Certified public accountants (CPAs) provide a wide range of services, including tax planning, tax preparation, auditing, and financial reporting. Wealth managers handle investments and estate planning. Combining these services through a strategic partnership expands the capabilities of both firms. Today’s article is for small business owners who are interested in understanding the framework of these partnerships. Some key takeaways:
- CPAs offer technical expertise that can enhance the client experience of a wealth management firm.
- CPAs operate under the AICPA Professional Code of Conduct, while wealth managers are bound by SEC regulations.
- Risk is reduced in this type of partnership because CPAs catch tax implications that wealth managers might miss, while investment professionals identify opportunities that CPAs might overlook.
CPAs bring several categories of professional expertise to wealth management firms.
A CPA offers technical expertise that can enhance the client experience of a wealth management firm. They can also provide practical business strategies to grow and scale a financial advisory practice. Some key elements for this include tax optimization, regulatory compliance, business structure analysis, and succession planning.
Tax Optimization Strategies
CPAs understand which deductions apply to different business structures and how recent tax law changes affect investment strategies. They can also help wealth managers with the timing of tax-loss harvesting. This knowledge directly impacts client portfolios and retention rates. Wealth managers can use that to provide a more comprehensive client offering.
Regulatory Compliance and Documentation
Financial advisors often hire specialists to handle compliance and documentation. CPAs can eliminate that need by bringing a systematic approach to compliance that protects wealth managers and shared clients. We understand documentation because much of what we do centers around regulation, tax obligations, and filing deadlines.
Business Structure Analysis
Wealth management firms offer financial advice to individuals and business owners. On the business side, a CPA can provide analysis and insights on entity selection, succession planning, and exit strategies. We can explain the tax implications of S-Corps, LLCs, and C-Corps and make recommendations based on business goals and ownership structure.
Estate and Succession Planning Integration
Estate planning requires good investment decisions and tax planning. Wealth managers can handle the investment side. CPAs specialize in tax planning. We can advise on trust structures, generational wealth transfers, and the tax implications of inheritances. When partnering with a CPA, wealth managers can gain access to this knowledge without hiring additional staff.
Partnerships benefit clients most when professional codes of conduct are observed.
Accounting and financial professionals are held to professional conduct and fiduciary standards that must be upheld to retain their licenses. A CPA operates under a different set of regulations than a financial advisor or wealth manager; however, most of the core principles remain the same. We both work in our clients’ best interests, and we’re both bound by confidentiality rules.
Fiduciary Responsibility Alignment
The American Institute of Certified Public Accountants (AICPA) has a professional code of conduct that CPAs are sworn to uphold. Wealth managers are regulated by the United States Securities and Exchange Commission (SEC). Partners should have a clear understanding of how these two standards intersect and where potential conflicts might arise.
Client Confidentiality Protocols
The way that you disseminate client information is a key component of any CPA/wealth management partnership. Both parties need to protect client privacy by having clear guidelines about what information can be shared and under what circumstances. Protocols for this should be built into the partnership agreement, and clients must sign off on any data sharing.
Transparency in Fee Structures
Billing the client for a service they weren’t previously aware of is a good way to lose them. Transparency isn’t just the best policy; it’s essential. It’s essential for a successful partnership. Fees can be split, charged separately, or structured as referral payments as long as the client knows exactly where their money is going. This can also be built into the partnership agreement.
Professional Development and Continuing Education
Financial and accounting professionals are required to obtain continuing education (CE) credits each year to maintain their licenses and certifications. The cost of these CE classes should be discussed when forming a partnership. In some cases, your firm may be able to participate in joint training sessions or share the cost of conference attendance.
Both partners bring measurable value to their respective clients.
The benefits of a partnership between CPAs and wealth managers extend far beyond a diversified product offering. Our respective businesses rely on good client service and satisfaction, and let’s not forget our revenue goals and projected business expenses. A professional partnership can provide measurable improvements in all these areas.
Revenue Enhancement Opportunities
Established firms can create instant revenue opportunities simply by forming a partnership with another established firm. For instance, a CPA can generate additional revenue by offering tax preparation services to a wealth manager’s investment clients. The wealth manager can provide investment advice to the CPA’s tax clients. It’s a win/win for both parties.
Client Retention and Satisfaction Improvements
Offering combined services is an opportunity to provide a better client experience because more of their needs will be met, and they won’t be subjected to conflicting opinions about their finances. This reduces client confusion and gives them what they need: peace of mind.
Operational Efficiency Gains
The depth and structure of your partnership could create cost savings and improve operational efficiencies. One example of this is dividing the responsibilities of analyzing a client’s financial situation. The wealth manager can handle the investment side, while the CPA can evaluate the tax implications. When done properly, this can reduce overall service delivery costs.
Market Differentiation and Competitive Advantage
A fully integrated CPA and wealth management firm creates a unique value proposition that differentiates it from competitors in both fields. This can be reflected in marketing materials and at conferences, highlighting comprehensive service capabilities that standalone firms cannot match. This is particularly powerful for acquiring business or high-net-worth clients.
Scalability Without Overhead Investment
Partnerships are one of the simplest ways to scale your practice without increasing fixed costs. There’s typically no need to hire extra people, expand your office space, or add new infrastructure. The complementary nature of accounting and financial services should increase the client base for both parties almost instantly after the partnership is finalized.
Risk Management and Professional Liability
Shared expertise can reduce errors, oversights, and professional liability claims. CPAs catch tax implications that wealth managers might miss, while investment professionals identify opportunities that CPAs might overlook. This collaborative approach provides internal quality control and a more comprehensive service offering for your clients.
What is a good implementation framework for a successful partnership?
Based on what you’ve just read, there are several benefits to forming a partnership between a CPA and a wealth management firm, but this arrangement isn’t for everyone. Certain criteria should be met for a partnership to be successful. The partnership structure, client onboarding, service delivery, and technology integration must be a fit for all parties.
Partnership Structure Options
The nature of your partnership should be established with a legal agreement that specifies roles, responsibilities, and compensation. Handshake deals are not a good idea because they cannot be legally enforced. Your options for a legal agreement include referral agreements, joint ventures, or formal partnerships that establish a new business entity.
Client Onboarding and Service Delivery Protocols
Every firm has a different way of onboarding and delivering services to clients. When forming a partnership, one of the first tasks is to standardize the processes. This includes selecting which partners are responsible for each type of client, scheduling meetings, and coordinating referrals or recommendations between partners.
Technology Integration and Data Sharing
Integrating technology stacks can be challenging, especially when one of the partners is using outdated software. It’s best practice to upgrade to a more modern system that offers an integrated CRM, shared document vaults, and custom reporting. There are several systems available for this purpose, so shop around and read customer reviews before making a selection.
Performance Measurement and Partnership Evaluation
Key performance metrics for evaluating a partnership include client acquisition rates, revenue per client, client satisfaction scores, and retention rates. Initially, partners will meet weekly or biweekly to review these. Once established, those meetings can occur quarterly, but it’s essential to monitor your KPIs regularly to prevent potential problems.
How to avoid common pitfalls.
CPAs and wealth management firms share similar missions but differ in their operational structures. Integrating them is easier if you’re aware of the common pitfalls many firms experience when forming a partnership. Most of these can be avoided with careful planning and open communication.
Here’s a brief list of potential problems to watch for.
Unclear Role Definition
Defining roles and responsibilities in the partnership agreement is crucial for success. Without that, partners may end up duplicating efforts or leaving gaps in client service. You can avoid this by specifying which partner handles each type of client and how handoffs will be managed for clients requiring accounting and financial services.
Inadequate Communication Systems
Poor communication is one of the top reasons accountants and advisors lose clients. The same principle applies to partners.
Open and honest communication is the key to long-term success. It’s best practice to set up regular check-ins, shared document folders, and clear protocols for client updates. This will help you present a unified front to your clients.
Misaligned Client Expectations
Setting proper client expectations can be difficult when you first combine your services with a CPA or wealth management firm. Failing to overlook this is a common pitfall during partnership negotiations. Your planning meetings should include how to explain fee structures to clients, service delivery timelines, and communication processes.
Work with a CPA firm backed by wealth management.
Schedule a discovery call today to discuss how partnership strategies can accelerate business growth in today’s competitive marketplace.
Talk soon,
Jeremy A. Johnson, CPA