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Why Stronger CPA Ties Boost Profits

September 10, 2015

Far too many financial advisors and accountants see each other as neighbors who visit every once in a while, when they should see the professions as siblings who take care of each other. Advisors plan for the client’s future, while accountants consult on the client’s past. Not only must these distinct fields work together for the client’s best interests, but doing so can also make both practices more profitable.

Advisors know they should forge partnerships with accountants, foremost among all centers of influence, because clients will view either their advisor or their accountant as their most trusted financial professional. If an accountant tells a client to reach out to a particular advisor, the client usually will heed that suggestion.

I have found that a good accounting firm can yield advisors 10 new clients, each with five times the liquid net worth of their typical client. Meanwhile, it can yield one more additional client who can represent the highest revenue generator an advisor will ever have. I refer to this as the “10x5+1 growth formula.” I’ve seen it happen time and again, especially with accountants concentrating on successful business owners, corporate executives and families with complex financial lives.

Seek the Ideal Match

Remember that accountants will not deliver good referrals if they don’t trust advisors with their wealthiest and most sophisticated clients. As a result, advisors must focus intensely on strengthening relationships with these professionals. Then, once advisors get a better understanding of accountants’ client base and tax solutions, advisors can better explain how their own services apply to wealthier clients. Ultimately, accountants will refer ideal clients when they’re confident advisors can handle the work.

Of course the best referrals will come from the best accountants. They are successful business professionals and experts who serve clients that the advisor also wants to serve. But just as advisors conduct fact-finding sessions on prospects to determine if they are good fits, advisors should conduct fact-finding sessions on accountants for the same purpose. An ideal accounting firm would have at least 75 clients who fit the advisor’s ideal clientele. That’s why an advisor should focus on building relationships with one or two accounting firms. Fewer deep connections are more fruitful than broad touch points with lots of firms.

It’s possible to conduct fact-finding missions on accountants, and win their trust, within a matter of weeks. But there’s no point in pursuing accountants who lack your ideal clients, or with whom you don’t get along personally, or whose businesses you cannot help to grow. Partnering with any center of influence demands give and take. Advisors must consistently add value to accountants in order to maintain a steady stream of top-quality referrals. The clearest way to do that is by increasing the revenue potential or potential resale value of accounting firms through your unique skill set.

Support the Accountant

Accountants in the latter stage of their careers could use a skilled advisor. The average top-performing accountants are around 60 years old, as are most of their business-owner clients. Many of those accountants will retire within a few years, and their entrepreneur clients are likely to sell their companies soon. Yet the ongoing revenue stream from a client’s business is the main source of accounting work. Other accountants looking to buy practices will pay less for firms that are about to lose that steady work. In those cases, advisors can offer alternative financial services those clients need and create alternative revenue streams, making these accounting firms more valuable in the process.

Further, business owners want help managing how the influx of wealth from a sale affects their investment strategy, retirement planning, estate planning and philanthropy goals. Some clients may even want guidance on the sale of the business. Complex needs require thoughtful solutions that your advisory firm can provide.

When advisors provide this support in a revenue-sharing relationship with the accountant, the accounting firm’s increased value will be ever more evident. During the first 18-to-24 months of such a partnership, advisory work should generate 10% of gross accounting revenues. The figure should significantly rise over time. Advisors also should refer their own clients to accountants when appropriate. Altogether new clients may flock to the advisor-accountant partnership, which is more useful than financial professionals who don’t coordinate services.

Clients consistently rank their financial situation as one of the biggest concerns in their lives. Advisors and accountants can do more for clients when they bring their core competencies into a combined-service offering. These financial professionals work as partners when they have mutual respect and intimate knowledge of each other’s businesses.