Transcript The Opportunity for CPAs

The Opportunity for CPAs
• You’re committed to determining the needs and
then delivering the right services to your clients.
• You play an important role in the lives of your
clients and in the success of their businesses.
• However, there is a very real opportunity in today’s
marketplace to do more.
• Industry research tells us that affluent individuals,
including business owners, are very interested in
obtaining more than tax services from their
accountants.
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Business Models of Financial Advisors
Investment generalist: Advisors who offer a broad range of
investment products and do not specialize in a single type of
product. Conduct brief fact finding sessions and then offer
clients a suite of possible products based on their needs.
Transaction focused
Wealth managers: Advisors take a comprehensive approach
to meeting client needs by using a highly consultative
approach to construct integrated, personalized solutions.
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Business Models of Financial Advisors
Many Advisors Call Themselves
Wealth Managers
Few Advisors Are Actually
Wealth Managers
Wealth
Managers
7%
Desbribing
themselves
as other than
wealth
managers
54%
Self described
wealth
managers
46%
N = 2,094 financial advisors
Source: CEG Worldwide, LLC., 2007
Investment
oriented
advisors
93%
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The Two Business Models Compared
Business Model
Investment
Generalist
Wealth Manager
$307.8 million
$645.2 million
Average annual net income
$279,000
$881,000
Average number of clients
269.3
101.1
Average assets under administration
N = 2,094 financial advisors.
Source: CEG Worldwide, 2007
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CPA Opportunity Key Points
 Substantial numbers of clients would like to obtain additional
financial services from their accountants.
 Despite this, relatively few accountants offer financial services,
meaning that relatively few clients obtain these services from
their accountants.
 When clients are able to obtain financial services from their
accountants, they report very high levels of satisfaction with
both products and service.
 The interests of clients point to a wide range of financial
services needs, including investment management, insurance
products, financial planning and estate planning.
 Only a small percentage of financial advisors are offering wealth
management.
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How to Implement a Wealth Management
Business
1.
2.
3.
4.
Buy It
Build It
Joint Venture
Strategic Outsource
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Buy It
Advantages
• Proven talent can be
acquired immediately
• Allows leveraging of existing
clientele of both
organizations
• Control over existing client
relationship is retained
• Scale can be obtained
quickly
Disadvantages
• Capital requirements make
this option suitable only for
large firms.
• Firm assumes all risk
associated with the
acquisition and new service
offerings.
• Lending in this economy
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Build It
Advantages
• Allows leveraging of existing
clientele.
• Control over client
relationship is retained.
Disadvantages
• Requires substantial
commitment to new
resources, including
additional expertise and
expanded infrastructure.
• May distract from core
competencies.
• Firm assumes all risk
inherent in new service
offering.
• Custodian minimum
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Joint Venture
Advantages
• Requires minimal
commitment of resources.
• Allows leveraging of existing
clientele.
• Control over client
relationship and level of
client service can be
retained.
• Risk inherent in new service
offering is shared with
strategic partner.
Disadvantages
• Requires a close match
between the firm and the
partner in terms of culture
and requires significant time
commitment to ensure
success.
• Equity left on table
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Strategic Outsource
Advantages
Disadvantages
• Requires minimal commitment of
resources.
• Allows leveraging of existing
clientele.
• Control over client relationship
and level of client service can be
retained.
• Adopt best practices through
experienced provider
• Maintain all ownership
• Quick startup time
• Some control lost
• Possibly cost
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Gross Revenue per CPA Firm from Financial
Services
2003 Revenue
(Average)
2004 Projected
Revenue
(Average)
Projected
Increase from
2003 to 2004
Smaller firms with in house financial
services (Gross)
$392,000
$546,000
39.3%
Larger firms with in house financial
services (Gross)
$718,000
$1,037,000
44.4%
Smaller firms using outside financial
services providers (Net)
$834,000
$1,359,000
62.9%
Larger firms using outside financial
services providers (Net)
$1,241,000
$2,451,000
97.5%
N = 394 CPA Firms
3 or fewer partners= small
Source: CEG Worldwide, Capturing the Opportunity, 2004
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RIA or Registered Representative
• Options on how form business:
– Create and oversee own RIA practice
– Affiliate with an entity as a registered
representative
– Become a broker of a broker dealer
• This comes down to fee based or
commission
• All have pros and cons, but primary issues would
be equity, control, compliance and perception
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FINRA vs. SEC
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RIA Formation
• SEC vs. State Registration
– $25,000,000 assets under management
requirement for SEC
• Net Capitalization requirements - $12,500
• Timing
• Costs – Minimal
• IARD Filing
• U4
• IARD Example
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Licensing Exceptions to 65
• CFP - Certified Financial Planner
– Awarded by the Certified Financial Planner Board of
Standards, Inc.
• ChFC - Chartered Financial Consultant
– Awarded by the American College, Bryn Mawr,
Pennsylvania
• PFS - Personal Financial Specialist
– Awarded by the American Institute of Certified Public
Accountants
• CFA - Chartered Financial Analyst
– Awarded by the Association for Investment Management
Research
• CIC - Chartered Investment Counselor
– Awarded by the Investment Counsel Association of
America, Inc.
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Courses for License
•
•
•
•
www.firesolutions.com
http://www.kfeducation.com/securities/
http://pfp.aicpa.org/
http://www.cfp.net/
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Compliance
•
Integral part of practice which cannot be overlooked
•
Must have individual overseeing the compliance
– Chief Compliance Officer
– Outsource opportunities
•
Email/File Storage/Manuals/Procedures
•
ADV Part I and II
•
Investment Advisory Agreements
•
Privacy Policy
•
Business Continuity
•
Code of Ethics
•
Organizational Chart
•
Policies and Procedures
•
Gift Log
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Technologies
• Portfolio Management, Reporting, Back Office
• Customer Relations Management (CRM)
• Document Management
• Financial Planning
• Risk Assessment
• Investment Policy Statement
• Email Compliance
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Technologies Must Work Together
Portfolio
Reporting
Position
Analysis
Solution
Custodian
Your
Practice
Independent
Entity
CRM
Rebalancing
Solution
Financial
Planning
Software
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Solutions
• Portfolio Reporting
– Portfolio Center
– Black Diamond
– Advent
– BridgePortfolio
• Custodian – New Requirements
– Fidelity
– Charles Schwab
– TD Ameritrade
– Scott Trade
• Rebalancing
– Tamarac
– I-Rebalance
– TRX
• Financial Planning
– Naviplan
– Money Guide
– Money Tree
• CRM – Client Relationship
Management
– Outlook
– Sales Force
– ProTracker
– Retdtail
– Junxure
• Position Analysis
– Morninstar Advisor
Workstation
– Principia
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Strategic Action Plan for Implementing a
Wealth Management Business
• Define the Vision
• Identify Needed Resources and Support
• Create a Marketing Plan
• Bring it All Together: The Business Plan
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Reasons Why CPAs Fail at Implementing a
Wealth Management Business
• Too Busy with Core Tax Practice
• Not Willing to Risk Losing Clients in Order
to Transfer Their Practice
• Are Not Able to Change Their Mindset to
That of A Financial Planner
• Do Not Achieve Full Partner Buy-In
• Champion???
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Business Plan
• Interview partners asking:
– What have we done in the past?
– What will stop you from referring?
– When a client asks for a referral, how are you
handling? Worked out?
– Your approach to managing money?
– In looking at your client base, what is the
approximate net worth of your top 15 clients?
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Quantify The Opportunity
• Extract the following from Lacerte/Pro Systems into
Excel:
– Interest
– Dividends
– Capital gains distributions
• With this information, assign a relevant interest rate
to extrapolate the potential assets under management
opportunity.
• Compare to partner responses for largest 10 clients.
• Taking the potential assets figure, multiply by an
advisor fee rate – 1% is a good approximation.
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Present findings
• With your partners “why”/“why nots” and
revenue potential, have an offsite meeting to
discuss if this truly warrants an opportunity for
the practice.
– Are the dollars enough?
– Can the practice be of the same quality?
– Cost to start?
– Can the “why nots” truly be overcome?
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Should You Even Be in the Business?
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Champion
• Each firm needs a champion to head up the new
offering.
• Will need to obtain their Series 65 or CFP.
• Any partner sharing in fee revenue will need to
have a Series 65 or equivalent.
• Critical area to discuss with compliance for
structuring.
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Company Kick Off
• Host an event at a local establishment and invite
all potential clients – XYZ University.
– Purpose is to announce new service, but must
be educational.
– Do not make a commercial.
– Invite local attorney to present on estate
planning issues. Be very clear on topics and
client level of sophistication.
– Invite independent insurance agent to discuss
relevant insurance topics
– Tax partner to discuss tax planning
– Champion of wealth management offering to
discuss new approach
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Wealth Management Offering
• Be very clear in your approach and the value of
having a CPA maintaining your portfolio
– Knowledge of taxes
– Coordination with other tax professionals
– Independent and unbiased
– Conservative
– Most trusted advisor
• Offer clients a second opinion analysis of their
portfolio. Explain your process of working with
clients.
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Essential Strategies of Elite Financial
Advisers
• Focus on Affluent Private Clients
• Use the Advanced Planning Consulting
Process to Differentiate Yourself From the
Competition
• Manage Your Practice Like a Business
• Partner with Financial Institutions
• Make a Lifelong Commitment to Learning
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Focus on Affluent Private Clients
•
•
•
•
What Type of Clients Do You Have Today?
Are They Suitable For Your Services?
How Would You Qualify Affluent Clients?
How Would You Approach Them and Position
Yourself as an Expert?
• How Would You Communicate With Them?
• How Would You delight Them in Order For
Them to Become Your Marketing Apostles?
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Use the Advanced Planning Consulting Process
to Differentiate Yourself From the Competition
• How Do Affluent Clients Buy Financial
Services?
• What Can You Do to Eliminate Client
Turnover?
• What Should Your Investment Policy
Statement Look Like?
• How Can You best Demonstrate to Your
Clients the Value You Bring to Them?
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Manage Your Practice Like a Business
• Which Financial Services are Affluent Clients
Looking For?
• How do You Spend All Your Time on RevenueGenerating Activities?
• Where Can You Grow Income, Even With the
Downward Pressure on Fees?
• What Do You Need to do to Sell Your Practice For
Significant Value?
• How Do You Find the Right Balance In Your
Personal and Professional Life?
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Partner With Financial Institutions
• Where Can You Get Extensive Practice
Management Support From Financial Institutions?
• How Can You Leverage the Technical Support
Available to Advisors?
• Where Can You Get Advanced Sales and
Marketing Training?
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Consultative Client Process
Discover
Meeting
Investment
Plan Meeting
•Complete
Discovery
Process
•Presentation of
Investment Plan
Investment Plan and IPS
•Diagnostic of current
situation, our
recommendations for moving
forward and details on our
investment approach
Mutual
Commitment
Meeting
•Confirmation of
Commitment
45 Day Follow
Up Meeting
•Organization of
Account
Paperwork
Regular
Process
Meetings
•Review of
Progress and
Wealth
Management
Wealth
Management Plan
•Evaluation of financial
needs with
recommendations
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Discovery Meeting
– Record meeting
– Thorough and detailed questions
• Always allow both individuals to answer
– Do not focus on the assets – focus on:
• Goals
• Values
• Relationships
• Process
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Create Investment Policy Statement
• Create your own or use an off the shelf solution:
– IPS Advisor Pro
• Mind Map
– Mind Mapper
• Goals analysis
– Looking at where client is and where they want
to be – you are there to help them fill in the
gaps
• Monte Carlo Analysis
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Financial Planning
• Two approaches depending on solution:
– Goal Based
– Cash Flow Based
• Need to address clients major concern:
– Do I have enough?
• Should have “what if” functionalities
• Asset allocation models built in
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For a consultative conversation on the concepts in this presentation or
questions about TPBS Capita Management, please contact:
Michael Tate
[email protected]
916.929.1006 x103
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