To define wealth management, one has to look as far as his or her financial discipline. To an investment advisor, it may mean growing assets. To an insurance advisor, it may mean tax-efficient estate preservation and to an accountant, it may mean the best way to sell a business to minimize taxes. One definition that I personally like is taken from the book “Accountants as Wealth Managers.” The authors define wealth management as the blending of core accounting services, plus investment management, plus advanced planning insurance solutions. Whatever it is called and however it is defined, CPA firms are trending towards financial services for additional revenue opportunities. Some firms are selling products while other firms are delivering consultative services that generate fees and/or commissions to the bottom line.
How to build a CPA wealth management practice is not for this column to address, but I do want to stimulate the thinking of CPAs who are thinking about growing their respective businesses. If wealth management for CPAs is defined as core accounting + investment management + advanced planning services, it would seem logical to start relationship building with potential alliance partners in those fields but because of the way CPAs have traditionally done their business model, peer professional partnering has not been successfully engineered with Financial Services. For CPAs to be successful quicker and profitable sooner, they need to partner with experts in insurance and investment planning and create a solid business model. This becomes the blueprint to a multiple disciplinary platform with the direction and support from the firm’s managing partner.
Your high net worth clients want ideas on how to reduce their income tax bite. In New York City the combined rates are 50%, in Massachusetts it’s over 40% and unless you understand how pensions work, how can you have the best conversation with this client relevant to tax-efficient savings and how to transfer income taxes not paid into contributions and deductions? Simply put, you cannot, and this is contra-intelligent to what a CPA stands for. Taken one step further, if you cannot create relevant client conversations that connect with their lives on a variety of levels, you are vulnerable to the firms who prepared for the trending of CPAs into wealth management and you will have to reinvent yourself from a disadvantaged position. All business models must adapt to change once the paradigm shift in thinking has gained traction.
First Conversation with high net worth clients; Chances are you are in the wrong pension plans.
"Are you in the appropriate pension plan? Restated, this question asks "would you like to explore ways to further reduce your income taxes? Which is another way of saying “we use special pension plans that take advantage of all the favorable tax law changes, enabling increased contributions and increased tax deductions while decreasing your tax obligation. Is this something you would like me to go over with you?”
The outcome of those CPA approaches is predetermined. My next column will address the next conversation for you to have with your “A” list clients, marketing changes into wealth management and compensation arrangements.
About Barry Goldwater
Barry Goldwater is the Principal of the Financial Resource Group and a 20-year veteran of the insurance industry. He focuses not only on working with the business and affluent clients of CPA's and attorneys, but also in helping CPA's form and develop a business model to include financial services. His expertise lies with using insurance and tax deductible solutions and their applications in the areas of Business Planning, Pensions, Retirement Protection Planning and Wealth Transfer Planning. He is an insurance specialist who is a member of the Bisys Exceptional Producer Group, the New York and Boston Chapters of the Estate Planning Council and he currently sits on the board of the Society of Financial Service Professionals. He can be reached at 617-527-9736 or firstname.lastname@example.org. His web sites are www.frg-creative.com and www.goldwaterfinancial.net.