CPAs today are asked to shoulder more responsibilities than ever before. The spread of new technologies such as automation and artificial intelligence has left some speculating whether the accountant could be an extinct profession in the future.
The days of accountants merely ensuring compliance and doing taxes once a year are surely coming to an end. But accountants possess intimate knowledge of clients’ financial and nonfinancial issues, and can be in a valuable position to offer advice which a computer cannot give. Furthermore, wealth management solutions can be done year round, giving firms a consistent and less stressful source of income compared to the frenetic work of tax season.
Transitioning to focus on wealth management can be both easier and more difficult than it appears. Clients often already ask their CPAs business and financial questions, and so shifting towards providing advice and managing wealth may seem to be a simple transition. But accountants and financial advisors often have different mindsets, and so CPAs may need to change their mindsets in order to maximize profits and help clients.
Trust and Marketing
A major advantage which CPAs have over traditional brokerage and advisory firms is that more people trust us. A 2016 Gallup poll found that accountants are in fact the fifth highest-trusted business sector in the United States. Customers know that when they ask for advice, we are telling them the truth and not selling them some financial strategy that coincidentally happens to make us the most money.
A potential downside of this trust is that CPAs can be unwilling to try to sell their products to their clients, whether it is out of a natural aversion towards “salesmanship” or an unwillingness to break that hard-earned trust. But if you believe in your future wealth management offering, there is no reason why you should not be telling your clients about it and how much it will benefit them. Salesmanship is not about crafty tricks where you attempt to deceive the client, but should be about reviewing their financial situation and offering them the best product.
You may want to practice how to address clients about any new wealth management offerings through roleplaying and communicating with other CPAs interested in wealth management. But never be afraid to market your product and show that you can continue to be trusted.
Partnering Up and Education
If you intend to focus on financial planning and wealth management, you may need new education and skills. The Certified Financial Planner (CFP) designation is one potential option, and we are seeing an increasing number of CPAs take this exam. It should be noted that in order to earn the designation, individuals have to spend $1,000 just to take the exam, get a loan from LoanMart, and gain three years of experience. But if you can afford the time and money, the designation is a key step in showing your wealth management skills.
Otherwise, an alternative approach is to partner up with someone who does have a CFP designation. Such partnerships, whether an individual partnership or a joint venture including your firm, can be tricky. The partner could choose to leave and take clients attracted by his financial services with him, and would fundamentally be calling the shots as he would possess superior knowledge to you. On the other hand, you could learn from your partner and eventually become a financial partner in your own right. Either way, the cleanest, best route is to keep everything in-house and learn wealth management yourself.
Not all clients are created equal. As Russ Alan Prince with Forbes points out, one of the biggest weaknesses for CPAs is that despite our knowledge of clients’ wealth and prospects, we are unable to identify wealth management opportunities. This happens because we fail to see how they can benefit and because we do not know enough about their financial situation to offer them the best advice.
Focus on clients who need wealth management solution advice first such as business owners. As noted above, get in their face about how you can help them and stress either your or your partner’s skills. If you have managed to gain their trust, you can at the very least get them to consider your offer.
Hitting as many of your clients as possible is important because you want clients, but there is another reason. You need to jump into the pool of wealth management instead of wading in a little at a time. This is not an easy field, and you want to accrue as much experience as possible. Furthermore, your clients will be less likely to trust you should they discover that wealth management is a mere sideshow to your other CPA duties.
The road towards becoming a financial planner and managing wealth is not an easy one, but it is crucial to surviving in a world where accountants must distinguish themselves from their competition. The sooner you look to accrue clients, get educated, or find a partner, the sooner you will be on the path to success.