September 2003

Comprehensive Financial Advice from a Team of Trusted Professionals
By Chris McCarty

A recent survey found that 68% of affluent investors (investable assets of more than $100,000 or net worth of more than $500,000) use financial planning advice, but only 5% of these sought such advice from their CPAs. According to the 2002 SEI Research Draft for Advisors, published by the Spectrem Group (, the other 95% get their financial planning advice from stockbrokers, Certified Financial Planners (CFPs), investment advisors, bankers, insurance agents, attorneys, and similar agents.

Advice from decentralized sources, however, lacks uniformity and is too vast to easily manage, and activities are difficult to coordinate. The net result is inefficient advice. A team of professionals that emulates the efforts of multiple advisors can deliver comprehensive financial advice, providing clear direction based on a thorough understanding of goals and objectives. Such a team provides specialized advice that fits into an individual’s overall financial plan.

Survey feedback indicates that integrating separate professionals’ work is a considerable challenge. Advisors criticize this arrangement, saying that it compromises objectivity, independence, confidentiality, and control in the client relationship. But a team doesn’t need to sacrifice these values; in fact, they are prioritized in the team approach.

Examining such failures and developing solutions is important for two reasons. First, the CPA’s role is vital in providing clients with comprehensive advice. Research indicates that of affluent investors, 92% say they have a CPA relationship and 91.5% of those have stated that they would turn to their accountant for more financial products. Second, this affects how CPAs grow their practices. According to a recent survey (Intuit ProConnection newsletter; Bill Teague, November 2002), the following is a ranked ordering of the ways CPA firms are seeking growth:

1) Increase revenues
2) Acquire new clients
3) Add new services
4) Acquire additional expertise
5) Acquire or merge with another firm.

Increasing revenues within their business model is difficult because CPA firms are limited by their time and billing structure. Understandably, CPAs don’t simply want to work more hours to earn higher revenues. However, advancing technology and competitive forces have put downward pressure on billing rates.

In response, many CPA firms look to higher-value clients who use more premium services. Developing more personal relationships with their clients allows CPAs to better understand each client’s needs, provide more personalized advice, and uncover the need for additional services.

Building a Team

CPA firms have two options to build the best team:

Although CPA firms deliver tax, accounting, and other related services, they also offer their clients objectivity, independence, and confidentiality. CPA firms have spent decades building their businesses on these values, and strive to maintain control of the client relationship in order to protect the integrity of these values. Continuing to do so is important for the firms’ continued success.

To clearly delineate each advisor’s roles and responsibilities, preserving separate names and identities is recommended. The CPA firm keeps its name intact, as does the wealth management firm. By doing so the firms do not fall under the designation of an exclusive joint venture. This also protects each firm in the event that a client needs to separate from a participating organization.

The professional alliance is stimulated by a revenue-sharing agreement in which each advisor bears responsibility for providing and supporting suitable advice in that specialty area. The originating professional is entitled to a minority interest in the revenue generated (assuming that proper licensing is in place), while a second professional, carrying out the work, earns the majority of the revenue generated. In compliance with appropriate documentation, clients receive proper disclosure on an annual basis describing the alliance.

Team members should not have too close a relationship. Arm’s-length relationships allow each firm to maintain its own business model. Working under an organized operating agreement rather than a formal partnership agreement allows each member firm to maintain objectivity, independence, and control.

Furthermore, this structure encourages accountability, which compels each team member to work at maximum effectiveness.

Communication is vital to success. A team’s advisors should communicate regularly, through e-mail, conference calls, or face-to-face meetings, in order to make certain that consistent advice is given. An established system for regular communication with clients ensures that their expectations and concerns are closely monitored. Especially important are the quarterly review appointments, which provide personal client–firm contact and allow for ongoing advice.

Newsletters and educational memos are sent to clients throughout the year, giving updates on macroeconomic issues. This can lead to responses from clients who desire more information and additional team services.

A statistic produced by a large national bank and published in Fast Company magazine states that one year from initial engagement, clients owning one product with the bank have a 75% retention rate, while those owning four or more have a 96.5% retention rate. Similarly, building a team of professionals and allowing clients to access additional services opens the door to growth and lasting, mutually beneficial relationships.

Chris McCarty is a financial advisor with Cirrus Wealth Management in Valencia, Calif. He can be reached at cmccarty@

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