only be around to assist with the negotiation of financial barriers, but should be pro-active in anticipating problems or alerting clients when something needs to change.
The wealth manager does not sit back and react to the clients' situation: They lead.
Assuming that we are now in agreement about what we want to build, the "how" becomes clearer. Being a wealth manager is like being the head coach of a professional sports team. The head coach of a team is accountable for overall performance and meeting the objectives of team ownership. As a wealth manager, you are the head coach of your client's financial team, accountable for the performance of all the other advisors to meet the objectives of the client.
While I consider the readers of this magazine more intelligent than the average financial advisor, even we understand that you can't know and be everything for everyone. The head coach of the world champion Boston Celtics may not be qualified to act as the strength and conditioning coach, but he sure is accountable to team ownership for the strength and conditioning of his players. Similarly, you may not be an insurance professional or an attorney, but a good wealth manager will see that the client is properly protected with good legal documents. You'll even make sure that insurance is owned by the proper entity with an appropriate beneficiary election.
WHEN TO START
How you implement high-quality personal financial head coaching is by forming a great team of assistant coaches. Some of them will actually reside in your office, others will be outsourced and still others will be referred professionals.
Your job, however, does not change. You are ultimately responsible for meeting the lifetime goals and objectives of your client, and overseeing every single step of the process. You may need a money manager, insurance professional, attorney, property and casualty insurance specialist, banker, realtor, broker and so on.
As long as all of those services are all marching to the same drummer (that being the beat of the clients' goals and objectives), it doesn't matter who completes the work. It can be you, someone in your firm, a formal joint venture, a loose joint venture or merely a referral to another firm. What the client wants is your best advice implemented for their benefit. I'm not here to debate fee-only, fee-and-commission or commission-only; that is just noise getting in the way of the wealth management business being as widely accepted as your core CPA business is now.
So the only open issue is when. If your clients had their way, you would have built a wealth management business in the 1980s, when I did. But you didn't, and there is still time - as long as your clients still love and trust you.
I'd say that the best time is when you can sit down with a competent coach in wealth management and build a business plan to determine the time and resources needed to make it work well.
If you start this fall and have the right team in place, three years from now you could be writing this article!
John P. Napolitano, CFP, CPA, PSF, MST, is chairman and CEO of U.S. Wealth Management, and the author of the recently published The Complete Idiot's Guide to Success as a Personal Financial Planner.
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