The Old World
In the old world, a client might have an attorney, a bank, an insurance agent, a broker, a financial advisor, and an accountant. Each advisor would handle a small portion of the client’s needs. Often, the accountant would act as the client’s "trusted advisor" when dealing with the other advisors. In this role, the accountant would help the client comprehend and utilize the advice that was coming from the other advisors.
The idea that the accountant might ever sell financial products to clients for commission was like the idea that the earth was round before 1492.
The New World
In the new world, many advisors who at one point only handled one area of a client’s finances are now encroaching on the turf of the other advisors. It is also readily accepted that accountants can and do sell financial products to clients for commission. In the new world, many accounting firms are getting licensed to sell insurance and forming arrangements with broker-dealers. In addition to their traditional accounting services, they are also selling insurance and/or investments to their clients for fees and/or commission.
The Next Step
The next step in the evolution of the new world would be for a client of an accountant to have, in effect, a "one-stop shop" where he or she can obtain advanced financial planning services and products in a consultative manner. This step moves the accountant toward becoming a wealth manager. As a wealth manager, the accountant acts as the client’s "personal CFO." He or she is not actually selling financial products and services; instead he or she is putting together a team of the best financial advisors possible who provide these services holistically.
Accountants as Wealth Managers
To create a successful wealth management platform, an accounting firm has to be able to provide holistic advice on investments, estate planning, asset protection, disability and income protection, and debt. Why would an accountant consider entering wealth management?
- Accounting firms typically sell for about 1.5x revenue. Wealth management firms typically sell for more than 4x revenue, and there are more interested buyers.
- Revenues from wealth management can provide sources of funds for junior partners to buy out senior partners.
- Adding wealth management can increase client loyalty.
Options
Accountants typically have three options if they decide to transition to a wealth management model:
- Develop a wealth management practice in-house.
- Buy an existing wealth management platform.
- Outsource wealth management to an established wealth management provider.
Accountants should carefully examine their situations to determine which option makes the most sense.
About the Author:
Matthew Tuttle, CFP®, specializes in helping clients create wealth management practices. He is the author of Financial Secrets of My Wealthy Grandparents and is frequently quoted in The Wall Street Journal, Forbes, SmartMoney, and many other financial publications. He frequently addresses accounting associations throughout the country. He welcomes your questions and comments and can be reached at 203-564-1956 or matthew@matthewtuttle.com.
