Build trust and revenues in four steps
A proposition for CPAs and their clients
by Andy StrAuSS
Affluent families are not feeling so affluent these days. the
financial crisis has left its mark and eroded a tremendous
amount of confidence, as well as wealth.
The Spectrem Group reports that in 2008,
the number of million-dollar households
declined 27 percent and the number of
households between $1 million and $5 million was down 29 percent. What’s even more
astounding, 53 percent of households with
a net worth in excess of $10 million dollars
think they can run out of money.
The accounting profession is being asked
to address client fears like never before. Have
you heard these questions asked recently?
Do I have enough money to retire?
How much money can I spend?
How long will my money last?
Will there be anything left over for my
How much risk do I need to take?
investors (those with $1 million of investable assets) found that less than 25 percent
were confident of achieving their goals. Conversely, more than 90 percent of those with a
formal wealth management plan expressed
confidence in achieving their wealth goals.
Not everyone who goes through a wealth
management process will feel confident, but
the plan itself delivers answers to the questions creating fear and anxiety.
The same study also exposes the fact that as
many as 75 percent of investors do not have
a wealth management plan. The accounting
industry has a unique opportunity to educate and encourage their clients to embrace
Affluent families are looking for one trusted professional to coordinate every facet of
their financial life. Wealth management provides a comprehensive approach to strong
financial stewardship and protecting family wealth. Elements of wealth management
include planning around taxes, investments,
retirement, wealth transfer, education, insurance, income protection, and business
management to protect clients from financial
risk. A successful transition for accounting
firms to a wealth management paradigm
hinges on paying strict attention to critical
success factors, including having one partner
in charge, creating the right infrastructure,
building alliances with advisors in investment management and advanced planning,
and ensuring that firm members can readily
access that knowledge. Define and educate
clients on the due diligence process of vetting
your trusted partners. Target partners who
are like-minded in helping clients, knowledgeable about the accounting industry and
experienced in building alliances.
CFP OFFERS NEW DESIGNATION
GREENWOOD VILLAGE, COLO. — The College
for Financial Planning has made available
the Accredited Portfolio Management
Advisor credential, or APMA, an education program for financial advisors interested in investment management theory,
security valuation, and overall portfolio
design and management.
Students must complete a two-part
program to earn the APMA designation.
The first part is a self-study or six-week
online instructor-led classroom program
that focuses on core concepts. Upon
completion of the first phase, students
will move on to a four-week online
classroom that teaches direct application of the core concepts, including the
construction of a class-managed portfolio
based on real-time market data.
In addition to receiving the designation, graduates will receive credit for one
of five courses in the college’s CFP Certification Education Program and three
hours of graduate credit in the college’s
Master of Science degree program.
NO. 1: CHANGE THE CONVERSATION
Charles Darwin said, “It is not the strongest
of the species who survive, nor the most intelligent, but those that are the most adept at
responding to change.” This is a call to action
for the accounting profession to respond to
the changing needs of their clientele. It’s time
to change the conversation to uncover your
clients’ deepest fears and anxieties.
At the Alfa Group at Morgan Stanley Smith
Barney, we use a client discovery process
called mind mapping to organize thoughts,
notes and client information. This process
focuses on the seven factors of financial
decision-making to determine client needs
and serve as the foundation of our client relationships. This process helps ensure that
the client and professional are on the same
page and have a mutual understanding of
acceptable risks and returns.
NO. 2: WEALTH MANAGEMENT
A recent Alliance Bernstein study of affluent
Andy Strauss is a financial advisor at The
Alfa Group, a wealth advisory team at Mor
gan Stanley Smith Barney in Ridgewood, N.J.
Reach him at andrew.d.strauss@mssb. com.
NO. 3: BUILD ALLIANCES
Such a wide range of financial needs requires
a wide range of financial experience. Because
no one person can be an expert in all these
subjects, the best wealth managers work with
networks of financial professionals with deep
experience and knowledge in specific areas.
Effective wealth managers, then, become
highly proficient at relationship management, first building relationships with their
clients in order to fully understand their
unique needs and challenges, and then coordinating the efforts of their expert teams in
order to meet those needs and challenges.
Affluent clients want their CPAs to work in
a coordinated fashion with their team of advisors to help ensure optimal outcomes. The
accounting firm of the future will align itself
with trusted partners in all areas of wealth
NO. 4: CREATE REVENUE STREAMS
Providing stewardship of your clients’ wealth
management process will enhance trust by
delivering answers. Coordination of the
wealth management process provides a
process of due diligence in selecting strategy
providers and open communication with
those providers to mitigate risk and protect
wealth. This business model will enable the
CPA to negotiate a fair fee structure for clients
while creating a vehicle to generate multiple
streams of revenue at no additional cost. The
CPA’s fee structure is negotiated with the service provider as a percent of the fee charged
to their client.
The affluent client doesn’t know whom
to trust and is looking for help from their
CPA. The financial crisis in 2008 and 2009
not only took its toll on client confidence, it
also exposed the financial services industry
for being ill-prepared to help when help was
needed the most. Add the negative publicity
from a number of high-profile Ponzi schemes
and we have the ingredients for a tremendous
amount of trust erosion.
The financial services industry is now in a
period of rebuilding trust and demonstrating relevance to clients’ success in achieving
their goals. The accounting profession is in
the position to take a leadership role to advise
their clients in making prudent, informed
decisions around wealth management and
being compensated for that guidance.
Adopters of this new wealth management
paradigm have built a differentiating value
proposition to their clients and prospects that
has strengthened client retention, acquisition
and wallet-share. AT
WHISTLEBLOWERS GET HEARD
NEW YORK — Research in the July issue of
The Accounting Review, a journal of the
American Accounting Association, suggests that media reports of whistleblower
allegations of financial fraud lead to multiple woes for targeted companies.
The study analyzed the stock performance of 81 companies after whistleblower allegations of financial misconduct were reported in the media, and
found that in the five days surrounding
such reports, the stocks of accused
companies experienced a 2.84 percent
average drop in price compared to the
market as a whole. The drop was 7. 3
percent when the allegations concerned
earnings management. There were also
long-term weaknesses: The median stock
performance of accused companies was
significantly lower over the course of the
next two years than that of similar firms
that were not accused. In addition, within
three years of the time that whistleblower
stories appeared in the media, 17. 9 percent of the firms involved had to restate
their financial results, and 26.9 percent
were sued for financial misconduct.