Is Your Accounting Practice On The Right Track? Don’t Let The Steam Engine Of Change Run You Over
by: Nathan Mersereau
In 1829 America was on the brink of significant change. A new mode of transportation was revolutionizing the way business was done. Farmers were threatened, transportation workers were alarmed and politicians were up in arms. Martin Van Buren, the governor of New York, wrote an impassioned letter pleading for the livelihood of those impacted by this dramatic agent of change, sure to cause “serious unemployment” and leave many “destitute.” The following is the conclusion to his letter:
“As you well may know, Mr. President, “railroad” carriages are pulling at the enormous speed of 15 miles per hour by “engines” which, in addition to endangering life and limb of passengers, roar and snort their way through the countryside, setting fire to crops, scaring the livestock and frightening women and children. The Almighty certainly never intended that people should travel at such breakneck speed.”
What Van Buren could not see was the inevitability of change and progress. Those who embrace change will prosper and ride the train to the next destination. Those who remain stagnant will become obsolete. As humorist Will Rogers said “Even if you’re on the right track, you’ll get run over if you just sit there.”
You can’t afford to just “sit there” in your practice. The emergence of the internet has enabled individuals to take financial matters into their own hands. Consolidation within the industry has allowed larger firms to offer a greater scope of specialized services. Smaller firms and individual practitioners are scrambling to make sure their services are relevant. Individuals are wondering how they will survive.
One way to grow and remain relevant is to offer financial services. As objective and trusted advisors, CPAs are uniquely positioned to serve clients in this way. Market research conducted on CPA prospects and clients has shown that a large percentage (especially high-income individuals and small business owners) would use these services if their CPAs were to make them available. They perceive no conflict of interest in CPAs providing financial advice and the means to carry it out.
If you choose to offer financial services there are several ways you can do it:
• Buy a practice – simply acquire an existing financial advisory practice with trained, licensed sales professionals, a clientele and systems of operation in place. This allows you to be up and running immediately, but substantial financial requirements and fiduciary risks may detract from this option.
• Build a financial services operation within your own firm - this takes knowledge and skills training as well as the need to find outside expertise and trained, licensed employees. Expanding your current operation by adding employees and infrastructure takes a lot of money and time.
• Develop referral arrangements – this is a low-profile, low-key approach. Your firm simply refers clients to financial advisors for predetermined compensation. Although this is an easy way to go, by giving away referrals, your firm runs the risk of losing your best clients to broker/dealers, just as you’ll be ceding control over the advice your clients receive.
• Form strategic alliance/joint ventures – this is the model I recommend, since it combines the best of the other business models, with very few drawbacks. Joint ventures also offer “turnkey” financial services operations, with each partner doing an agreed-upon portion of the work. Forming strategic alliances with suitable financial advisory firms will allow you to use outside providers to access financial services, while establishing formal equity/revenue sharing relationships that can pay off handsomely. You’ll also be sharing the risks associated with advisory services with your strategic partner(s), rather than taking them all on yourself.
How you survive in the world of change is up to you. Offering financial services may be one way you can ensure relevancy in the years to come.
About The Author:
Nathan Merserau, CFP is President of Oakland Wealth Management Inc, http://www.oaklandwealth.com, an independent, fee based investment advisory firm in Southfield Michigan. Nathan helps accountants establish financial advisory services within their practices so they can add value for their clients and lead more balanced, fulfilled lives. You can email him at Nathan@oaklandwealth.com.
August 2006
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