Much has been written in recent years about wealth management services that call for
practitioners, including CPAs, to have personal financial planning certification and to come under investment-adviser or other regulations. Much less
attention has been paid to PFP services that don’t require specialization or additional licensing.
One of these services is
helping clients assemble and oversee wealth management teams. In addition to CPAs, these teams consist of attorneys, investment advisers, pension
actuaries, insurance experts and others. CPAs also can offer important accounting and tax services to wealth management teams. For tax practitioners, the
ability to provide these PFP-related services is one of many market differentiators between CPAs and registered tax return preparers (a designation
recently created under IRS regulations). For other CPAs who don’t have a credential such as the AICPA’s Personal Financial Specialist (PFS),
PFP-related services present an opportunity to add a profitable practice area, though additional education might be
THE VALUE PROPOSITION
While some clients know how to choose and monitor a wealth
management team fitting their needs, most do not have the expertise or time to adequately vet the array of professionals needed. CPAs are well positioned
to help clients pick the right advisers and, perhaps more important, to avoid the wrong ones. That’s because CPAs possess a number of attributes
essential to this role:
- Strong, often multigenerational trusted client relationships.
- Related intimate knowledge of the client’s
financial and, often, nonfinancial issues.
- Fiduciary responsibility to act in the client’s best interest (except in certain cases, such as independent
- Professional discernment to disqualify those likely to be a poor fit for a client’s team.
- The related ability to recognize inappropriate
planning approaches for a particular client.
- A strong understanding of the unique financial planning issues of business owners.
- Deep, relevant technical
skills in such PFP areas as tax and estate planning, budgeting, financial analysis and managing cash flow.
- An existing network of allied
A CPA can serve as an independent adviser whom clients pay on a fee-for-service basis. This raises a vital
question that every CPA firm must ask before offering an additional service: “Will clients pay for it?” In this case, astute clients have long
understood that CPAs bring an analytical and objective perspective to the process of working with legal, investment, insurance and other professionals. The
CPA’s knowledge, experience and well-honed professional skepticism neutralize sales presentations designed to appeal to client emotions. The
CPA’s presence at these meetings also requires the agent or representative to provide solid analytical backing for any recommendations. Often, the
CPA’s advice can save clients from wasting money on “financial solutions” that are inappropriate for their needs—a savings that may
far exceed the cost of the CPA’s time.
For example, a business owner planning retirement may be bombarded with sales pitches for variable
annuities, insurance policies and other investment vehicles. In those situations, the CPA can step in and ask the questions needed to assess the products.
The CPA might ask the seller of the annuity, “How exactly does this work? What are the benefits and costs? What is your commission?” (See
sidebar, “Questions CPAs Can Ask,” below.) The CPA also can evaluate the credibility of the product and of the person pushing it.
CPAs benefit from asking questions of reputable professionals in the many PFP disciplines. Knowledge gained from regular interactions with these
professionals tends to bring new sophistication to a CPA firm. That, in turn, attracts a higher level of new clients.
There is little capital outlay
in providing these services—other than for marketing, modifying client engagement letters and providing related legal advice—and an elaborate
business plan should not be necessary. Most seasoned CPA practitioners already possess the foundational experience and expertise to start helping clients
with wealth management teams, but that doesn’t mean that CPAs mulling such a move don’t have much to learn and
ENHANCED SKILLS REQUIRED
Before CPAs can assist in developing a wealth management
team, they need to understand the following:
The roles played by wealth management team members.
Key to putting together the right team is gaining a general understanding of what each PFP professional does and the kinds of problems that each can solve.
Exhibit 1 lists these professionals
and the services they provide and also lists related services that CPAs can offer. CPAs can charge for these tasks individually or in
The understanding of each professional’s role and strengths is essential to knowing which questions to ask when
assessing a professional’s qualifications, managing clients’ expectations about what a competent professional in each area should be able to
accomplish for them, and properly leveraging the perspectives of multiple specialists. This process often leads to creative solutions to client problems
that individual team members might not reach on their own.
Sources of CPE and other educational and regular reference
materials. CPAs who want to help clients with wealth management teams need to possess or acquire a solid understanding of
investment theory, types of insurance products, risk management and behavioral studies. For example, CPAs not licensed to provide investment
recommendations don’t need to be investment experts, but they do need to know enough to help the client assess an investment adviser’s
credentials or recommendations. Resources such as the AICPA’s Personal Financial Planning Section and PFS curriculum can help CPAs find CPE courses
and other learning materials on these and other crucial subjects. In addition to CPE and reading about PFP topics, CPAs can gain valuable insights through
networking with wealth management professionals and connecting with fellow CPAs, possibly through the AICPA’s PFP Section and state CPA
The potential applicability of CPA professional standards and regulations, and how to effectively minimize
liability. CPAs need to understand how to manage the liability and other risks associated with helping clients deal with wealth
management professionals and issues. These risks, like other CPA practice risks, are manageable with knowledge, good judgment and common sense. CPAs should
know which clients are suitable for help with wealth management teams. CPAs also need to possess or gain a relative understanding of the various regulatory
and AICPA standards governing the numerous professional and practice areas involved in financial planning. This knowledge will help CPAs avoid offering
services that require investment or insurance licensing or that could come under specific CPA professional standards, unless intended. For example, a CPA
not intending to fall under the AICPA’s attestation standards needs to know enough about the standards so as not to accidently provide attestation
advice that unknowingly would subject him or her to those standards.
In addition, CPAs should ensure that clients are making the final decisions on
their finances and are aware that the responsibility for those decisions lies with them. A well-crafted engagement letter or letter modification is an
important part of this process. CPAs should speak with an attorney and professional liability insurance provider before beginning any work with wealth
HOW TO CHARGE FOR SERVICES
CPAs can charge an hourly rate for attending PFP
meetings and follow-up monitoring, or an annual retainer with well-defined service specifications. CPAs can earn the rates they want to charge if they
learn how to communicate the value of their service to clients. That value is considerable for clients who lack the skills to properly qualify and monitor
financial advisers. CPAs need to understand the theories and forces behind client behavior. For example, clients who don’t truly understand the stock
market are likely to want to jump into the market when it suddenly rises and bail when it abruptly falls. The result of these emotionally driven decisions
is that clients end up buying high and selling low—the opposite of what they should be doing. It is crucial for CPAs and other advisers to comprehend
how clients relate to financial issues and how to continually enhance interpersonal communication with clients. In satisfaction ratings, clients often
place as much or more weight on their perception of service and relationship quality as they do on the CPA’s knowledge and creative money-saving
As the investment of their time is the primary cost, CPAs can roll out wealth management team services slowly, starting with attending PFP
meetings for a few clients, then adding services and new clients as the word gets out and demand expands.
CPAs also can play an
important and profitable role as the tax and accounting resource to wealth management teams. On the accounting side, CPAs can provide personal financial
statement, budgeting, cash flow maximization and related services. On the tax side, CPAs can participate in joint planning meetings with the other advisers
to ensure that the most effective tax strategies are being used at each planning stage in relation to investment, insurance and other PFP recommendations.
Before a financial plan is finalized, it is wise for CPAs to perform an overall tax strategy review to ensure that the plan is “tax-smart”
Clients are seeking the right advisers to help them navigate through the
uncertainty in our economy. A CPA who remains on the PFP sidelines may be forcing many clients who lack the proper knowledge to try to find competent
advisers on their own at a time when they could benefit from the CPA’s insight, experience and objectivity. For many CPAs, tangential PFP involvement
has become an issue of quality client service, client relevance, profitability and competitiveness. Helping clients assemble and monitor wealth management
teams is the right option for many practitioners and firms who have not sought PFP specialization but want to enhance services and remain on a traditional
fee-for-service basis with clients.
Questions CPAs Can Ask
Following are typical due-diligence questions CPAs can
ask investment and insurance professionals vying to become part of a client’s wealth management team.
Do you practice true asset allocation of stocks and bonds, diversifying across many categories and geographical areas? If so, detail your
2. What is your
3. How do you
incorporate risk in portfolio selection, and do you measure risk and risk-adjusted returns of your portfolio?
4. What is your investment performance record?
5. How are client preferences and needs incorporated in
the portfolios you design?
Describe your client service procedures.
7. Disclose any potential conflicts of interest.
8. Do you offer clients other financial services, such as retirement planning?
9. Do you use an independent custodian?
10. What is your fee structure?
How do you determine the face amount of insurance necessary in a given client situation?
2. What is the quality of carriers with whom you work?
3. Are you limited to working with certain
4. How long have you
been in the business, and what specialization credentials do you have?
5. How do you determine the best type of life insurance policy for a client?
Provide some examples of when you recommend different types of policies, such as term, whole, universal or variable.
b. If both term and a more
expensive product could be used, can you give me examples of how you present the costs and benefits of each?
6. What is your process for self-regulating
a. What is your process for recommending the right product, rather than the one offering the highest
b. Can you give me examples of when you introduced a lower-cost product as a reasonable option when the client could have afforded a
more expensive one?
7. Who are your typical clients in terms of income, net worth and profession?
8. Tell me about the types and complexity of the problems you help clients solve, in areas such as
estate, retirement and business planning.
9. Can you tell me how you handle difficult insurance underwriting issues and provide examples?
10. Can you provide references from other CPAs, attorneys, bankers and
who don’t want to provide investment advice can create a profitable practice area helping clients assemble wealth management teams consisting of
investment advisers, insurance brokers, attorneys and other professionals.
CPAs operating on a fee-for-service basis can offer to assist clients with performing due diligence
potential wealth team members and vetting specific investment and other proposals made to the client.
CPAs can charge individually or in combination for a number of services,
including sitting in on client meetings with advisers, assessing the tax impact of various strategies and providing the objectivity and
analytical thinking to counteract product sales pitches that appeal to clients’ emotions.
It is crucial for CPAs considering the addition of support services for wealth management teams to
understand the regulatory and standards structure that governs the various specialties within personal financial planning. CPAs don’t want to
accidently give advice that subjects them to regulatory scrutiny or puts them under AICPA standards for a certain specialty.
Continuing education is essential for CPAs looking to assist with wealth
management teams. CPAs need to know enough about investment theory, risk management and human behavior to properly analyze specific
advice and know how to counsel clients effectively.
CPAs must make sure that clients make all the final decisions on financial planning moves and that clients accept responsibility for
those decisions. Engagement letters play a key role in protecting the CPA.
Before advising clients about wealth management teams, CPAs should consult with their attorneys and insurance
Lewis J. Altfest (email@example.com) is CEO and chief
investment officer, and Walter M. Primoff (firstname.lastname@example.org) is Professional
Advisor Group director, both of Altfest Personal Wealth Management in New York City. Altfest also is an associate professor of finance at Pace
To comment on this article or to suggest an idea for another article, contact Jeff Drew, senior editor, at email@example.com or 919-402-4056.
Practitioners Symposium and
TECH+ Conference in partnership with the Association for Accounting Marketing Summit, June 11–13, Las
information or to make a purchase or register, go to cpa2biz.com
or call the Institute at 888-777-7077.
Section and PFS credential
Membership in the Personal Financial
Planning (PFP) Section provides access to specialized resources in the area of personal financial planning, including complimentary access to Forefield
Advisor. Visit the PFP Center at aicpa.org/PFP. Members with a specialization in personal
financial planning may be interested in applying for the Personal Financial Specialist (PFS) credential. Information about the PFS credential is also
available at aicpa.org/PFS.
Private Companies Practice Section
Companies Practice Section (PCPS) is a voluntary firm membership section for CPAs that provides member firms with targeted practice management tools and
resources, as well as a strong, collective voice within the CPA profession. Visit the PCPS Firm Practice Center at aicpa.org/PCPS.
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