Easing the Transition

Nationwide, there are about 52,000 CPA firms and 190,000 individual CPAs in public practice. Each year, an increasing number of accountants either become financial advisors or add advisory services to their professional offerings. This trend was not lost on a former H.D. Vest executive and CPA by the name of Tony Batman. Back in 1997 he saw that “a huge opportunity” existed in providing these transitioning CPAs with everything they needed to build a successful financial services business–whether they intended to become full-fledged advisors themselves or boost in-house capabilities. In 1997, with partner Jim Ainsworth, Batman co-founded 1st Global, Inc., on the firm belief that, as Batman says, “CPAs and tax professionals could be the future dominant competitor in financial services.” Today Dallas-based 1st Global has more than 1,400 individually licensed professionals working in 700 distinct “practice units”–a mix of CPA, law, and tax firms–and is adding about 300 new financial advisors each year from 100 to 200 firms. As for the rest of the CPA marketplace, “We’re going to get them all,” he says. Senior Editor Cort Smith spoke to Batman by phone in mid-October.

Why CPAs? First, accountants were very frustrated and disgusted at seeing the poor services being offered by traditional financial advisors, especially Wall Street firms. They saw the conflicted transactional business by Wall Street firms that often made no sense from a client’s unique needs or tax situation. The CPA firms thought they could do a better job than traditional advisors. Secondly, there are some economic changes in the accounting profession; as more and more services become compliance type services, there are lower margins. And CPA firms with established trusting client relationships felt they should pursue the higher-margin financial services.

Do accountants who become conversant in advisory services have an advantage over the competition? I believe that they do. The three tenants of comprehensive “wealthcare”–which encompasses investment services, retirement services, cash management, tax services, business succession, asset preservation, and so forth–are wealth accumulation, wealth preservation, and wealth transfer. Each in its own right is rather complex, but the overriding complexity comes from the “tax drag.” CPAs are uniquely qualified to explain how each of these problems can be solved in light of the complex tax issues. CPAs also are uniquely positioned to understand a client’s total welfare: where their assets are held, all their liabilities, and what they’re trying to accomplish in their lives.

What obstacles must CPAs first overcome? Many CPAs erroneously believe that the key to their success is well-developed technical competency, since they view financial services as primarily a technical vocation. The fact of the matter is that it is primarily a sales vocation–not in the sales sense. Rather, it is more about the art of human influence, because Americans left to their own devices will procrastinate forever on taking care of their financial affairs. There is an art [in getting them] to take action. We help CPAs develop and use those necessary skills correctly.

Another deficiency is in basic marketing. CPAs have rarely, if ever, had to market. They may put out a few brochures, but they don’t fight the marketing wars like most other businesses. When it comes to financial services there is no external force that compels clients to get their matters taken care of, as they would in filing taxes. So CPAs must develop those marketing skills that raise in their clients’ minds a sense of urgency [to act].

Technical competency is quite quickly learned by CPAs, as is product knowledge. It’s the basic business skills that seem to be problematic for some firms.