While in India with an accountant and his client, I observed a classic “trusted advisor” moment. The client is the chief executive of one of the largest family-owned businesses in India. As an aside during our meeting, the CEO mentioned to his accountant that he would be going to Tokyo on a Thursday for some negotiations with the company’s most important potential business partner. The CEO would then be returning on Friday morning, little more than 24 hours after his arrival. The accountant listened carefully to the plan and said simply: “No. You will not come home Friday. You will instead spend the weekend in Tokyo with the executives of the other business.”Without hesitation, the CEO lifted his cell phone and said to his secretary: “Please change my return flight to Monday morning.”
Our meeting then continued.
How can we explain that relationship? For wealthy families, the traditional view is that the trusted advisor relationship is held by lawyers, investment professionals and executives in business, but only occasionally by accountants. The green eyeshades are perceived as lost in the details of balancing the books and placing every penny in its appropriate column.
But this observation, and some other recent experiences, suggest that the traditional role of the CPA or chartered accountant is changing significantly, if not fundamentally, for those who see the opportunity. Today, these professionals are playing an increasingly important role among the circle of advisors to families of substantial wealth.
As law firms grow in size and product offerings, as bankers and investment managers move to their own side of the table, rather than the client’s, and as governmental regulations lengthen every executive’s antennae, the accountant becomes more objective and more critical to the family.
A NEW DAY FOR CPAS
The evolution of the CPA to trusted advisor has particularly significant consequences for the ultra-wealthy, those who can afford to build their own portfolios and wealth management programs. Talk about a family office with these very wealthy individuals and watch the reaction: “I know what that is and I would like one.” Yet it is difficult to find someone who knows the family as well as the CPA and can run the office — or can advise someone running the family office — as well as a CPA.
Because of their unique vantage point, CPAs are increasingly being recognized as the trusted advisor and are being asked to build a family office. With the offer to leave the accounting firm and assemble the family office come the inevitable questions of whether to accept the opportunity and what to do with an already successful accounting career. In the past, when a CPA accepted an offer to run a family office, the accountant was usually an aging professional seeking a quiet transition to retirement. That individual often performed little besides bookkeeping functions.
A growing number of CPAs now see a bigger role for themselves, and bookkeeping is only a small part of it. In fact, it’s the accountant’s broader knowledge of the family that makes that individual so valuable in founding a family office. They know every detail of the client’s finances and live in the same community with the client, seeing the client often. The accountant works hand-in-hand with the wealth creator on anything of significance. The accountant typically possesses the analytic and organizational skills that allow the wealth holder to organize their options more thoughtfully. The accountant is trusted; the accountant is objective; the accountant has no product to sell (most of the time); and the accountant may be skilled in project management.
Because the accountant occupies a position of knowledge and trust held by no other advisor, they can serve a client family holistically. At the same time, the accountant can call upon the skills, understanding and background acquired over a successful career.
The opportunity to manage the big picture for a wealth holder offers rewards well beyond the routine execution of accounting. Playing that role allows the accountant to be proactive and think more strategically, not just react to problems. Instead, they can build the luxury of thinking time into a model without time-based billing. This enables an advisor who traditionally thinks of service delivery in terms of hourly rates to become the CEO — a role in which the accountant takes more ownership, delivers greater value and is much closer to the family. In this position, the accountant can fully leverage their lifetime of experience, knowledge and wisdom. That is likely to be a more fulfilling endeavor for an accountant — as it is with any career professional.
THE GREATEST SERVICE OF ALL
An accountant overseeing a well-run family wealth management program can deliver the ultimate prize: freedom from wealth. More than ever, individuals with substantial family wealth want to reduce the burden of that responsibility. The accountant is in a perfect position to help a client achieve that.
For the accountant to become the right hand of a wealth creator or a wealth inheritor seems logical and desirable. And for a caring professional, there can be great satisfaction derived from putting on the conceptual goggles of the client to set and meet specific objectives. “What is the wealth for?” is the question to ask clients. Acting in the role of trusted advisor, an accountant can facilitate the discovery process and serve as the coordinator, the implementer and the translator once the answer is clear.
AN ADVISOR’S TALE
Stuart Black, the former president of the Institute of Chartered Accountants in Australia, is just such a trusted advisor. One of Australia’s most highly respected accountants, he has been asked by families to run a family office on more than one occasion.
For someone as successful as Black, the reward in ascending to the role of trusted advisor is as much personal as it is financial. As a trusted advisor, Black engages all of the talents and knowledge accumulated during a long and successful career. He appreciates the satisfaction that comes in creating order out of the occasional chaos of managing substantial family wealth. To watch Black in action today is to see a consummate professional who enjoys the daily challenges and opportunities. His sense of calm and fulfillment is evident, even as he manages through sometimes difficult issues.
To fulfill his role as trusted advisor, Black quickly realized that even with his renowned firm of accountants, he did not have the capacity to coordinate all of the family’s affairs. Black needed an investment advisory infrastructure to determine whether investments were appropriate to meet the client’s needs. He also needed project management systems and an approach to strategic philanthropy for programs likely to span generations. And he needed an understanding of governance structures and process to which accountants are generally unaccustomed.
Black also found that, although he and his company were performing many family office services, their clients did not think of the firm as the “family office” and were not paying for “family office services.” In a conference with a client who wanted to know more about possibly building a family office, Black outlined the many responsibilities of a family office. The client observed that Black’s firm was already providing 80 percent of the services. Similarly, an accountant in New Delhi stated that he looked forward to a family office offering to enter India, because, “Then I can charge for all the work I am doing now.”
Black developed the capacity to build family offices by partnering with a multi-disciplinary organization that could deliver that expertise holistically. Family offices of that caliber allow Black to talk about everything a wealthy family needs: unconflicted investment portfolios, free of proprietary products; resourcing world-class investment managers; building strategies for effective philanthropy; working with multiple generations; and ultimately creating a succession plan for himself that forms a team capable of a comprehensive approach to family wealth.
As a result, when a family asks Black to help build the family office, he can deliver — and talk about more than just bookkeeping. The value he adds is more than can be gauged by hourly fees. A fine byproduct of this experience is that he is inspiring younger accountants in his firm to think with him multi-generationally, and to cultivate relationships with those families for whom they are managing the family office.
For accountants, there has never been a more opportune time to become a trusted advisor building a family wealth management program. There is more wealth today, and more families of substantial assets need someone to address financial complexity and to make sure that their wealth is correctly focused. Accountants aspiring to more personal and financial satisfaction need only expand their horizon to become the next trusted advisor of a family.
