Clients are looking for truly holistic advisors, and accountants are perfectly positioned to be just that, says Rory Henry, a director at Arrowroot Family Office and author of "Holistic Guide to Wealth Management."
Transcription:
Dan Hood (00:03):
Welcome to On the Air With Accounting. Today, I'm editor-in-chief Dan Hood. If you're an accountant or a tax professional, you've probably at some point looked at a client's taxes or their finances and thought, wow, their financial advisor is terrible. I expect the question, why don't you become their advisor yourself or work more closely with their advisor here to talk about all of that and why accountants should think about this question very seriously and look, rethink their role is Rory Henry. He's the CFP, a director at Arrowroot Family Office. He's also the co-founder of AFO Wealth Management Forward and the author of the recent "Holistic Guide to Wealth Management." Rory, thanks for joining us.
Rory Henry (00:37):
Dan, thank you so much for having me on the show. I've listened to a number of these podcasts and I've had the privilege of going to conferences and singing karaoke with you, so I'm excited to have this conversation and I won't be singing this time, Dan.
Dan Hood (00:50):
Yeah, we haven't recorded any of the karaoke, which I think is appropriate, but I'm glad to have you in this nonmusical capability
Rory Henry (00:57):
Capacity. Yeah, will sit on the audience's ears.
Dan Hood (00:59):
Exactly. But I think it's worth listening. This is going to be worth listening to much more so than the karaoke because it's a fascinating topic and it's one that accountants have been talking about for a long time, or people around accountants have been talking about for a long time, but it's still some room for movement on it. I want to start though. We're going to talk about that issue, how accountants can fit into this, but I want to start by talking about the holistic financial advisor that you're talking about in your new book. What is that? How would you describe the holistic financial advisor?
Rory Henry (01:29):
Gosh, Dan, that's a good question. As a holistic financial advisor, I think we're looking beyond the investment portfolios, beyond the tax strategies. Many times these professions have worked in silos and weren't really integrated in the holistic advisor. This advisor I think of today is really taking this 360 degree view of the client's entire financial lifecycle, their personal, their business, integrating the tax planning, the business advisory, the retirement planning, the estate, the insurance, and the investments, and it's really connecting these dot stand between their financial decisions and in the end, their life goals. So that holistic advisor is literally looking at their tax savings, looking at their business optimization, and then giving them a financial roadmap to have an understanding of where they want to go in their life with their business. I always say we've got to ask our clients the questions, what do they want out of their business? They want IPO, they want a nice lifestyle business with more times with friends and family, and so it's really doing that foundational work of a holistic financial plan that becomes the pathway to make their business and personal financial decisions.
Dan Hood (02:36):
It's a holistic role. That is the, when you describe all that, but it's precisely the kind of stuff that as a CPA or an accountant, if you're just looking at somebody's taxes, right, you're seeing a lot of those things, those issues will come up just in their taxes or in their, if you're working on their finances in any other capacity, and you can see how for a lot of your clients, they're not getting that holistic approach or no one's taking that holistic approach them. Have you seen that a lot?
Rory Henry (03:01):
Yeah, so the tax returns great insight into a client's finances, and it becomes a springboard. I see most professionals out there, Dan, on the tax side, tax planning's, a great service offering that allows them to do more future facing advice. Obviously, we've heard it a number of times over the years that accountants are very backwards facing, but it's the ability to provide those planning opportunities to have that tax efficiency. But then pairing that Dan, with the long-term outlook, what are the retirement needs? Making sure that a client's risk profile for their investments is being done properly, and then connecting estate planning. I always say Dan, estate planning is a family office level of care. It's connecting generations, and it covers the full balance sheet for folks out there. I call it a virtual family office. Stuff that we do here at Arrow Root is really covering the tax, the accounting, the business advisory, the financial planning, the investment, the insurance, the exit, the estate planning, ensuring that a client's business and personal finances are working in concert with each other to ensure that they're making the correct decisions.
Dan Hood (04:08):
Well, I'm glad you brought up the family office. I wanted to talk a little bit about that knowing, right, you're from a family office, I know that's the context within which you operate, but is this always a family office level? Services have to be within that context. I think there's, or can other clients, can accountants bring this to other clients?
Rory Henry (04:29):
Yeah, that's a great question, Dan. I want to give definitions here to what a family office is. So historically, I think when people think of family offices, they think of John d Rockefeller, JP Morgan, Jeff Bezos, Elon Musk, a hundred million, $250 million in assets. And so single family offices historically advise the business and personal financial affairs of these really wealthy families. There's now multifamily offices that put together a number of family families, and they save on infrastructure costs of all these professional service folks working for them. This concept of what we call a virtual family office now can now be had by wealth management firms as well as accounting firms, and they're connecting professional service providers via technology in collaborating to make sure that clients are receiving sound tax efficient advice, their business are being vis properly, but also doing the personal financial planning and the wealth management, the estate planning with professional service providers that are working to make sure that client is making the correct decision. Now, there's different forms that this can take and we can touch on the licensing requirements, but in essence, it's really taking the best of the CPA and business advisor world with the financial planner and the wealth manager and making sure that client's getting great advice.
Dan Hood (05:44):
Now, and obviously then this, I mean, there's insurance, there's legal issues. If you're looking at estate planning, do you need all these experts in-house in the family office, or is it partnering with other service providers, but under the, whoever's the holistic advisor is the one who sort of, I've heard it described as maybe the quarterback of this team of advisors?
Rory Henry (06:02):
Yeah, the quarterback, I say the accounting professional, Dan, because they are the financial first responder. I think our Fred and Jody Pater continually calls 'em the financial first responder. They're the one that has an outsize impact on the lives of clients. They're helping file tax returns for the first time opening businesses, growing those businesses. So we as wealth advisors, usually don't start getting the football until we're at the red zone, and the accounting professional main times does all that work to get it to the 25 yard line, to the 10 yard line, and the financial advisor gets it down at Red Zone scores. The touchdown gets all the glory and the margin services. So it is the accounting professional that has that outsized impact, and this is why I'm a big believer in holistic financial planning as the foundational piece to making sure that clients have the healthy financial habits that'll help them grow their businesses and help them grow their personal finances. It's the accounting professional that is uniquely positioned to start offering these services, whether they bring this in-house, get licensed, or they partner with someone like a family office or another RIA out there to service the investment and financial planning needs of the client.
Dan Hood (07:13):
Well, since you mentioned credentials and licensing, and that's obviously a thing near and dear to the average CPA's heart.
Rory Henry (07:18):
Yes.
Dan Hood (07:19):
Maybe talk about some of the, when you look at a holistic, not necessarily holistic financial advisors, you say you don't necessarily have to have credentials yourself, but if you're looking for holistic financial services, what kind of licensing might you want to have represented on the team that's serving you, whether it's one person having it or a mix of different advisors?
Rory Henry (07:39):
So the unicorns out there are the CPAs who had the PFS as well, or a series 65 license. So the series 65 license is probably the easiest pathway. I've had CPAs that have passed it in a couple of weeks that I wouldn't say that's the norm here, Dan, but it's a lot easier than the CPA exam. You can also go through the A-I-C-P-A, get the PFS credential, but that's the way to get paid via investment management services. But the great thing about financial planning is you technically don't need a license to do financial planning. Folks in the accounting profession are many times doing holistic financial planning or lion's share of it already. They're doing the tax planning, they're setting up retirement accounts for folks out there, and so they have the data, they have the trust, and it's the relationship. They just need to expand by offering some of these services. So that's why I wrote the book, gives them a methodology, outlines all the services, gives them a pathway to start earning on those investment management services,
Dan Hood (08:37):
And you're main contributor, but there's also you brought in a lot of outside experts from around the profession to share their insights. I mean, it's a compendium of not just all your insights, but a lot of other people in it. It's a great resource, I think for people who are considering this.
Rory Henry (08:54):
I was able to get all stars. I'll promote them. They're wonderful folks out there. Blake Oliver wrote a chapter, Alan Colton, Bob Lewis, Phil Whitman, I talked about the m and a activity. We have tax planning with Jackie Meyer, and we have the estate planning technologies from the CEOs in the WealthTech space. So it's a number of great contributors. So Hans, not just me talking about all these different service lines, I wanted to get an all-star list of contributors talking how we can integrate these services in a holistic and authentic way,
Dan Hood (09:25):
Which I don't mean to imply by that, that we wouldn't think of you as a valuable source of information where of speed, but it's just one of the great things about the book really is that in addition to your expertise, you bring in all this other expertise from around the profession, particularly as you say, sort of in different niches where they have specific expertise and you make the strong case as you have here today for why this is an appropriate role for accountants, but it's worth reinforcing. You talked about the tax aspects, the fact that accountants are there at the beginning with clients, right? They're working with the very first tax return, the very first set of very first monthly closing for their small business if they're starting one up. Are there other things that make this an appropriate role for accountants?
Rory Henry (10:06):
Yeah, I mean, look, I think know there was a McKinsey study that was done here recently that said that there's been this movement towards clients wanting holistic advice. So I think it was from 2018 to 2023, there's a 60% uptick in clients looking for holistic advice. And the two top categories here, Dan, were legal services, which are estate planning and tax preparation. So there is this movement by clients who are looking to have a virtual family office or a holistic type of offering. They want a one-stop shop. You shouldn't be hungry and want to go to a baker over here, go to get your meat over here. We want to look to our practitioners who are providing us advice and making sure that we can go to a one stop shop, whether you service that yourself or you bring a subject matter expert. So we're seeing this increase by clients on wanting a holistic offering.
(11:05):
And then I'll say this, there is tremendous technology that's being introduced into the marketplace, the wealth tech side, I would say estate planning. I want to give practical tips for those in the audience. The wealth tech space estate planning has really been an entry point, like I stated earlier, for folks out there to start serving generations, it's a great way to look at the full balance sheet, the assets and liabilities, and making sure that they're providing for the many needs of that client in case of any unforeseen circumstances. So I said that's why it's a family office level care. It's a great way to retain clients. It's a great way to attract new clients, and those are high value clients, usually with investible assets and high net worth, and that's where all we're all after, right? As these professions continue to be commoditized, we've got to start providing higher level services for it for our clients. That's tax planning, that's estate planning, that's doing the investment management piece as well.
Dan Hood (12:00):
Excellent. Well, there are, I mean, just listening to you describe it, there are a lot of reasons why it would make sense, certainly for clients to want this, right? They're probably among other things, tired of having their account or their tax preparers say, what have you done all? What are you doing all year? This is crazy. But also there's all kinds of benefits to having all these services sort of coordinated and having someone surveying the whole universe. There's some obvious reasons why it might be valuable to accountants, but not all accountants have taken it up, and I want to dive into some of that and maybe why they might have been a little reluctant and why they should be less reluctant and what they need to do to take on this role. But we're going to take a quick break first
And we're back. We're talking to Rory Henry, who among many other things is the author of the recent "Holistic Guide to Wealth Management,"
and we've been talking with him about why this might be a role that's appropriate for accountants, not why it might be.
(12:54):
It is, it's pretty clear that it, is it an opportunity for accountants, and this is one of the things we see every time there's some kind of economic upset, it drops in the market and that sort of thing. 2008, 2009 or on COVID, we see a lot of people, a lot of people looking at their current financial advisors and it's saying, Hey, I'm not necessarily getting the service I want from 'em. And accountants, a lot of people will say, oh, this is a great opportunity for accountants, but in general accounting, the percentage of accountants who offer this hasn't really increased as much as you might expect. It's somewhere between 25 and 30%, particularly skewing towards larger firms. I want to get your sense, do you have a sense of why accountants might be reluctant to take on this role?
Rory Henry (13:33):
Well, Dan, I think you probably could agree with me. It is a risk averse profession, but that's why I believe they have the ability to make great financial advisors. We as financial advisors, I've talked about in the book the evolution of professions. On the accounting side, we've seen the move from time-based billing to value pricing. Now modern firms doing subscription pricing on the wealth side, it's different. We haven't had to reprice our services at all. It's the exact opposite. We've had to provide more value to justify the 1% a UM. So you've gone to the seventies and eighties getting access to capital markets for folks. That's what a stock broker was in the nineties. And in two thousands, being that portfolio manager, the advent of mutual funds and exchange traded funds to now doing holistic financial planning and making sure that we're doing the estate planning, doing the insurance planning, bringing in the tax planning, leading, RIAs now are taking over this tax planning service line.
(14:30):
They see the value, the immediate value you can provide to clients. So the evolution on the wealth management side has seen a movement towards providing all these additional services. And don't get me wrong, Dan, they're going to start doing just tax returns as a loss leader to provide greater value to their clients. So we're seeing this evolution of the professions. I believe the accountant is a great financial advisor, has great financial advisor potential, because what we do as financial advisors, we're just really helping clients from making three to five catastrophic decisions. Like you just stated in March of 2020 when COVID hits and the market drops, going to cash would be a wealth destructive behavior. Now, this isn't investment advice, right? As well as during tariffs, right? When that tariffs announcements hit and all of a sudden the market drops, we're helping clients many times stay invested. I call it, we are emotional circuit breakers, and it's not really timing the market, Dan. It's time in the market. We're not picking stocks anymore. The computer does a lot of that work. We're helping people save and invest, and we're accountability partners, and that's what really accountants are. They're risk averse. They're making sure that clients are staying part, staying on pace with their plan and helping 'em make great decisions and looking at the different options available. So I think accountants are greatly positioned to take on more of this future facing role.
Dan Hood (16:00):
I love that emotional circuit breakers because we talk to, as part of our service, our survey every year of the top CPA firms in wealth management, inevitably one of the things, the most common thing they're talking about doing, as you say, it's not picking stocks, it's not this, it's not that. It's a lot of handholding and it's keeping people from doing stupid things. When the market's going crazy, it's saying, no, no, stop. We figured this out. We have a plan for this. As you say, time and market, the whole point of it is we've prepared for these kinds of things and the most important thing for you to do is nothing just turn away,
Rory Henry (16:35):
But dead person has the best returns right there. That's
Dan Hood (16:38):
Exactly, and that, I mean, there's read to which you could say this is a perfect role for accountants to be cautious and to be careful and to say, listen, we're risk averse, but also caring deeply about the success of their clients.
Rory Henry (16:51):
Yes. I mean, look, we are helping people navigate life transitions and money is very emotional too, Dan. We all experience it. It's personal, it's professional, but it's emotional. And we're helping clients through marriage, having a child for the first time, buying a home, starting a business, growing that business, selling a business. There's healthcare needs and there's legacy considerations with estate planning. Our friend Ron Baker says, we're advising clients from womb to tomb. I absolutely love it, and that's really what a virtual family office is.
Dan Hood (17:21):
Yeah, no question. And I think for, you've mentioned accountants have traditionally been a sort of backward, historically facing profession, and there's a certain amount of discomfort for a lot of accountants with offered just broadly, not just to a wealth management advice, but advice in general moving towards advisory services because there's a certain sense, well, I'm not comfortable promising things about the future, but is that really what a holistic financial advisor is doing? Are they making promises about the VI or are they Yeah,
Rory Henry (17:53):
Just as a business advisor making promises with the success of a business, we're just giving options for clients out there. We're looking at their risk profile and then putting them into some type of portfolio. But like I said, it's really looking at all the additional stuff we're doing as advisors. That's why I trademarked the term Dan advise roar, and the ROAR is not short for Rory, it's for return on relationship. We're not necessarily a servant to a service. We service that relationship and use our acumen and expertise. McKinsey did also, another study says by 2030, we're all going to become really integrated wealth and life coaches helping people with their businesses, their taxes, their financial wellness. They'll help their healthcare, and as AI continues to advance, it's going to do all the data and mind for opportunities. It's going to be that human on the other side working with you that understands you, that can provide personalized, timely, and impactful advice.
Dan Hood (18:51):
I was going to ask you about the return relationship, because the relationship is so much at the core of what good accountants are doing is building a long-term relationship with their clients, getting to know them very well, Karen, about their results and so on, and being there with them when they need. So I'm glad you brought that up because it's a neat concept, right? If you think it's about return on investment, but the return on relationship
Rory Henry (19:13):
And you will get that ROI, if you focus on the relationship and that return on that relationship, if you cultivate those relationships, you provide great service, you understand your clients, you're connecting these services, and you're helping clients get to where they want to go in life. I'm a big believer, again, in the platinum role, the golden rule is due on others as you would want on you. The platinum role is due on others as they would want done onto them. And so it's really putting yourself in their shoes and helping them to where they want to get to go in life.
Dan Hood (19:38):
Excellent. Excellent. Alright, well, you convinced me. I assume you've convinced hopefully some of our listeners who maybe haven't moved down this path to becoming a holistic financial advisor. Let's talk about what are some first steps you could take? I don't have any wealth management or financial advisory role in my firm. How do I build that? How do I move towards that?
Rory Henry (20:02):
That's a good question, Dan. I always say for folks out there, go through a holistic financial plan yourself, experience it, get some demos with some financial planning software. There's tremendous software solutions out there in the marketplace. So go through that yourself to find out really what it entails. And then I would say do an estate plan as well. On your own family. 55% of the population has no estate plan at all. 31% of people have a will, 11% of people have a trust. And so we have the ability to start having people think about the end in mind. I always say there's two great services out there, exit planning and estate planning on the business side, exit planning, we think backwards estate planning, we think backwards as well, and we can map out a plan of action. So those are just some practical ways we can start. And then I would say, look at the series 65 exam. If you want to start doing investment management, you could also look at the PFS. And then I always tell CPAs out there, caring professionals, you got to crawl before you walk before you run. So partnering with ra, like Arrow Root, family office, or another wealth manager you currently work with is a great way for you to start having calls with wealth advisors and seeing how the process works. And Dan, the secret sauce, it's not that difficult.
(21:19):
The CPAs who we work with go, that's all you're doing. You're literally putting things into a software program and spinning out a risk score of a portfolio. Yes, that's the easy part. The more difficult part is really the human first approach and making sure that we can do the personal scales and really understand our clients, but accountants already do that. If they have a great business that it's tech enabled, they're already doing all that work. They understand the family dynamics, they understand the intricacies of a business, and many times we are like therapist Dan out there. I think those in our audience can agree. People share intimate knowledge about their business and personal finance with us. This we sit in a privileged position. And so I think we offer need to be able to offer our clients this integrated approach to make sure they have great business advice as well as great personal financial planning advice.
Dan Hood (22:07):
Right. Well, it's an excellent point. A lot of people, when people talk about why accountants should look at wealth management, they often say, well, you already know the details of their financial position, their tax return, and so on. But as you point out, you also probably know a lot about their family and their business and their hopes and dreams and all that sort of squishy stuff that's so important to the holistic advice, as you say, a lot of portfolio selection. I don't want to say it's automated, it's not, but it's a lot easier than you might think. What's hard is understanding people, understanding what they want, knowing where they're headed, knowing who in their family you can talk to about something and who you can't, that sort of thing. You already as an accountant know a lot of that as well.
Rory Henry (22:47):
Yeah, yeah. I totally agree, Dan. It's like sitting around a campfire talking to a good friend on what they want out of life, and then you can use your act and your knowledge of the tax code and planning to be able to help them get there
Dan Hood (22:59):
Sitting around the campfire and charging them for your dunk. Exactly. Excellent. Well, this is, as I say, I think you've convinced me I'm going to go become an accountant and then become a holistic financial advisor, but I suspect you've convinced a lot of other people. I would recommend that they go take a look at the book, "Holistic Guide to Wealth Management." It's great stuff. Rory Henry of ArrowRoot Family Office, thanks so much for joining us.
Rory Henry (23:21):
Thank you, Dan. Appreciate it.
Dan Hood (23:23):
And thank you all for listening. This episode of On the Air is produced by Accounting Today with audio production by Anna Mints. To review us on your favorite podcast platform and see the rest of our content on accounting today.com. Thanks again to our guest, and thank you for listening.