The Path to Creating Sustainable CPA Firm Growth

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By Tony Batman, chairman and chief executive officer, 1st Global

In the face of rising competition, a stagnant economy and increasing demands from clients, successful CPA firms of the future will have to leverage their value and expertise to position themselves as the premier strategic partner for financial solutions. CPA firms can no longer continue business as usual.

CPA firms must be cutting-edge, creative and comprehensive in order to prosper in today’s business climate. A return to double-digit growth will require a change of direction for many CPA firms that will have to add services the firm has never offered before while improving operational efficiency for the services they currently offer.

For many CPA firms, the path to creating sustainable growth is through wealth management.

Consider a firm with a wealth management business that yields 20 percent to 40 percent in revenues as a percentage of their total tax, accounting and auditing revenues. The coefficient of value extraction means that a firm with $10 million of tax, account and auditing revenues could annually create an additional $2 to $4 million of sustainable wealth management revenues. Depending on profitability, the enterprise values of wealth management businesses are two to four times the wealth management revenues, substantially above those at a typical CPA firm.

In my 20 years coaching CPA firms on wealth management, I’ve seen many well-designed and well-run wealth management enterprises that generate 35 percent pretax profit margins and create three to seven times more enterprise value than traditional tax and accounting services. The AICPA/Moss Adams LLP 2007 Personal Financial Planning Practice Study indicated financial planning firms have revenue of $970 per client, whereas wealth management firms average $2,800 per client.

However, building a successful wealth management enterprise inside a multi-partner CPA firm is challenging. A recent study from Cerulli Associates revealed nearly 60 percent of firms called themselves full-scale financial planners while just half of them actually fit the profile of offering comprehensive financial services.

The first step to creating an executable road map for success in wealth management is to quantify your firm’s potential as a wealth management enterprise. This requires a full-scale wealth management feasibility analysis and consultation. This should include:

  • An analysis of current infrastructure and potential for success in wealth management
  • Pro forma profit and loss estimates for the wealth management enterprise at one-, three-, five- and 10-year periods
  • A pro forma valuation of a wealth management enterprise
  • Demographic and geographic market research on the firm’s potential client base
  • An understanding of internal and external impediments to success
  • Personality and skill testing of management team
  • Regulatory compliance review of an existing wealth management business
  • Learning “best practices” for CPA firms conducting wealth management
  • Development of a compelling value proposition
  • A consultation of the current and impending regulatory environment
  • Strategic firm business and succession planning
  • A SWOT analysis of available business models

An engagement of this magnitude typically requires an objective third-party consultant — someone who knows the CPA and wealth management business, and has gained insights from working with hundreds of successful firms to develop best practices for CPA firms offering wealth management.

Strategic planning compels business leaders like you and me to identify and pursue profitable growth opportunities. Wealth management can take many CPA firms from success to significance. But if you know your potential before engaging, it will only make the execution better.

In order to achieve the firm’s highest wealth management potential, there must be a clear vision of what the ultimate destination should be and then carefully defining each step required to realize that vision.

When you’re ready to create sustainable growth, consider the road less traveled. Wealth management, when implemented correctly and intentionally, can provide the growth your firm desires.

1st Global Capital Corp. is a member of FINRA and SIPC and is headquartered at 8150 N. Central Expressway, Suite 500 in Dallas, Texas 75206; (214) 265-1201. Additional information about 1st Global is available via the Internet at

1st Global was founded by CPAs on the belief that accounting, tax and estate planning firms are uniquely qualified to provide comprehensive wealth management services to their clients. Each affiliated firm is provided with education, technology, business-building framework and client solutions that make these firms leaders in their professions through dedicated professional client relationships built around wealth management.



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