Professional Advisors Alliance

Choices for Expanding Your Practice in Financia

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Why Expand Your Practice in Financial Services?

You are living through an epic period of change in your profession.

Across the United States, accounting firms of all sizes are building on their “traditional

services” by becoming financial advisors and wealth managers. This expansion is being

driven by structural changes in the CPA profession, new regulation and emerging

opportunities.

According to the CPA Vision Project: 2011 and Beyond from the American Institute

of CPAs (AICPA), “CPAs must rapidly develop new skills, gain knowledge, and develop

new competencies in broader areas of business practice so they are able to jump

the experience curve.”

Almost all CPAs are aware of the changes and opportunities. But this leaves one critical

question: Why should YOU consider expanding YOUR PRACTICE in financial

services?

At Professional Advisors Alliance (PAA), we believe the best answer may be shorter

and simpler than you think.

Because You Have Choices.

Our first goal at PAA is to help you understand the range of choices you have to expand

efficiently in financial services, while preserving the core competencies and key values that

have made you successful.

We believe that when you understand the choices – and their relative benefits and

drawbacks – you will be able to make profitable decisions for your firm’s future.

One choice you can make right now is to consider the potential of building stronger client

relationships, expanding market share and generating increased revenue for your business.

two

Cons

ider

the O

pportunities – Imagine the Growth

Here are ten important reasons to consider expanding your firm’s financial services.

1. Increase your value to clients and strengthen client relationships – Industry

surveys show that CPAs are the trusted advisors, from whom clients want to receive

financial advice and analysis. CPAs who offer financial services can address a wider

spectrum of clients’ needs and provide solutions to important issues.

2. Meet demand for objective advice –

Today clients are more aware of financial sales

tactics and conflicts-of-interest. They want and

need professional integrity and objectivity, and

you can provide it.

3. Offer one-stop services – For today’s busy,

on-the-go clients, the convenience of having

financial services delivered through one source

can save time and money. You can be that

one-stop source.

4. Deliver holistic planning on a continuous basis – Consolidating clients’ financial

lives can increase your understanding of their total financial pictures. It also can strengthen

client relationships through continuous planning and periodic reviews.

5. Increase your firm’s revenues and profit margins – Financial services expansion

can help you choose and implement value-added services. You can control fixed and

variable costs, generate recurring revenues and increase profitability year after year.

CPAs are beginning to play a major

role in the delivery of financial

services. Eighteen CPA firms have

exceeded $1 billion in investment

assets under management, and 93

firms have exceeded $100 million.

Source: July 2008, CPA Wealth Provider

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6. Reduce tax impact on clients’ assets and unearned incomes – When you better

understand each client’s total financial situation, you will have greater ability to control

income and estate tax impact.

7. Increase value and create exit strategies for partners – The value of a financial

services affiliate can grow into a significant asset for partners over time and become a key

component of retirement cash-out strategies.

8. Generate more predictable income – Asset management fees, planning fees, trail

commissions and insurance renewals provide a predictable base for income growth.

Recurring income can also enhance the valuation of partners’ interests based on future

discounted cash flows or earnings.

9. Competitively position your firm – You can protect your “traditional accounting”

services and relationships against financial services firms encroaching onto your turf,

while increasing client retention with periodic reviews and portfolio updates.

10. Expand your network and provide growth opportunities for employees –

Your network of affiliated professionals will expand through collaborative “case teamwork.”

You can also develop challenging career

tracks and growth opportunities for your

firm’s emerging talents. According to the AICPA, a CPA firm with

$500,000 in annual billings has clients

with an estimated minimum of $50

million in assets under management.

By capturing only a fraction of those

assets, and their future growth, CPAs

can generate a solid base of predictable

fee-based income.

four

Know

th

e Key

s to Su

ccess – Make the Right Decision s

You have the benefit of avoiding the “learning curve” that many other CPA firms have

experienced while expanding their practices in financial services. Specifically, you can

adopt the key practices that successful firms consistently mention as important.

PAA has studied these factors extensively and can help you understand them better.

Keys to Success

• CPAs choose comprehensive services and a broad spectrum of products and services –

diversification avoids disappointments in any one area.

• CPAs expand with a clear focus on their clients’ needs – they offer problem solving,

not product selling.

• A marketing plan is developed for introducing financial services to segments of the

CPA firm’s clients in logical sequence, using effective communication channels.

• CPAs have ready access to proven professional advisors and strategic alliance partners –

they don’t try to “do it alone.”

• All active partners of the CPA firm make a total commitment to expansion.

• The firm’s partners have clear expectations for their roles, responsibilities, and

revenue splits.

• CPAs create strategic alliances with flexible structural options – “room to grow

and change.”

• Thought is given to the legal structure and service delivery infrastructure of the

financial services unit.

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Know

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e Key

s to Su

ccess – Make the Right Decision s

Four-Step Strategic Planning

Proc

ess

Four Steps to Strategic Decisions

Understanding the keys to success will help you follow a disciplined process in evaluating

expansion decisions, including: choosing financial services, selecting an Alliance Partner, defining

revenue sources, and settling on a legal structure.

The recent Moss-Adams study recommends the four-step process described in the diagram below.

PAA helps CPA firms understand

and evaluate a variety of

choices for expanding their

service menus. Often, the

key to a successful expansion

is finding the right mix of the

services – one that captures

the strengths of the CPA firm,

the needs of its clients and the

goals of its partners.

The

Wea

lth M

anagement Spectrum

six

Wealth Building& Protection

WealthManagement

0 - 20 20 - 40

• Alternative products

to traditional deposits

(mutual funds, annuities,

stocks)

• Debt reduction

• Insurance

• Retirement savings

• College savings

• Budget planning

• Portfolio approach

to holdings

• Align risk/return

strategies

• Insurance planning

• Retirement savings

• College savings

$0

Net

Wort

h

The

Wea

lth M

anagement Spectrum

seven

WealthManagement

WealthMaintenance

WealthDistribution

WealthTransfer

20 - 40 65 - 8540 - 65 85 -100+

• Portfolio approach

to holdings

• Align risk/return

strategies

• Insurance planning

• Retirement savings

• College savings

• Preservation of principal

• Growth income

tradeoffs

• Insurance planning

• Retirement savings

• Investment restructuring

• Cash flow

• Needs analysis

• Estate planning

• Planned spending

• Insurance planning

• Long-term care

• Asset utilization

• Tax planning

• Legacy planning

• Multi-generational

planning

• Insurance planning

• Charitable giving

• Business succession

• Medical needs analysis

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Whi

ch B

usiness M

odel is Right for Your Firm?

PAA believes that CPA firms should make the choices that are in their best interest for

responding to changes and expanding services. We do not try to dictate service expansion

menus or business models. Instead, we work with you as consultants to help you

understand, compare and choose among viable options. While there are many different

business model variations, most fall into these three basic categories:

1. Referral – Your firm and an Alliance Partner provide cross-referrals to each other’s clients.

• This is the simplest and most casual method to establish, with few requirements.

• Without proper licenses, your firm may not share in commissions or fee-based revenues.

• Your firm’s ability to offer financial services and products may be restricted.

2. In-House – Your firm (or its partners) becomes licensed in securities, insurance and/or

registered as an Investment Advisor or Investment Advisors Representative. The firm then

offers a range of financial products and services to its clients and receives the resulting

compensation.

• You may wish to call upon the expertise of a relationship partner (such as an insurance

or estate planning expert) to help close a complex case. But there is no obligation to

share any cases, clients or revenues.

• This approach works best for larger CPA firms that can commit adequate staff and

resources to their own financial services units.

3. Partnership – Your firm and a financial services Alliance Partner form a written

agreement to set up a new joint venture firm or unit. The agreement specifies how you

will share costs, allocate manpower, and split revenues.

• The CPA firm refers clients to the on-site unit for specific financial services.

• The unit has its own profit-loss statement and usually its own marketing name (DBA)

or brand.

• This approach has proven very successful among many fairly small CPA firms that need

technical support and a proven service-delivery infrastructure, but don’t wish to build

their own financial services units from scratch.

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Whi

ch B

usiness M

odel is Right for Your Firm? Benefits of Partnership

Entering into a partnership model offers the opportunity to negotiate an attractive

arrangement with an Alliance Partner and to ensure that you have a clear understanding

of the terms of the relationship. And ideally, both participants should agree that the

strategic alliance can be adjusted or revised at periodic intervals.

A partnership also provides you with:

• Control over the revenue and profitability targets you wish to achieve.

• Flexibility in naming and positioning the unit, so that it aligns with your values.

• Opportunities to share the partner’s technical expertise and “learn as you grow.”

• Control over the ethical and service-delivery standards of the new unit.

• Selectivity in referring specific clients to the unit.

• Ability to decide how far in each client’s planning process your firm wishes to

stay involved.

• Ability to monitor clients’ satisfaction

with case results.

And, perhaps most importantly, the

partnership model gives you the

confidence of knowing you aren’t

venturing into this initiative alone.

You rely on the knowledge, expertise

and networks of your Alliance Partner.

According to a recent survey, 75% of

CPAs said “creating strategic alliances

with experts in life insurance and

investments” is an important factor

that contributes to success in financial

services expansion.

Source: Accountants as Wealth Managers

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A Co

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onsulting Process to Guide Your Way

PAA begins with a comprehensive consulting process that helps CPA firms evaluate

their options for expansion. This process can help your firm answer such questions

as the following:

• What are the most important needs of our clients that this venture can address?

• Which new service(s) should we offer to our clients – and in what order?

• What resources should the firm plan to commit to this effort?

• What is the best way to structure the unit’s business model and identity?

• What is the best way to meet licensing, continuing education and training

requirements?

• What is a realistic revenue model and profit goal?

• What are the key risks in expanding? How can they be managed or covered?

• What core strengths should we look for in selecting an Alliance Partner?

There is no cost or obligation for your firm to participate in the PAA consulting

process, which concludes with a written proposed plan of action.

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Start-up and Integration Help

After your firm has agreed on a business model and terms, PAA provides further

assistance in helping your unit get “up and running” quickly and smoothly.

Our start-up and integration services include:

• Guidance and support in meeting licensing and/or registration requirements.

• Orientation and training for the CPA firm’s partners and/or employees.

• Help in understanding, accessing or integrating computers and systems.

• Consultations with your partners to set standards and expectations.

• Support in implementing marketing and client communication strategies.

Our ultimate goal is to help you implement:

• The RIGHT business model for your firm’s needs.

• An EFFECTIVE financial services delivery system that meets your standards for

ethics, objectivity and integrity.

• A PROFITABLE business entity capable of generating consistent revenues and

bottom-line results, in line with your expectations and planning.

A Co

mpr

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onsulting Process to Guide Your Way

The T

ime is

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Many clients already think of their CPA as their “Primary Advisor.” They want their

CPA to provide:

• Independent and objective advice

• A long-term trusted relationship

• Continual and responsive service

• Comprehensive advice on financial situations, and the ability and expertise to

provide top-notch solutions

• A full range of services, and the knowledge to make them work to achieve

their goals.

Professional Advisors Alliance can help your firm systematically begin the journey

into financial services.

Your clients have been waiting...

...how long will they wait before

looking elsewhere?

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The T

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About Our Program

Professional Advisors Alliance (PAA) is a business

development program for CPAs designed to help you

understand the best ways to include financial services

in your practice, strengthen your client relationships

and increase your revenues and profits.

We also can help you comply with regulations,

licensing requirements, continuing education rules

and professional ethics.

Our focus is always on helping to maintain your

independence, objectivity and professional integrity.

PAAPAA

Professional Advisors Alliance

Choices for Expanding Your Practice in Financia

l Serv

ices

PM1305 11/08 A8JC-0826-05

Securities and investment advisory services offered through Hornor, Townsend & Kent, Inc. (HTK), Registered Investment Advisor, Member FINRA/SIPC.600 Dresher Road, Suite C1C, Horsham, PA 19044800-225-7637www.htk.com