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John Corn

Making the Jump From Tax Planner to Financial Planner

How CPAs are well-positioned to expand their role by giving clients what they want most during these uncertain times: a trusted advisor.

December 16, 2010
by John Corn, CPA, PFS

For CPAs wishing to enter the field of personal financial planning, the current climate offers tremendous opportunity. Economic hard times and various scandals have eroded the trust people have throughout the system and left them wondering to whom to turn to with their investments during these uncertain financial times. People are looking for more than hot stock tips and short-term, market-timing strategies that fail to take into account their long-term goals or specific risk tolerances. In short, they are in need of a trusted advisor now more than ever — and their most trusted advisor is their CPA. Because of this, CPAs should feel compelled to step up and offer a full complement of financial planning services, including an investment-advisory relationship.  

What Are The Necessary Skills?

CPAs have the potential to make great financial planners, and those offering investment advisory services can add greater value to clients with a more profitable economic model than financial planning alone. CPAs can offer more of what their clients want than most traditional stock brokers. CPAs are already a trusted advisor to their clients, and they also have overall expertise in tax and estate planning. This puts the CPA planner in a strategic position to provide a more holistic planning experience than most other financial advisors.

At the heart of a successful financial-services offering is the relationship between the client and the professional. While technical expertise is important, working with clients in a consultative manner, and not as a product salesman, is key to building the deep relationships that clients desire. Since this is how CPAs have traditionally engaged with their clients, they have an advantage here, too. CPAs know how to be effective listeners, compassionate yet firm. They are able to reconcile inter-family issues and understand the individual needs and goals of each person, to lead them through good times and bad. Successful financial planners use these skills to gain intimate knowledge of their clients’ values, goals, net worth and income needs to effectively create a customized investment plan. Relationships are further enhanced through regular contact with clients and by coordinating with their other professional experts and/or family members.

Reader Note: John Corn will be part of a panel of speakers at an all-day pre-conference workshop on this topic on January 9 at the Advanced Personal Financial Planning Conference. Join us from January 9-12, 2011 in Las Vegas. Early registration ends for the conference on December 17, 2010!

CPAs can offer great investment advice. There are long-term investment strategies that are globally diversified, low cost, tax efficient and can deliver market returns year in and year out. This can be done without being a stock picker or market timer. The key is to work with clients to develop their plan, implement it and help them stick with it for the long term.

What Options Are There?

Assuming that young, aspiring financial planners exhibit the necessary traits listed above, there are a few different ways to move forward, each with their own unique opportunities and challenges. Briefly, they can:

  1. Start their own independent Registered Investment Advisor (RIA) firm. While this may provide the most upside potential, it is also demanding and risky. It's generally a different kind of CPA who enters the financial planning arena. Usually, it is the outgoing and pro-active entrepreneurial type who will be successful. These people need to be forward thinking and have vision for both what they and their clients can accomplish. Like any good financial planner, they need to be able to accurately assess their current situation, envision what they would like “to be when they grow up” and then put in place the pieces it would take to get there.
  2. Create an RIA firm within their current CPA firm. Many of the same issues that apply in the above option apply here as well. However, one advantage here is that the planners already have an established network of potential new clients — their current tax clients. In many cases, they are already the trusted advisor, so it may be a natural fit to step in as the champion of a financial services offering. Growing a successful business may not take as long if there is authentic buy-in from partners in the firm. It is important to fully understand who may be resistant to change or not willing to solicit their tax clients to become clients of the RIA firm.
  3. Join an established investment advisory firm. The fee-only investment advisor is a growing segment of the financial services world. The need for advisory firms to find young, quality talent is more important than ever. Recruiting and retaining young, ambitious financial advisors is key to ensuring growing advisory businesses can continue to operate and clients can continue to be served at a high level. Just as CPAs need succession plans for their firm’s practice, so do investment advisors. Hiring the right advisor becomes critical to the long-term success of the business. The experience received from being a successful CPA can be a valuable differentiator. The challenge, however, may be if firms are looking to hire young advisors with “established” books of business to create an immediate source of revenue.

Conclusion

For CPAs wishing to become a successful financial planner and investment advisor, there is no one-size-fits-all approach. Whatever the circumstances are — and however it makes best sense to proceed — one thing is clear: The current economy, in the aftermath of the recession, has caused many investors to re-evaluate the financial advice they have been given. Investment advisors held to the highest fiduciary standard are strongly positioned to step in as trusted advisors to more and more people. Now is the time for CPAs to become that very advisor to their clients.

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John Corn CPA, PFS, is an investment advisor with Buckingham Asset Management, LLC which is a division of the Buckingham Family of Financial Services. Buckingham Asset Management is an investment advisory firm that offers fee-only investment management to individuals, businesses, trusts, partnerships, not-for-profit organizations and retirement plans.

The AICPA’s Personal Financial Planning Section is the premier provider of information, tools, advocacy and guidance for CPAs who specialize in providing estate, tax, retirement, risk management and investment planning advice to individuals and closely held entities. All members of the AICPA are eligible to join the PFP section. Don’t miss the Advanced PFP Conference at the Bellagio in Las Vegas Jan. 9-12, 2011 with a robust agenda tackling the latest issues and a special day-long session on implementing PFP in a tax practice. The Personal Financial Specialist (PFS) credential is exclusively available to CPAs who wants to demonstrate their expertise in this subject matter. If you are Series 7, 65, or 66 licensed, you have until 12/31//2010 to use that license as one of the qualifications to obtain the credential. Visit www.aicpa.org/PFP to learn more.