In our last blog, we explored the value of offering Financial Services and what should be considered in evaluating the opportunity. Your goal should be to broaden the menu of services available to your clients while increasing your value as their trusted advisor.
In this blog, we outline the primary business models and how to determine which model fits you, your firm, and your clients best. The business model you choose will ultimately determine which services you offer and your role in the process. Although there are variations to each business model, the three primary models are outlined below.
The Independent Model is a do-it-yourself model where the CPA performs the duties of a Financial Advisor in assessing client needs, recommending and implementing investment strategies, and providing ongoing monitoring and servicing of the accounts. While this may appear to be a very efficient business model, it can be a life changing model for the professional who takes on the new responsibilities. If you are seeking a change in your daily routine, this may be a good solution. If you plan on your accounting practice remaining as the core of your services, this model may prove challenging as your business grows. Some firms will build this model with a professional who is building a client base and has the capacity to broaden his/her responsibilities. In the end, this model requires an accounting professional to swap billable hours for hours dedicated to offering financial services. The trade-off of hours can be favorable to the bottom line – but it is important to understand the shift in responsibilities. This model can be very efficient to deliver services if you have the expertise, time, and interest in building it into your practice.
Pro: No introduction to another professional is necessary. No sharing of revenue is necessary.
Con: Give up billable hours to perform services. Access and expertise of higher-end services may be limited.
Questions to ask yourself:
Do I want to perform all of the responsibilities of a Financial Advisor?
Do I have the time and resources to perform the responsibilities?
Should I shift some of my accounting responsibilities to others so I can take on these responsibilities?
Strategic Alliance Model
The Strategic Alliance Model enables the CPA to be involved in the process to deliver financial services and wealth management in a consultative role and may include a very proactive coordinating role of multiple advisors and specialists depending on the client’s needs. Some CPAs use this model to simply refer clients to an established Financial Advisor that coordinates strategies, recommendations, and services with the CPA and the clients. Other firms use this model with the CPA acting as the quarterback for the client who coordinates multiple advisors including asset managers, Financial Planning firms, insurance specialists, estate planning attorneys, and Long Term Care specialists.
This model allows the CPA to offer a broad array of services through selected professionals within your community – and deliver the services at the professional level of expertise and service your clients expect. The outsourcing process is similar to a doctor referring a patient to a specialist. The last thing a patient wants is a general doctor performing the task of a specialist and your clients deserve the same level of expertise without having to live through your learning curve.
This model is good for firms that have a need for a broad array of services and have enough clients to warrant building the strategic alliances while avoiding the expense of building a program internally. For many firms, the key to success with this model is making it a collaborative process to serve clients.
Pro: Efficient model to deliver a broad array of services to clients.
Con: Outsourcing to professionals may appear like an uninterested solution.
Questions to ask yourself:
Do I want an advisory role with my clients and a desire to coordinate services with specialists?
Do I have the time and skills to perform this role?
The Internal Model is comprised of a dedicated professional within an accounting firm that delivers financial services and wealth management to its clients. Some firms choose to move a CPA into the role of a Financial Advisor and other firms hire a professional and place him/her within the firm. The integration of services is often enhanced with this model as it allows the CPAs to work more closely with the advisor across its entire client base. Some firms have gone so far as to buy or build a financial planning practice or asset management business to serve the needs of its clients and truly broaden the firm’s overall business strategy.
Pro: Provides comprehensive financial management to clients through one firm. Can be more efficient than the other models. Opportunity to build a significant business strategy for the firm.
Con: Expensive investment to build or buy a firm/entity. May be difficult to attract a professional with the experience and expertise that is needed to deliver sophisticated solutions.
Questions to ask yourself:
Can we afford to build this model? Can we afford not to?
Is this the best use of our resources?
Do I have the time to build this program?
Do we have enough clients to warrant the investment?
Selecting the right model
In order to determine which model fits best, ask yourself and your partners the following questions:
What role do we want to have?
Which role would our clients prefer us to perform?
Which role will be best for most of our clients?
Which roles can we afford to build?
Will the return on our investment to build the program be acceptable?
Which model would bring the most success to our firm?
I encourage you to speak with some of your clients and ask them if they would consider your firm’s services in managing their investments and overall financial life. Speak with firms that are similar to your firm that offer financial services and ask about the model they use. Ask what they like about it and what they don’t like about it.
Simply put, the independent model puts you in control and requires you to drive the bus. The strategic alliance model leverages your time and knowledge and lets you share the driving. The internal model allows you to supervise the bus and limit your role because you hired the driver.
Choose the model that allows you to help your clients most, is a good business decision for your firm, and a good personal decision for yourself. Your clients will appreciate the additional level of care you provide and value your professionalism.
Selecting the right licensing and registration
Selecting the right licensing and registration determines how you offer Financial Services and what your role will be. In our next blog – Step 3, we will review the various licensing and registration options available.
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