How to Form a CPA-Financial Advisor Alliance

Terry Sheridan
Share this content

Developing a strategic alliance with a financial advisor may be just the ticket to grow your accounting practice, particularly if many of your clients are affluent. An added benefit is that this type of pact can avoid raised eyebrows about potential conflicts.

More than half of those folks with more than a million to invest find an advisor through their accountant, attorney, or other professional, says John Bowen, founder and chief executive of CEG Worldwide in San Martin, California, which trains advisors. And 30 percent make the connection through another client of the advisor.

"So there's a real desire by financial advisors to figure out how to do this and do it well", he says.

But here's the catch: Advisors are almost never in the same office or practice as the accountant, he says. And only a fraction of accountants also are financial advisors or have wealth management divisions in their firm. (A number of advisors are former CPAs or attorneys, though.)

That's where the conflict concern comes in. A CEG Worldwide study indicated that 95.4 percent of CPAs believe there's a conflict with an in-house financial advisor and 76.5 percent are concerned an advisor in the practice would affect their client's trust.

"When you prepare someone's taxes, you have all of their financial information and they're coming to you for advice", Bowen says. If someone in the accountant's office then tries to sell investment or insurance products, the firm may no longer be seen as trustworthy, he continues. Meaning, the client figures the CPA will be turning over financial information to the advisor.

More palatable to everyone is the strategic alliance. For CPAs and advisors, the "economic glue" can be a joint business development and revenue sharing, he says. And accountants can be connected to top advisors without the direct costs incurred if they were in-house.

Couldn't a strategic alliance be considered a conflict? "Almost anything could be seen as a conflict", Bowen says. "You have to provide total transparency, and the [Securities and Exchange Commission] requires that."

According to a CEG Worldwide study of more than 2,000 advisors, 61 percent said that referrals from other professionals brought them their five best new clients in the previous year.

That's not to mean the goal is casual, informal referrals. Strategic alliances are formal business partnerships that spell out the commitment on each side.

CEG Worldwide recommends in an e-book that an alliance's best practices include a pilot program that allows you and some of your top clients to experience an advisor's services. This can include a marketing campaign that announces the alliance and allows your clients a no-charge second opinion about your advisor-partner, and a private event for select clients.

While CPAs and attorneys are prime alliance partners, financial advisors also can link up with life insurance salespeople, association executives, business brokers, investment bankers, consultants, and casualty agents.

"Having the professionals collaborate for their best interests is very attractive for the affluent", Bowen says.


Please login or register to join the discussion.

By top beancounter
Jun 26th 2015 01:11

Simple answer is, although we have a financial advisory division for our more affluent clients, we sell no products of any kind.

Thanks (0)