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Life Health > Life Insurance

Singing the Praises of Tax Season

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With tax season now in full swing, many life insurance professionals are bringing a heightened focus to planning opportunities. They needn’t search far afield for client prospects: the certified public accountants with whom producers regularly collaborate on cases are a veritable font of quality leads.

Yet, many advisors are wont to turn to CPAs more for the expertise they provide on tax questions than for the new business they can also offer. These advisors, sources tell National Underwriter, would do well to follow the lead of fellow professionals who are successfully marketing their practices by partnering with CPAs.

“Having a relationship with CPAs is important, especially during tax season, because that’s when they see their clients,” says Peter Chung, an AVP of professional partnerships at Partners Financial, Austin, Tex. “And CPAs are uniquely positioned to convey the message that clients need to get together with a financial advisor to explore ways to take advantage of tax law changes.”

Chung should know. For he is helping to spearhead an alliance program that, since its launch 12 years ago, has yielded more than 400 revenue-sharing arrangements with CPAs for the 200-plus participating advisors. And the effort is backed by the resources of an industry titan: New York-based National Financial Partners, the company’s parent, which boasts some 170 affiliated advisory firms in North America.

Among other initiatives, says Chung, the program’s advisors are encouraged to present case studies to help allied CPAs identify planning opportunities during client meetings. A discussion of the client’s potential estate tax liability, for example, might prompt the CPA to suggest exploring a life insurance-funded wealth transfer strategy with a partnering advisor.

“Significant life insurance sales are regularly written based on these case studies,” says Chung. “CPAs see our insurance professionals as subject matter experts who are vital to meeting the client’s needs.”

Tax Form Triggers

Also helping insurance and financial service professionals forge partnerships with CPAs is Pacific Life. Keith Buck, a director of the advanced design unit for the Newport Beach, Calif.-based insurer, says the company offers a range of aids–data mining tools, a “tax form triggers” checklist and quarterly webinars to which both the CPA and the financial professional are invited to attend–to help CPAs in the program ferret out planning opportunities that may be referred to the financial advisor.

But Buck stresses that such partnerships are a “two-way street:” The CPA must benefit as much as the producer from the alliance, either via referrals to client prospects or additional billable hours from existing ones.

“The advisor needs to approach CPAs with a review to helping them grow their revenue,” says Buck. “CPAs will be interested to know, for example, that the life insurance professional can broaden the services and expertise they offer the CPA’s clients, such as financial, business, and wealth transfer planning.”

How many CPA alliances should a life insurance professional have? Bill Mercer, a Pittsburgh, Pa.-based general agent for Ohio National, thinks that one really good relationship should suffice. Mercer says his CPA partner of 20 years has sent him a “ton of clients,” most of whom are in need of retirement planning.

Pacific Life’s Buck believes that from three to five alliances is optimal, but observes that not all will be “primary” relationships. Those CPAs (and estate planning attorneys) who provide only the occasional referral may be categorized as “secondary” partners.

One advisor who has more than one alliance is Mercer Morrisette Jr., a Myrtle Beach, S.C.-based financial professional. Mercer, who has collaborated with as many as five CPAs in prior years (but now does business chiefly with two) says the partnerships account for about 40% of new business. And he credits an initiative of his carrier, Prudential Financial, Newark, N.J., with helping to give him broad exposure to CPAs in his community.

Morrisette speaks twice yearly to more than 150 CPAs affiliated with the South Carolina Tax Council. Sponsored by Prudential, the two-day gatherings avail him of opportunities to discuss insurance and financial planning topics; and to plug Prudential’s 10-year old Alliance Program, which helps Prudential advisors build relationships with CPAs and other tax preparers, plus commercial property and casualty agents. To date, the program’s 78 advisors have developed 84 alliances.

“The alliance program lets me share commissions with partnering CPAs,” says Morrisette. “The terms of the partnerships are all in writing, including what’s required of the CPAs. They must have, for example, the same FINRA licenses I have. When I receive a referral that leads to a sale, I handle the paperwork and Prudential cuts a commission check to the CPA.

“The arrangement has worked out very well for the partners,” he adds. “And it’s made a big difference to my practice: This week, I have 12 client appointments that my CPA partners set up for me.”

To be sure, not every tax preparer is keen to enter into a revenue-sharing arrangement. Case in point: Andy Cohen, a CPA and vice president of Norman Jones Enlow, Zanesville, Ohio. Specializing in business, estate and life planning for family-owned and closely held firms, Cohen outsources the implementation of plan recommendations requiring the purchase of the insurance to one of a handful of agents with whom he has allied informally. The reason: By limiting compensation to fees, Cohen avoids potential conflicts of interest associated with the product sale.

In place of commission-splits, Cohen says, he asks only that partnering advisors provide contacts that might lead to additional corporate tax work in exchange for the referrals he sends their way.

And those referrals are top-quality, either because the client has already bought into Cohen’s plan recommendations or because he’s identified the product need–thanks to an in-depth understanding of financial solutions. In addition to being a CPA, Cohen also boasts the CLU and ChFC designations, plus a master’s degree in taxation.

“We encourage all of our CPAs to pursue other advanced designations and degrees,” says Cohen, who adds the advanced training helps the firm compete against other practices that now offer more than tax preparation services. “Many CPA firms of our size, those with 40 more of professionals, have a practice unit that is doing investment advising and that sells insurance products,” he says.

Getting the Strategy Right

Sources say that advisors need to be patient in cultivating relationships with potential partners. Jason Moehring, a senior financial consultant for Cornerstone Group, a practice affiliated with Thrivent Financial for Lutherans, Blaine, Minn., observes that a significant amount of retirement and investment planning has resulted from referrals from a partnering CPA–but only after a long period of professional courtship.

“I spent a lot of time getting to know [the CPA], how he works with clients, and what he is looking for when he needs someone to turn to,” says Moehring.

“Once the ground work is laid, I have to stay in touch,” he adds. “I make sure that I provide feedback to him on the clients and thank him for the referrals he gives. I also call to see what tax issues my clients should be aware of. And I keep him current on insurance and investment trends.”

If the advisor-CPA partnership calls only for an exchange of referrals, then the relationship should be simple to enough to manage. But sources caution that producers need to be able to diplomatically navigate potential frictions with CPAs when, as is often true in complex business and estate planning cases, the engagement calls for jointly meeting with the client and the two advisors differ on strategy.

When these situations arise, says Morrisette, he’ll suggest to the client that he meet privately with the CPA and (if needed) the attorney to explore the different proposals further and return with a consensus recommendation.

“You never want to get into an argument with the CPA in front of the client,” he says. “That fortunately hasn’t happened to me. Also, misunderstandings as to the client’s situation can be a good thing if they lead to new planning options.”

When, Morrisette adds, a client revealed that he owns a 401(k) with $1 million in assets, the disclosure surprised the client’s CPA, who had not thought to ask about retirement assets that were not generating taxable income. Upshot: Morrisette recommended rolling the 401(k) into a guaranteed life income annuity.

Producers have their own blind spots, starting with a basic one: knowing with whom to partner when conducting a search. If the CPA’s business model and clientele don’t mesh with the advisor’s, then the CPA’s referrals will be of little value.

Moehring says the producer can ease outreach efforts by asking clients for referrals to their CPAs. If the clients are affluent, chances are their tax preparers also cater to the high net worth.

Should the insurance professional and CPA agree their practices are a match, then the next step is to develop a business plan. Among other things, says Partners Financial’s Chung, the document should outline revenue targets; the scope of each advisor’s services; how and when to refer clients to one another; revenue-sharing arrangements; co-marketing and presentation strategies; and, not least, techniques for identifying client prospects.

“Too often, financial advisors simply assume that a CPA can effectively describe the value they bring to table,” says Chung. “It’s fine to formalize the terms of an alliance, but without a business plan, the chances of success actually drop.”

Failure is also likely, adds Buck, if the advisor structures alliances to disproportionately benefit his or her practice; approaches the CPA with sales (rather than planning) ideas; and fails to understand how the CPA’s breadth of services, market focus and strategic vision will complement (or not) those of the producer.

But when the two practices are aligned, then sales and referrals can be expected to follow–and increase over time.

“My [CPA] partnership has growing more sophisticated,” says Ohio National’s Mercer. “The referrals I get now are of a higher quality than in years past. The cases are bigger; the dollars invested are larger.”


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