Are CPAs Key to Financial Planning’s Future?

At Tolleson Wealth Management in Dallas, CEO Richard Joyner is always on the hunt for new talent to add to his stable of wealth managers. As with many of his peers, Joyner’s firm was having a hard time recruiting seasoned professionals.

A few years ago, however, the multifamily office, with $4 billion under management, switched course.

Instead of concentrating its efforts on recent graduates with less than three years of experience in financial services, the firm decided to groom its young hires in-house to become the kind of financial planners who would work well with its high-net-worth clients.

And increasingly, Joyner says, these new recruits were coming with accounting backgrounds. “As we started looking for people with the skills we wanted, we found that was a good source of talent for us,” says Joyner, himself a CPA.

He now estimates that about four out of every 10 of his firm’s new hires are these young accountants. “They have great training and they’re doing complicated analyses; that’s complementary to what we do,” he says.

Joyner is not alone in seeing a great potential for accountants in wealth management. And accountants have seen the opportunity and now find themselves in settings previously reserved for traditional financial planners.

A growing number of CPAs are pursuing broader planning work, providing guidance not just on this year’s taxes but also on investments, financial planning and estate planning.

Just look at the rise in American Institute of CPAs members who are practicing planning: The number of CPAs who have AICPA’s Personal Financial Specialist designation increased by 32% over the last five years, the organization reports.

And attendance at the annual conference held by the AICPA’s Personal Financial Planning division set a record this year, with 1,250 CPAs and non-CPAs attending.


Some, like Tolleson’s recruits, embark on wealth management early in their careers, hardly ever having a chance to fill out a 1040. More common are practicing accountants who come to wealth management as a by-product of tax preparation — people like Jerry Love of Abilene, Texas.

About 15 years ago, Love says, he noticed that clients were asking him his thoughts on how much they needed to save for a secure retirement, what types of investments he might recommend, how to budget, how to get out of debt — all sorts of questions that were veering away from taxes. “Then I noticed that the questions were more than casual,” Love says.

Before long he got his PFS designation; he obtained the CFP later. Within the decade Love had left the accounting firm where he was partner — the largest in Abilene — to strike out on his own as a registered investment advisor.

Taxes still make up the lion’s share of Love’s revenues. Yet the financial planning piece, which only contributes 10% directly to the firm’s revenues, is important as a value-add, Love says, showing clients that he is looking at their situation holistically.

He also believes the added planning capability makes him a better accountant who can better serve his clients — especially baby boomers on the cusp of drawing down their retirement funds.


Many CPAs-turned-advisors say it’s the client tax return that can unlock the shift into financial planning. Tax returns hold a treasure trove of information about a client’s financial life — including insights into retirement, investments and insurance. That makes them a natural springboard to begin a conversation about financial planning, and to begin charging for those services, says CPA Jack Oujo of Wall, N.J.

Oujo decided to pursue financial planning 20 years ago, affiliating with HDVest — an independent broker-dealer that targets CPAs who want to go into financial planning. Today, Oujo does not take on any tax preparation work unless it is for a wealth management client.

Oujo says it’s been the right move. “A sole practitioner CPA is out of their mind if they are not getting into this business,” he says. “The business is there for the taking.”

He believes the sweet spot for accountants rests with two constituencies: baby boomers nearing retirement and owners of small and midsize businesses. By targeting those two segments in their own practice, most CPAs “should be able to double their income in three to four years,” he maintains, saying he speaks from experience.

HDVest itself has showed steady (if not spectacular) growth over the last few years, climbing to $273 million in total revenue last year from $241 million in 2010.

The company, based in Irving, Texas, recently launched the 1040 Analyst tool — software that integrates with tax preparation programs and identifies areas where accountants can offer wealth management services.

AICPA, too, believes in the power of the tax return. The organization offers a checklist for members to help them spot potential revenue-generating areas in their clients’ tax returns.

“We’re in a natural position to become” planners, says Towson, Md., advisor Lyle Benson, who became a planner 30 years ago and now runs the organization’s Personal Financial Planning division. “Not only do we have this very important information in front of us — the tax return — but we also have that regular contact with clients.”


Of course, accountants have long worked in high-net-worth divisions of wealth management firms and family offices. After all, wealthy people have complex tax situations and they need astute experts to manage their tax burden alongside an investment whiz.

Indeed, when asked by Financial Planning about their CPA relationships, more than 27% of survey respondents said they had a CPA in house at their firm.

What’s different, says Tolleson’s Joyner, is that “now the accountants are in front of the clients.” Underpinning the trend is a demographic shift that favors professionals with tax expertise: Baby boomers are starting to retire, shifting their nest eggs into income mode, and that has significant tax consequences. Managing the drawdown at retirement well can make the difference between getting by and living well.

“If I were a financial planner without an accounting background, I’d be very worried,” says Roger Ochs, the president and chief executive officer of HDVest. “I think the CPAs have an advantage.”

At the same time, accountants have been forced to come up with better, more profitable revenue streams. TurboTax and other tax software have drastically driven down the price of tax preparation. And there are only so many tax returns an accountant can do.

When done right, financial planning is more profitable than accounting, says Rick Telberg, editor of CPATrendlines, a subscription newsletter about the accounting industry. “It broadens the CPA’s range of services, which means the firm can attract more clients — and that makes the firm more valuable when it comes time for the owners to retire.”


That may be one reason that even larger accounting firms are entering the wealth management arena.

Take Wipfli Hewins. Regional CPA outfit Wipfli, based in Milwaukee, teamed up with Hewins Financial Advisors, headquartered in San Mateo, Calif., back in 1999. Fifteen years later, the firms are one yet separate, with Wipfli CPAs owning 51% of the wealth management firm. They share clients and cross-sell each other’s services. But each side sticks to its own knitting — Hewins to wealth management and Wipfli to tax.

Still Hewins credits his association with Wipfli in large part for his firm’s growth to $3.5 billion in assets — up from $1 billion in 2011 — and with helping his firm spread its geographic footprint outside the Bay Area.

And he is pushing for more accountants and wealth managers to embark on similar partnerships: His side business, Cue Wealth Management Solutions, provides asset management services to CPA firms that are struggling to create this capability in-house.

Accounting and consulting giant Moss Adams joined the wealth management fray more than a dozen years ago, but then spiked the advisory firm’s growth six years ago by bringing over Rebecca Pomering, from its RIA consulting division, to run the operation. Moss Adams Wealth Advisors now has $1.4 billion in assets, according to the firm’s most recent ADV filing.


So should traditional financial planners view accountants as competition? “They are financial planners,” insists Michael Kitces, director of financial planning with Maryland’s Pinnacle Advisory Group and author of the blog, Nerd’s Eye View (as well as a Financial Planning contributor).

Accounting is but one path into financial planning, argues Kitces — who himself has a master’s degree in taxation — just as planners come from other backgrounds like law, finance or even medicine.

And for a profession that’s in desperate need of new talent, he says, all newcomers should be welcomed. The average age of advisors is 51, according to Cerulli data — it inches up each year — and recruiting young entrants into the field has proved challenging.

“I think all financial planning firms that are growing are looking everywhere they can to find talent and CPA firms are a natural place for us to work with,” Pomering says.

That said, she doesn’t believe there is a critical advantage to being a CPA in the wealth management world.

The CFP course of study covers taxes, Pomering notes — so even though CFP holders may not be tax experts, the basic knowledge is enough to make tax-sensitive recommendations. By contrast, she adds, CPAs who do not pursue additional credentialing do not automatically get a wealth management sensibility in the course of their work.

Yet some in the industry do think advisors need to watch their backs. Planners who have built a business on CPA referrals are particularly vulnerable, notes Mark Hurley, chairman and CEO of the Fiduciary Network, a firm specializing in buying up wealth management practices.

After all, by venturing into the business themselves, accountants won’t be referring clients to financial planners — and that’s happening at a time when there just aren’t as many new financial planning clients to be had, Hurley argues. “So not only are accountants not sending you new clients, but now they’re competing with you for new clients.”

That comes at a particularly tough time for smaller planning firms, says Hurley, who argues that big wealth management firms have figured out how to onboard new clients easily now — leaving fewer potential clients for small outfits to fight over. “Historically the pie [of financial planning clients] had been too big, but not anymore,” he says.


Larger wealth management firms may exploit the trend by hiring more CPAs, much as Tolleson has done. Or they may choose a path like Hewins and join forces with a CPA firm. Suddenly, there are more opportunities for the professions to cohabitate.

Yet wealth managers and CPAs may find that they’re uncomfortable doing business a different way. On the surface, accounting and wealth management are complementary businesses with many overlaps. But it doesn’t always work well in practice.

The CPAs, by nature, tend to be more conservative, Telberg says. “CPA revenue is like an annuity. If you do a tax return one year, you’ll probably do it next year,” he explains — adding that CPAs don’t want to risk losing that annuity by delivering poor financial planning advice. “That could jeopardize the whole relationship.”

Then there is the business model. CPAs charge hourly and for a very specific task, but hourly fees aren’t the norm in financial planning, where most advisors charge a percentage of assets. “I don’t know any financial planner who starts the 15-minute clock the moment he or she picks up the phone with a client,” Pomering says.

Kitces adds: “CPAs are paid for their time, and wealth managers are paid for their expertise.”

And knowing when to wear a CPA hat and when to don the wealth management one can muddle the business model. “We continue to see sole practitioners that try to do both things, being both a CPA and a CFP,” Pomering says. “As the regulatory environment becomes more complex, as financial planning becomes more complex, for one person or even a small organization to cover all those bases is really tough.”

In fact, Hewins believes it’s a mistake for practicing accountants to also take on wealth management work. “Pretty soon they’ll come to a fork in the road, and they’ll need to decide, ‘Do I want to be a tax person?’ or ‘Do I want to be an investment person?’” he says.

Hewins says he prefers working with former CPAs instead: “They’re some of our best hires.”

Whether CPAs are a threat to the financial planning profession or a solution to its biggest problem remains to be seen. In the meantime, there’s no denying that the CPAs are here and they’re ready to take their piece of the pie.

The above is a reprint from Financial Planning Magazine’s October 2014 issue. Original article by Ilana Polyak.1

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Are CPAs Key to Financial Planning’s Future?

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