[IMGCAP(1)]Much of the time in this column we focus on ways for CPA firms to enhance their client services through deeper delivery of wealth management services. To those who have, congratulations. But there are more firms that do not offer wealth management services than those who do.

These firms have grown their traditional business so well that they have specifically decided not to offer wealth management services. These firms chose to have their focus be tax, accounting and business consulting, and to support a wealth manager when called upon or needed.

When a client goes to their CPA with a financial question that is completely out of the CPA’s wheelhouse of knowledge, what does that CPA do? The options are many: Wing it, tell them you don’t know or guide them to a resource where they can get what they need. The better firm wants to be a part of the solution and help the client find the answer through another firm or some other source. When it comes to working with another professional, that selection by the CPA is important and a reflection of the level of care that you may provide.



Some firms simply give out three names and let the clients ferret their way through three dazzling presentations. That doesn’t seem like much of a solution to me. Investing just a little of your time, (which would be billable) could pay large dividends to your clients with a firm that better suits their needs.

An example would be the client who tells you during tax season that they intend to retire at the end of the year, and that they are scared to death about the 401(k) and the loss of health insurance. Sending them to an investment person who doesn’t properly address the second part of the question — that is, the concerns about health insurance — doesn’t resolve their initial concerns. I stress the word “initial” here. These are only the first two things out of their mouths, and they volunteered that information. Just a few skillful questions from you should help identify what kind of financial doctor you should introduce to them. A few of these questions can include:

  • What would you like to do with all your free time?
  • How have you managed your 401(k) and other investments until now?
  • What would you like to do with your 401(k)?
  • Who are the beneficiaries of such a large account?
  • How old are your will, trust and health care documents?
  • How much income do you need?
  • What other concerns do you have?

Each of these questions will get you answers that are much deeper than the two issues that they raised at the onset of the conversation. Based on their responses and comments, you should get a sense for just how deeply they or a team of advisors have been serving their more holistic needs during the accumulation stage of their financial lives. This brief conversation will also reveal gaps and areas of their financial lives that would benefit from more attention. In the course of this article, we will use real-life examples of client situations facing CPAs daily.
If you read this column regularly, you know that I almost always favor the personal financial head coach approach to wealth management over directly referring clients to all of the specialists that they may need. When the CPA refers the specialists that are needed for a specific task, it leaves a larger possibility that there may still be cracks in the overall plan and the coordination of all the moving parts.

One such crack may lie inside the answer to the beneficiaries of the 401(k) or life insurance. If your client gives you the standard answer where the first beneficiary is the spouse with the contingent beneficiaries being the children equally, there may be a few things that they did not consider. One such gap may come if the children are minors under the age of 21. The will or the courts will assign a custodian of the assets until the children are old enough to receive the proceeds (18 or 21 in most states). But I must ask, what happens to a 21-year-old child with $1 million in their bank account? It may or may not turn out like Grandpa intended.

It would be unfair to generalize, but it would be true to tell you that nearly every single IRA or life policy that I’ve reviewed for clients had those simple beneficiary designations before going through the planning process. If your client works with an advisor who simply manages money or sells life insurance, and doesn’t question the beneficiary elections upon opening the account, than who is held accountable when the unthinkable happens? The answer is that no one is accountable, yet everyone feels horrible for the poor decisions and possible lousy ending. A better answer is to get it done right the first time, and to ask your client if asset protection and preservation of the assets in question are important so that the young child would not have direct access to such a large sum at such a young and vulnerable age.



Now the question rises as to how you evaluate an advisor and their offerings to understand when there may be a good fit with a particular client. The first may be rapport. Do you feel that your client and this professional can develop the type of rapport that is necessary to advance such a relationship? To do this, you have to know your client, but you also need to invest the time to see if the advisor has a way of being that would work for this client. There may be certain lifestyle similarities or attitudes about what is important that help you judge.

Take a look at the wealth manager’s regulatory history. Ideally you want someone with no or limited regulatory reporting instances. Not all issues are indications of integrity or ethical issues. But a plethora of complaints and sanctions is past performance that we’d like to avoid.

Beyond rapport and regulation, does the professional under consideration serve other clients just like yours? If the advisor is used to working with retired teachers, will they be able to handle the more complex needs of the owner of eight restaurants? The same could be true for the advisor who does typically work with larger, more complex situations if you want to use their firm to solve the needs of a smaller or less complex client. It would be  a great service to uncover the professional who not only can handle the complex needs of the aforementioned restaurant owner, but who actually specialized in working with just such characters.

Another important characteristic may be the method of communication with you. CPAs are often an afterthought in the minds of investment and insurance professionals (except when it comes to soliciting new business from the CPA). If you are a firm that simply wants to introduce and get out of the way, then this may work for you. But most will want to be in the loop with respect to the scope of work — especially as it relates to any issues that ultimately have any tax or accounting consequences or needs.

For example, your client who owns rental properties may be a bit more concerned about asset protection if the mortgages are paid off or very low. This situation may call for protected entities such as LLCs or Sub-S corporations, but this too is an item that frequently slips through the cracks between professionals if the issue isn’t raised and addressed. Any one of five advisors could have answered this question. The CPA themselves, the client’s attorney, their investment advisor, insurance agent or banker could or even should have asked the question about asset protection. Here, a communicative wealth manager who takes accountability as the client’s financial head coach may have suggested this, and incorporated you into the decision-making process regarding the complexity and cost of tax compliance.

Another point of evaluation can be their technical abilities. You may start this part of the inquiry looking for evidence of formal training. This training can come from a degree or a professional designation or two. But your diligence doesn’t stop there. In conversation, reference client situations or past strategies deployed by your best clients and ascertain the wealth manager’s understanding and experience with respect to such. It would also be reasonable for you to ask for a conversation about the planning process and a sample planning document. Do you want a firm that delivers simple boilerplate plans, or do you want your client to get a customized, detailed analysis of their situation with the independent advice they are seeking?

As CPAs, you know that the numbers don’t lie. As a result, I’d ask about compensation. Not just from a cost perspective, although it is important to understand their fee structure and their anticipated costs to the client. But I’d ask about the nature, frequency and extent of the compensation being received by the wealth manager. Are they paid commissions or fees, or both? Are they paid up front, for a period of time or forever? Are their revenues generated from fees for advice, asset management, securities commissions, insurance commissions or some other source? Don’t accept generalities here, and be sure to ask for the details. If there is any hesitation in the voice of the wealth manager from this question, that could mean that they don’t know, don’t want to share it or don’t want to reveal it. Transparency up front is good for everyone.

John P. Napolitano CFP, CPA, is CEO of U. S. Wealth Management in Braintree, Mass. Reach him through JohnPNapolitano on LinkedIn or (781) 884-2390.

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