why now is the time for cpas to embrace wealth management

seth fineberg is an accounting industry consultant, content strategist, analyst and speaker. his current business is accountants forward. he has been a business editor and journalist for over 30 years, the vast majority of which has been spent overseeing the accounting profession’s evolution.

start with a conversation.

by seth fineberg
the holistic guide to wealth management.

today we are cresting the biggest waves of change that i’ve seen in my 20-plus years of covering the accounting profession. i’m talking about the need for cpas to go beyond simply being the trusted tax guy (or girl) for their clients and to help them manage all aspects of their wealth. this movement has been building for the better part of a decade, but only recently has it gone from “i’ll think about it” to “can i afford not to get on board?”

not to sound the alarm bells here, but cpas must soon choose between riding the financial planning wave or being swept under it.

sure, some cpas will be able to stay in their tax preparer lane and make a decent income. they’ll always have a core group of loyal clients who require preparation of tax returns, financial statements and other routine recurring services. but many clients need help with many other areas of their business and personal lives. fortunately, advances in technology, service options and more have created unprecedented opportunities for cpas to remain in public practice and continue to thrive.

the fundamentals of the accounting business have reached a point of inflection. cpas must evolve if they want to remain relevant outside of the limited services described above. an important new service area to consider is wealth management.

i realize some cpas aren’t going to change what they do despite all the evidence supporting the need to pivot. sure, they may make some incremental adjustments at the firm level to improve their efficiency but adding entirely new service areas – such as wealth management – is not for the faint of heart. doing so requires commitment, confidence, collaboration and a willingness to explore the unknown.

from financial historian to advisor

vendors, service providers and industry organizations have long been urging cpas to become trusted advisors to their clients, not merely financial historians. some cpas have heeded the call, but many remain skeptical.

so, what does the term ”advisory” really mean? in simplest terms, it begins with having conversations with clients – when it’s not busy season – to discuss their total financial picture. these should be frank discussion of their worries and goals going forward. it’s not about rehashing their financial history, which is what doing taxes is all about. having these important non-tax conversations with clients puts you well on your way to being their ”trusted advisor.” establishing the trust part is essential because it’s what opens the door to having more meaningful conversations with clients, which can ultimately lead to providing them with wealth management and other services.

why now?

first we have generational dynamics at play in the workforce. we have more people (i.e., boomers) retired or planning to retire than at any time in our nation’s history. while boomers may be the most financially literate generation we’ve seen, they still need plenty of help with their money issues. further, we’re undergoing the largest transfer of wealth between generations that our nation has ever seen – and it should continue for several decades.

whether you’re a client’s personal cpa or perhaps the cpa for the company employing them, there is no reason why you can’t step in and offer boomers guidance. as mentioned earlier, there are a growing number of service providers in the market that would be more than happy to partner with you to provide various aspects of wealth management to your clients.

for example, and not discounting lead author rory henry’s own company arrowroot family office, service providers including trust & will, wealth.com, bento engine, nitrogen, dpl financial partners, docupace and many more providers have knowledge and tools to help accounting firms expand into the wealth management space.

again, as a cpa, you are your clients’ most trusted guide. you are the one who has been helping them in their financial lives the longest. and even if your client tells you they already have a financial planner, it’s worth reaching out to that planner, and potentially collaborating with them as part of your service to ensure that your client is getting the best possible advice.

second, we have the burgeoning number of gen xers (roughly age 43-58) who have ascended to management positions. they’re at the stage of life at which they need to give serious thought to retirement planning and other wealth management concerns. i have found that gen xers generally do not have as much financial literacy and wealth management acumen as their elders. it hasn’t been engrained in their psyche or made a high priority.

in fact, a recent clever survey found that only half (56%) of gen xers have less than $100,000 saved for retirement, although 55 percent believe they will need $500,000 or more to retire comfortably. according to an emoney report, with support stats from experian, “generation x is dealing with a good deal of debt in the form of mortgages, credit cards and student loans. in fact, this generation carries more debt across nearly all credit products than any other,” researchers asserted.

but financial planning magazine recently reported that “senior members of generation x, who are now between the ages of 43 and 58, face a potentially acute financial crunch, according to the society of actuaries. that makes a good chunk of the roughly 63 million cohort a major test of how wealth advisors can best help clients at an age when they need it most, according to the society of actuaries.”

most gen xers plan to remain in the work force for many more years. they are open to learning what their cpa can do for them instead of working with a new wealth manager they don’t already know and trust. you may have already worked with gen xers as individual taxpayers or business owners during earlier hard times. having a basic conversation with them about wealth management should not be a challenge.

i can’t stress enough the importance of offering clients help in areas for which they truly need assistance – but didn’t know their trusted cpa was capable of providing it. doing so will cement your relationship with the client and provide you with higher margin, more fulfilling services that add more value to the client relationship.

next steps

understandably, many cpas are reluctant to start offering wealth management or other new high-value services because they feel they may not be knowledgeable enough. or they may feel they don’t have the right kind of training. but, for cpas, there are many different ways to offer wealth management services to your clients and doing so doesn’t need to be all that complicated. as your client’s most trusted advisor, chances are you already have many pieces of the wealth management puzzle in place.

as an individual’s or corporate client’s cpa, you are likely already steeped in their financials. you know year in, year out what they owe in taxes and why. you know intimately where their spending goes, and you may already offer basic ways for them to save on taxes. in short, the trust is there. the data is there. so, with all due respect, when a client asks you to help them secure their financial future as well as that of their family and employees, why do you refer them to financial planners or wealth managers instead of helping them yourself? don’t tell me it’s because you do not have the initials cfp after your name. that doesn’t cut it these days.

you not only have years’ worth of your clients’ financial data at your fingertips, you have their trust and a good rapport – things that can’t just be built overnight. why pass them on to other professionals who must essentially start the relationship from scratch with your client and spend months, if not years, trying to get to know your client as well as you do? even after all that time, certain decisions or recommendations will be left to interpretation by another individual or organization who doesn’t have all the client data and insight you have to support those actions. this is at the very core of why you, the cpa, are best suited to help support the aspirations of your client, their family and their employees.

in short, schedule a non-tax conversation with your clients about even the most basic next steps we’ve discussed above. there are numerous ways to partner with other specialists and technology providers to make you even more valuable in this area of advisory work.

when it comes to wealth management or other high-value services, don’t wait for clients to ask. learn to anticipate their needs and help them understand why you are the right person to help them.

remember those awkward junior high school dances you attended? you had sixth- and seventh-grade boys on one side of the gym and girls on the other. they all wanted to dance, but no one on either side wanted to make the first move. most believe if someone of the opposite gender really wants to dance with them, they would have already asked. ultimately everyone goes home at night feeling disappointed.

conclusion

don’t wait for clients to ask you to dance. have the courage to make the first move. there have never been more tools and resources available to assist you.

posted on november 3, 2024