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Financial Planning > Tax Planning

Should I Build My Own Tax Practice?

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If you’ve ever found working with CPAs to be difficult, but at the same time realized that they hold the key to hundreds of potential clients, you may have had the following thought run through your mind: “Why not start my own tax practice?” In this week’s column, I’m going to tell you why you should carefully weigh the pros and cons of this strategy.

Many annuity producers have been pitched “marketing” programs that encourage cutting the CPA out of the client relationship. The logic goes something like this: “Open your own tax practice, offer the cheapest return in town, and by doing so you’ll steal all of the tax clients away from CPAs, and you’ll become the most trusted advisor!” While that may sound good in theory, let’s take a closer look and I think you’ll see as I did, that this is very flawed logic.

There are two main reasons this strategy will ultimately frustrate you:

  1. Competing for tax clients based on price is a huge mistake.
  2. By removing the CPA, you’re giving up your most valuable asset–time.

Competing For Tax Clients Based on Price

Simply put, competing for tax clients based on price, in hopes of converting them into planning clients, is a horrible idea. It doesn’t take much research to learn that most CPAs actively work to grow their practice with high-income, high-net-worth clients. Why? Because they’re the ones that make the best clients. What CPAs know about high-income/net-worth clients that you may not know is that they never shop for advice based on price. Therefore, competing for high-net-worth clients based on price is the first fatal flaw in this approach.

Ask yourself, would you ever let someone prepare your taxes for $49, or even $99? I know I wouldn’t. In fact, the first thing that would cross my mind is something must be amiss. My CPA charges me $600 each year to prepare my taxes, so how can you possibly do it for $99 or less and do a good job?  

As an advisor, you may be thinking, “I can offer tax services cheaper because I’m going to make my profit on the sale of other financial products.” While true, the problem is the client doesn’t take the time to understand this, and as a result, pricing your services so far below market value actually works against you, making prospects suspicious of you from the start.

Many advisors I’ve coached in the art of strategic relationships have shared with me that after trying this model, the vast majority of clients they attracted were those shopping for a deal, primarily because they couldn’t afford good advice. Not exactly the high-net-worth clients they were hoping to attract.

The Cost of Lost TimeYour Most Valuable Resource

Almost every advisor I know that’s ever tried building their business by opening a tax practice did so with the following false belief. “If I prepare the client’s taxes, I’ll become the trusted advisor, then they will have the same level of trust they have in me as they do in their current CPA.”

Here’s the flaw with that logic. To assume that preparing the tax return makes the CPA the most trusted advisor is a fatal error. In my experience, it’s not preparing the tax return that gives the CPA so much credibility. It’s the amount of time the CPA spends building trust with clients. CPAs have by default a built-in trust development process. CPAs have to meet with their clients each year and must gain access to all of their personal financial information, and as a result, the clients get comfortable working with them, and over time their trust is earned. 

If you decide to start your own tax practice as a means of prospecting, understand you are going to have to prepare your clients’ taxes for probably three to four years before you come even close to having the same level of trust with them that they currently have in their CPA. 

The reality is, the power behind working with CPAs is in leveraging your time. You simply cannot afford to build your business the old-fashioned way, one client at a time. As a strategic advisor, you need to think smarter and understand that it’s possible to gain the trust of hundreds of potential clients all at once, if you simply start at the top. 

Starting with the clients’ most trusted advisor, (the CPA in this example), and having that CPA transfer the trust their clients have in them to you is the key. You should be working alongside CPAs, positioned as the go-to advisor for their firms. You need to be introduced to their clients as the expert, and as a resource for their practice in the areas of planning in which you are the expert. Let’s face it, opening a tax practice is really more of a potential liability than it is a good prospecting strategy.

In reality, you need CPAs. And while the CPAs may not realize it yet, they need you as well. You need to leverage the trust they have with their clients, and they need you to provide services their clients are looking for that they don’t specialize in. It’s this team approach to planning that’s the key ingredient to unlocking relationships with the high-net-worth clients you want to work with. But first, you need CPAs to introduce you.

So how do you go about forming these relationships and getting these introductions? How do you identify the best candidates for a strategic alliance? And how do you differentiate yourself from all of the other advisors in your market vying for each CPA’s attention? By approaching CPAs with a true value proposition, in which they win, you win, and ultimately their clients win. 

In the coming weeks, I’m going to reveal the most strategic methods being used by advisors today to form these profitable relationships. Until then, check out for more helpful information and articles.


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