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:
- Competing for tax clients based on price is a huge mistake.
- 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