Mindy Diamond for WealthManagement.com writes: At first blush, accountants and
financial advisors appear to make strange bedfellows. The former are
often perceived to be more analytical and the latter, more
entrepreneurial. These perceptions aside, many medium to large
accounting firms have taken steps to establish or greatly expand their
financial services practices primarily to:
- Deliver more robust service offerings to their clients;
- Become more profitable as a firm;
- Diversify their traditional accounting practice; and
- Counter the competition that is providing financial services to their clients.
“Accounting
has been increasingly more competitive, and accounting firms need to be
able to add value for their clients beyond traditional compliance work,
says Marc L. Scudillo, CPA and managing director of EisnerAmper’s
wealth management unit. “Increasingly more clients felt that tax
preparation was a commodity,” so his firm had to make a change. While
EisnerAmper established their wealth management practice in 2001, they
believe it is still in its infancy and that there is tremendous upside
growth potential.
Accounting firms
also see a sizable benefit in being able to work with their clients in a
way that is unique to their profession. Clients already view their
accountants as their “trusted advisor,” and they are generally more open
to divulging their complete financial picture with little or no
hesitation.
Another advantage that
accounting firms believe they have over the traditional brokerage and
advisory firms is that their clients don’t feel that they are being sold
something. They view the investment advice they are receiving as part
and parcel of their tax, estate and business planning.
But
marketing has been a big challenge, Scudillo says. “We have to work at
having clients know that these services are available to them in a
fashion that is unique to their previous experiences from the brokerage
industry.” Scudillo believes it’s a challenge partly because of the
“protection” component an accountant feels toward the client and also
the fear that the firm would be perceived as a “sales” organization.
In
April 2013, we received a call from "Phillip" the head of the wealth
management unit of one of the largest family-owned, property and
casualty insurance companies in the country.
A Growth Opportunity
Affiliating
with an established CPA firm can be a growth opportunity for one’s
practice. Phillip, for example, had moved from Merrill Lynch in 2004 to
launch a wealth management division at one of the largest family-owned,
property and casualty insurance companies in the country. At that time,
it became clear that the insurance firm was not investing adequately in
his unit and that, as a result, the wealth management practice was not
growing nearly as quickly as it should have been. He felt the firm no
longer saw the value in the wealth management group because the unit
made up only 2 percent of the firm’s gross revenue and was not their
core business.
We introduced Phillip
to a large CPA, business consulting and financial advising firm, with a
good number of corporate clients, a retirement planning sub-specialty
and a core practice that catered to the mass affluent. Phillip saw many
synergies with a potential merger. The CPA firm had recently completed a
similar deal with the wealth management unit of another property and
casualty company. Moving to the new firm, he would be able to more
easily recruit advisors in the CPA firm's network and cross-sell CPA
services to all clients.
The merger
gave the CPA firm a chance to expand their footprint, provide their
clients with more services including risk management, gain better access
to professionals through more locations, and grow their assets under
management. In the fall of 2013, Phillip and his advisors moved nearly
$250 million in assets to the CPA firm.
So
far, Phillip and his team have been introduced to many of the new
firm’s corporate clients, started writing retirement plans and have been
providing wealth management services to a whole cadre of wealthier
clients that they never had exposure to at their prior firm. He believes
the firm values their business and will continue to invest in it
providing the scale, depth of services, and referral stream that he had
initially sought. The accounting firm has gained another revenue stream
and prospects for its accounting and tax services.
While
the financial advisor and accountant might seem like a bit of an “Odd
Couple” at the outset, as long as the CPA firm understands that the
wealth management unit cannot be run like an accounting firm and
vice-a-versa, there are significant synergies to be had.
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