three ways to work together on wealth

collaboration can be in house, but it doesn’t have to be.

by anthony glomski

the term “wealth management” comes up time and time again as you seek advice about helping your clients with their financial challenges and opportunities.

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people throughout the financial services industry like to call themselves “wealth managers” or “wealth advisors,” but research shows that only about 1 in 16 financial professionals really provide collaborative wealth management. this type of client relationship includes not only investment consulting, but all aspects of advanced planning and relationship management. mostly they focus on investment management services that everyone else provides. in most cases, standard investment management services are not enough to make a meaningful difference in your client’s total financial picture. but your role as your clients’ personal cfo does make a huge impact.

true collaborative wealth management is designed to solve a full range of challenges that your successful clients face on an ongoing, long-term basis. collaborative wealth management coordinates all aspects of your client’s financial life that must be addressed if you are going to help them build a secure and meaningful future for themselves and their families.

by using a collaborative approach, you will gain a detailed understanding of your client’s deepest values, goals and most important financial wants and needs. by doing so, you can help clients clarify what is most important to them and craft a measurable, long-range plan to meet those needs and goals. the process is designed to foster an ongoing and dynamic relationship with clients to ensure that their needs continue to be met as life circumstances change over time – it’s not a one-and-done exercise.

i like to use this simple formula for describing the collaborative wealth management process:

cwm = ic + ap + rm 

collaborative wealth management =

investment consulting + advance planning + relationship management

let’s take a closer look at investment consulting, which deals with the overarching concerns shared by all successful people and their families: making consistent, smart decisions about their finances. investment consulting aligns a client’s financial assets to their goals, as well as to their return objectives, time horizons and risk tolerance. it’s the foundation upon which a true collaborative wealth management solution is created.

three approaches to investment consulting

for cpas, investment consulting may be a foreign concept. here are three common ways that cpa firms approach it:

1. bring it in-house. with this approach, the accounting firm takes on the role of the investment manager.
2. create a formal partnership/joint venture with an advisory firm.
3. have an informal partnership or strategic alliance with someone in your network. there is no formal agreement in place; thus, no formal revenue sharing occurs. instead, it’s about utilizing investment professionals in your community to help you with the investment component of your collaborative wealth management offering.

if you’re going to be collaborative, you have to select one of the three models below. let’s take a closer look at each:

1. in-house model: let’s say the tax partner at a firm brings in the business and the partner refers the client internally to the firm’s in-house investment advisor. that investment advisor is typically paid 35 percent of the fee. typically, the partner who brought in the business receives an “origination fee,” which may be recurring, and the rest of the fee is spread out to cover the firm’s overhead.
2. partnership model: the industry norm is an ongoing revenue share that’s paid to the cpa firm that referred the business to the advisory firm. this is often the preferred model for some cpa firms because they’re not incurring the overhead and expense of having an investment advisor in-house. on a net basis, more and more firms are finding they come out ahead when they opt for this partnership model.
3. informal partnership/strategic alliance with someone in your network: here you align yourself with an investor advisor or firm with whom you’re able to collaborate closely on behalf of your client. you want to collaborate in a way that provides value, for instance by providing tax-loss harvesting services, pension plan design or opportunity zone tax deferral strategies. to do any of these things, there should be an active dialogue back and forth between you and the investment advisor or firm.

the reason this process is called collaborative wealth management is because not all the specialists are in the same office in the same meeting at the same time. information is passed back and forth and everybody is somewhat in a silo. and that gets back to the core of this post.

to make this process work, someone needs to step up and be the master coordinator – the person who sees everything that’s going on in your client’s financial life. that someone should be you, the cpa! and you should rightfully be compensated for assuming this important role.

when we take on new clients at my firm and start looking at their financial situation, i can’t point to a single case in which the client had a fully coordinated consultative approach among their various advisors. but i can point to several situations in which important parts of their financial picture has broken down, or opportunities have been lost, or big issues get missed. this further makes the point that you have the opportunity to expand your relationship with the right type of clients.

well, who is taking care of the client?

knowledge transfer

if you’re partnering with outside firms then you absolutely must have a secure drive for sharing information, for collecting client documents and for providing you access to that information. that way, all the information and supporting documentation you need to serve that client is in a single, secure location.

if you asked me a few years who should be responsible for creating this shared drive, i would have told you it was the advisory firm’s responsibility. but now i’m seeing cpas step up to create those secure drives and other knowledge-sharing solutions – and they’re being paid to do so in addition to earning an ongoing retainer for maintaining those knowledge-sharing solutions.

again, we’re not just talking about a secure drive that has some files in it. cpas are taking the step of building out a comprehensive disaster recovery plan. although cpas are not technically doing an audit, the motions that cpas go through to build that disaster recovery plan are similar to what i used to do when i did an audit. like an auditor, you have to meet with the client and be adept at getting all kinds of information from them. it can be a time-consuming and challenging process. it’s not easy to set up a comprehensive disaster recovery plan, but clients and your strategic partners will say it’s well worth it when you think of all the crazy things that happen in today’s world that can cause you to lose critical data.

once you have the plan in place, you now have a single secure go-to spot where everything about the client lives. how many of your clients have set up a disaster recovery plan for their personal lives? how would they feel knowing that you built critical safeguard for them in the wake of a natural disaster or crisis like covid-19?

we are seeing savvy accounting firms charge ongoing project-based fees for managing a client’s critical disaster recovery plan – those plans are critical to a client’s business sustainability today. (note – you will often hear me talk about project-based fees, a billing method you may or may not be using now.)

when it comes to billing, i’ve learned something very important over the years – clients want value and they will pay for that value. simply sending a time-based invoice that details every minute they spent to do a job does not add value.

“economic glue” that holds your partnerships together

once you get comfortable collaborating with other professionals – and start seeing how their skill sets mesh with yours to bring more value to your client situations – an interesting thing starts to happen. you become part of your partners’ coordinated approach solution offered to their clients and this will result in more work for you – and more high-margin fees.

a “true” wealth manager is someone who’s typically serving business owners and entrepreneurs with complex situations; they’re bringing a variety of solutions to the table for their clients. many of those solutions come from other professionals, so the wealth manager is taking a coordinated approach. when bringing these solutions to clients, all of a sudden, you’re going to have more work to do – and that additional work is going to result in project-based fees. think of it as a virtuous circle.

the virtuous circle occurs when a wealth manager (sometimes referred to as an elite wealth planner) comes to you seeking solutions for their existing clients and then both of you collaborate about what makes sense for your clients. then you go back to your clients and say, “hey, this can make sense to protect your assets,” or “this can make sense to ward off threats of potential lawsuits or litigation from future ex-spouses” or “this can make sense to shield you from excessive taxes.”

instantly you’ve created economic glue, because the elite wealth manager you’ve partnered with is going to get compensated by working with that client and then you’re going to get compensated even further by working with an existing client. in many ways this is the preferred model. which would you rather have – more clients overall or more work from your best existing clients?

posted on october 16, 2023