due to one reason. and it’s a big one.
by russ alan prince
a growing percentage of accounting firms have wealth management practices by one name or another. most of these practices provide investment management services, life insurance, or both.
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but an estimated 75% to 90% of these wealth management practices are severely underperforming.
the reason why is both simple and difficult.
the logic of accounting firms providing wealth management is to:
- better serve clients. this is—or must be—the primary motivation for an accounting firm providing wealth management expertise.
- generate substantial additional revenues from financial products. successful accounting firm wealth management practices—even many unsuccessful accounting firm wealth management practices—have vastly higher margins than most other types of accounting firm practices.
- garner new clients for the wealth management practice as well as other accounting firm practices. when you meet the gold standard of delivering wealth management services and products and show highly satisfied clients how to refer, the accounting firm benefits from an overflowing pipeline of new business.
the logic of accounting firms providing wealth management services and products is sound. however, implementation is the reason so many accounting firm wealth management practices underperform.
generally speaking, accounting firms deliver wealth management in two primary ways. they can establish their wealth management practice, which can be accomplished organically or by acquisition. or, accounting firms can joint venture with a wealth management firm. both approaches are viable, and the better one for any firm is a function of a multitude of factors, including cost, relative time commitments, and clientele.
it is widely accepted that within all accounting firms, there is a panoply of clients that could benefit from wealth management expertise. bottom line: when accounting firm wealth management practices underperform, they are not capitalizing on these extensive relationships. moreover, in some ways, they are doing a disservice to their clients. there are various reasons for this failure, one of the most pronounced being a lack of attention to process.
most of the time, accounting firms focus on wealth management services and products. for example, a great deal of attention is directed to the wealth management platform. additionally, many accounting firms put much effort into providing a solid educational foundation for wealth management services and products.
to be clear, these considerations are vital. so many accounting firm wealth management practices underperform due to the erroneous perception that the business will boom with an exceptional wealth management platform combined with an outstanding education on the various wealth management services and products. when these two criteria are met, the business regularly fails to boom. it usually comes nowhere close to initial expectations. it commonly badly underperforms.
according to homer smith, managing founder of konvergent wealth partners, and co-author of optimizing the financial lives of clients: harness the power of an accounting firm’s elite wealth management practice, “being able to skillfully deliver the range of wealth management services and products is essential. just as important is being able to align the range of wealth management services and products to client needs—including latent needs—wants, and concerns. in working extensively with accounting firms, this is where they tend to fall short. we help them correct this limitation resulting in meeting a steady stream of their very best clients for whom wealth management can prove very beneficial. when we work with an accounting firm’s very best clients, not only does the accounting firm profit from sharing in wealth management revenue, but they also get additional revenues for their other practices. most importantly, the biggest beneficiaries are the clients.”
“central for accounting firm wealth management practices to excel is discovery,” says anthony glomski, principal and founder of ag asset advisory family office and co-author of your $5 million high-net-worth practice: guidelines for sourcing and working with the wealthy during the covid-19 crisis and beyond, “only by gaining a deep understanding of clients can any wealth management practice deliver exceptional results. discovery is the best process to gain that deep understanding. by skillfully using open-ended questions and being empathetic, accountants and wealth managers together can identify ways to use their expertise to make a meaningful difference in the lives of clients.”
in sum, combining technical wealth management expertise with discovery, accounting firm wealth management practices significantly increase the probability of achieving their potential. clients are better served, more highly preferred clients come into the accounting firm from referrals, and the accounting firm financially does substantially better.