How to Add Wealth Management Services Into Your Accounting Firm
How to Add Wealth Management Services Into Your Accounting Firm
Wealth management advisory firms and accounting firms have many commonalities in the services that they provide. These financial professionals both assist in achieving the common goal of financial success for their fiduciary clients. When these professionals work together, the goal of financial independence is easier to accomplish. The wealth management and accounting industries have a good deal of intersection and complement each other.
Accounting professionals typically act as the soundboard for the client and understand the ins and outs of their financial situation. However, oftentimes, a CPA may look to incorporate assistance from a financial planning or wealth management professional to assist them with investment management techniques or strategies. Tax planning often has aspects of retirement planning or financial planning within potential plans. When clients attempt to address retirement planning and strategies to become financially independent, taxes are a required component that needs to be considered. With this level of collaboration happening on a weekly basis for many firms, why not bring these wealth management practices into the firm to have a cost-effective, in-house solution? Here are some options for bringing wealth management services into your accounting firm.
Building an Internal Wealth Management Department
Firms can build their own internal wealth management department within their accounting firm. This will allow wealth management to provide a new dimension and expansion to the accounting practice within the firm. This will allow for the department to be used as an in-house resource for current clients and also as a tool to attract new clients. While currently, most clients may be coming to your firm for accounting and tax services, the wealth management division could potentially introduce clients to the investment and wealth management side of the firm, even if they were not originally looking for these services. This will allow your firm to become a one-stop shop for all of their financial needs, leading to a better and improved service for your clients. The opposite could be true as well, with clients looking for investment and wealth management services coming to your firm for accounting and tax services. This option is usually easiest for larger firms that have the capital to allocate to starting, building, and maintaining this new department within the firm. Although it is a similar division to existing accounting services within the firm, it is a different line of business with different intricacies that require it to be treated in such a way.
Potential risks are always a factor when considering this option, as one is risking the potential loss of a tax client if their investment portfolio, managed by your firm, goes the wrong way, even if the result simply has to do with an uncontrollable outcome of the market.
Revenue Sharing Systems between Firms
Many larger wealth management firms or brokerage firms will offer a revenue-sharing agreement or system with accounting firms. The referral of clients in both directions allows for both firms to enjoy additional gains in revenue. This allows the accounting firm to simply concentrate on optimizing their accounting and tax practices while outsourcing the wealth management component to a partner firm while still being compensated. This option will result in a small percentage of added revenue but requires little to no startup capital to start. Because the solution is not in-house, there are no maintenance costs associated with this option. Because of this factor, this option is ideal for small to mid-sized accounting firms. This option will require all accountants to be licensed and certified.
Solicitor for a Registered Investment Advisory Firm
Another option a CPA can take advantage of is by becoming a solicitor for a Registered Investment Advisory (RIA) firm. This arrangement does not require any testing, allowing a CPA or accounting firm to be compensated for their referrals. However, the accountant must maintain proper certifications such as Series 6, 7, 63, 65, and/or 66. No advice or guidance is given on behalf of the RIA, but they could be involved in discussions or communication between the client and the wealth management advisor. The client would need to sign off on a disclosure form, making them aware the accounting professional they are working with is being compensated for the referral. This is an important disclosure document allowing the client to be fully aware of the arrangement between the accounting firm and the RIA. This level of transparency is a common practice and a best practice that every firm follows. With this option, the CPA doesn’t have to invest any money in startup costs or maintenance costs for an in-house wealth management division. No partnership between firms is required, making this option the easiest to implement. With the standard transparency required of the firm, clients will have a complete understanding of how the firm practices and services their clients. It will also create a separation between the accounting tax services provided by the firm and the wealth management services provided by the RIA.
FAQs
Most advisors benefit from client referrals, but they often find clients on their own. They are consistent in their outreach, often taking an intentional and proactive approach to increasing the rate of referrals they gain from clients and other influential members of their network.
Accounting and financial planning professions tend to rely heavily on math and numbers; however, accountants do auditing work, financial forecasting, and put together and look through financial statements, while financial planners help individuals with their wealth management and retirement planning strategies.
Wealth management is an investment and asset planning advisory service that combines multiple financial services to address the needs of affluent, high-networth clients. A wealth management advisor is a high-level financial professional who manages a client’s wealth holistically, typically for a percentage fee.
Wealth management is the highest level of financial planning services for affluent clients. It generally includes comprehensive and holistic investment management alongside financial advice, estate planning, tax guidance, and even legal assistance.
Retirement planning is one of the most important and central components of wealth management. Wealth managers and advisors make sure that individuals planning for their retirement start saving and investing early by taking risks in investments while young and getting more conservative when their retirement age approaches.
- Boston Consulting Group. “Private Wealth 2017,” Page 7. https://image-src.bcg.com/Images/BCG-Transforming-the-Client-Experience-June-2017_2_tcm9-161685.pdf
- Investor.gov. “Investment Advisers.”. Accessible From: https://www.investor.gov/introduction-investing/getting-started/working-investment-professional/investment-advisers
- True Independence. “True Advantage.”. Accessible From: https://www.tru-ind.com/tru-advantage
- Andreessen Horowitz. ‘Why Software Is Eating the World.”. Accessible From: https://a16z.com/2011/08/20/why-software-is-eating-the-world/
