Hand in Hand

If investment advisors are the quarterbacks of their clients’ financial planning squad, accountants are often important skill players on that team, performing essential duties that the advisor can’t. Moreover, advisors and accountants, especially CPAs, will often provide referrals for each other, since each has a unique set of competencies. While both of these dynamics continue to be important in the advisory business today, another trend has emerged. More and more, advisors who began their careers as accountants are transitioning into financial planning and are incorporating both sets of skills into their practices.

Brad Wasserman of fee-only WHLS Financial Advisors, LLC, in Southfield, Michigan, is one of those advisors. At age 41, Wasserman entered the financial planning industry only two years ago but has been a practicing CPA for 20 years.

“CPAs are becoming more involved in investing and financial planning,” he explains. “Maybe not to the extent that some have predicted, but for those that commit the time and training that is required, it is a win-win situation for clients and us as advisors.”

When Wasserman and his partners in their accounting firm, Woronoff Hyman Levenson & Sweet PC, launched an RIA business in 2003, it was the culmination of years of exploration and research on Wasserman’s part, prompted by the frustration he experienced working with his accounting clients over the years. “Clients would send me their brokerage statements, and I saw that people were making basic mistakes, even before the late ’90s,” he recalls, including many who were not following the rules of asset allocation. “We were making recommendations to fix those problems,” Wasserman says, “but didn’t have the ability to implement them.”

A solution has arisen, however, with the development of WHLS’s financial advisory branch. As Wasserman’s clients rely upon him as a trusted investment advisor, “more of our CPA clients and people in the community will look to us for their investment services” as well.

Wasserman sees all of his client relationships as long-term, close relationships, not unlike a family. Wasserman’s own family is pretty tied up in the business, too. “My father-in-law is my senior partner and my brother-in-law also works here,” he says. “There are some family relationships in our business that carry over to our clients.” Family ties in the firm have allowed Wasserman and his partners to commit to building an investment practice alongside the CPA firm, he says. “We all get along very well, both in and out of the firm. Having them here is a definite positive for me.”

CPA vs. RIA

While independent advisors often pride themselves on their disciplined approach to investing, Wasserman believes his CPA background gives him and his partners even more discipline.

“Clients realize that as CPAs, we are using a very rational approach to investing,” he explains. “All too often in the past, clients or their advisors placed the emphasis on [trying to figure out] ‘Which is the best fund?’ or ‘Which stock will do well?’ Instead, we listen to our clients, ask about their objectives, and then develop a long-term plan.”

This plan, embodied in an investment policy statement, is more academic than reactionary or predictive, Wasserman continues, since “No one can predict the future direction of the markets.”

For example, Wasserman recalls that one of his firm’s accounting clients had a broker who often moved the client’s money from one money manager to the next, usually with disappointing results. The broker was trying to predict which particular sector would perform best, but was not being successful.

Another accounting client didn’t need a broker to make him chase the hottest sector, Wasserman says, but repeatedly selected money managers himself based on their track records. “As CPAs, we track [portfolio] performance for our clients, and know how few money managers and mutual funds are able to consistently beat the market benchmarks, especially when you factor in fees, taxes, and trading costs,” he says. “We explain these facts to clients. We want them to understand the rationale of our approach.”

Wasserman and the two other advisors in his firm focus on minimizing taxes by using tax-managed funds, resulting in higher after-tax returns. “If someone has the same 10% return, but their actively managed fund had large taxable distributions,” he says, “their after-tax return would be much lower than 10%.”

“I was at a seminar recently where a gentleman [planner] stood up and said he does 200 to 300 conference calls a year listening to money managers,” he recalls. “We [instead] focus our energies on working with clients and helping them understand and meet their goals, while letting the markets do their job.”

Investment Process

WHLS is a member of the BAM Advisor Service network (https://bamweb.bamservices.com), a company based in St. Louis that helps CPA firms build RIA practices. All of Wasserman’s investment research is outsourced, ennabling him to spend the majority of his time with clients, something he sees as a benefit few in the business get to experience. “We have outsourced the reporting and the trading,” he says. That leaves more time to spend on compliance matters, other research, and one-on-one service.

Serving about 40 clients with an average portfolio size of around $900,000, Wasserman works primarily but not exclusively with his firm’s existing CPA clients. They tend to be small business owners, physicians, dentists, or recently divorced folks. The average size of the account is not by accident, notes Wasserman, arguing that a certain amount of assets is necessary to successfully build a practice and to provide the proper level of service to clients.

WHLS follows a passive investment strategy, primarily using the enhanced index funds from the Dimensional Fund Advisors family for his clients’ investments. “We are very strong believers in the importance of diversification,” Wasserman says. As a result, his clients’ portfolios are not limited to one asset class but are instead exposed to all classes globally. However, these investments are not actively managed mutual funds, but rather passive vehicles similar to index funds.