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Are CPAs a Looming Threat?

Lately more articles and videos—in publications like the CPA Journal and the Journal of Accountancy—are popping up encouraging CPAs to become comprehensive financial planners.

According to an article from ThinkAdvisor, “Should Advisers Fear Accountants,” approximately 120,000 CPAs currently play a role in financial planning.

Andrea Miller, director of financial planning for the American Institute of Certified Public Accountants, said the organization is encouraging its members to evolve their skills to provide advisory services. This is evident in AICPA’s Personal Financial Specialist (PFS) designation.

“We believe that CPAs are in a unique situation to advise clients, and we want to encourage them to do more in this area,” Miller told ThinkAdvisor.

Perhaps those CPAs don’t want to do financial planning and they’d rather work with you. In that case, reach out to your clients’ current CPAs to figure out ways to better serve your clients, says a Financial Planning article “Should I …Work with a CPA?”

If CPAs are a looming threat to financial planners’ livelihood, some media reports recommend CFP® professionals become one (for more information visit aicpa.org/becomeacpa.html).

Sharif Muhammad, who is both a CPA and a CFP® professional, said it being both makes tax planning easier for his clients.

Forge Relationships with CPAs

So you’re not a CPA, you don’t want to become one, but you want to work with one. Forging a relationship with your client’s current CPAs would be a logical starting point—especially in an effort to provide your client with the best comprehensive service.

“People will always need advice around taxes, and you need to know enough to know when you’re out of your depth,” Justin Harvey, founder of Quantifi Planning in Philadelphia said in the Financial Planning article.

For Mike Alves, CFP®, CLU®, CRPC®, forging a relationship with a client’s CPA starts with the clients.

“Normally, it’s the client who introduces us to them,” Alves said. “We have an in-person meeting to set expectations.”

That initial meeting is setting the stage for the financial planner to become partners with the mutual client’s CPA.

According to the Kitces.com article, “3 Ways Financial Advisers Can Get CPAs to Actually Refer Clients,” the best time to connect with CPAs is between May and September (well after the tax filing deadline and before the swing of the next tax season). The article also noted that CPAs need help with three things; help with those, and it’s likely they’ll partner with you.

The three key things, writes author Dave Zoller, CFP®, are (get approval from your client first for all of these): (1) communicating with your client’s CPA about any money moves that have tax implications; (2) helping your client’s CPA create a list of all the client’s accounts and whether that account has a 1099; and (3) helping the CPA find missing cost basis of your client’s older investments.

But even when you forge the relationship, you should still be well-versed in tax law, Muhammad said.

“Nothing could differentiate a CFP® professional more than being well-versed in taxes,” he told us. “Especially during a massive tax change like the one we just experienced and especially when you’re dealing with small- to medium-sized businesses as well as certain families whose tax situation could be significantly impacted by the tax law.”

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Ana Trujillo Limón is senior editor of the Journal of Financial Planning and the FPA Next Generation Planner. She also edits the FPA Practice Management Blog. Email her at alimon@onefpa.org, or connect with her on LinkedIn


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It Is All About Perception: Live Beyond Your Own Business Limitations

Years ago a rookie financial adviser (me) new to the area asked a veteran colleague and friend, “What is the wealthiest street in the city of Milwaukee?”

“Well, that’s easy, it’s Lake Shore Drive because that is where all of the money and mansions are, however, I would not prospect them,” he told me. “They all already have an adviser.”

Many weeks later, the veteran stopped me as I rushed by him on the way out the door.

“Where are you going in such a hurry?” the veteran asked.

“I’m going to see my client at his home on Lake Shore Drive,” I replied.

T.S. Eliot said it best when he said, “Only those who will risk going too far can possibly find out how far one can go.”

Risk has many definitions. To my co-worker, it implied taking time to prospect an affluent niche that he believed would most certainly reject him. To me, the rookie, there was no risk in attempting to prospect them, since no attempt at all would absolutely result in failure.

My point today is that the reality of business risk is really about how our perceptions dictate what we believe is possible. The lesson learned should be: don’t limit yourself.

The following is a brief outline of how you can live beyond any business limitations you might have set up for yourself.

Identify Your Business Risk

It was a simple thought, “I’m not going to get rejected by people who don’t have money,” that led me down a path of forming my belief system around who I was going to prospect. In other words, I didn’t care about rejection, I cared about wasting time with unqualified prospects.

Unfortunately, it took some time to realize that although I was closing these new wealthy clients, they were only willing to invest a small portion of their assets with me; thus, my updated business risk was in not being confident enough to put together comprehensive financial plan, but merely pushing a product.

Model the Masters

Once you’ve identified any challenge, it’s important to look for the solutions. In this case, my solution came in the form of a conversation with my then branch manager who simply said, “You’ve got 500 accounts. You don’t need 500 more with the same average asset per account; what you need is a minimum account size. I recommend from this day forward that you never take an account under $100K.”

He was a former top producer turned branch manager and to me he walked on water. So, it didn’t take long before I picked up the phone and cold-called business owners inserting the phrase into my introduction, “I tend to work with business owners who have $100K or more in investable assets.”

Create a New Reality

Change can be a scary thing until you realize that not changing will cause you more risk. Take for instance what happened just 30 minutes after I started using the aforementioned phrase. The 30-plus year veteran business owner that I was speaking to replied, “I know what you mean, I don’t have time for small accounts either.”

And, just like that everything changed for me. I was no longer afraid to position myself as an adviser with a minimum account size. In fact, I embraced and was proud of it.

Become the Mentor

Now, as a business consultant/coach I’ve had the pleasure to help others break though the reality of their own business risk. Take Sandra P. a 30-year veteran client of mine who agreed to set her account minimums at $500K, then at $1 million and later at $3 million. It wasn’t until she gathered $10 million of new assets in one month that she realized how limited her thinking had previously been.

Why Having a System to Breakthrough Your Business Risk Works

The reason why having a system to break through your business risk works is because it helps you be aware of what those risks are, then by modeling your mentors it supports a paradigm shift of what is truly possible.

If you would like a complimentary coaching session with me, please email Melissa Denham, director of client servicing.

Dan Finley

Daniel C. Finley is the president and co-founder of Advisor Solutions, a business consulting and coaching service dedicated to helping advisers build a better business.

 

 

 

 

 


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Helping Clients Manage Life Transitions—With Credit Intact

Divorce, widowhood and other life events can be as much a financial hardship as an emotional one. Here are some strategies to help your clients minimize potentially negative impacts to a credit score after experiencing a life transition.

A question that often comes up when I speak with clients who are going through these situations is, “How can getting divorced or becoming widowed affect my credit score?” Not surprisingly, these life transitions can have a significant impact on a client’s financial well-being.

Transitioning from a two-person household to one requires making major lifestyle adjustments, and credit scores are often overlooked in the midst of this turmoil. To help a client avoid making hasty decisions that could affect their financial security, here are four strategies to help minimize the impact to their credit scores.

1.) Get organized.

Before you attempt to address the credit question, it is imperative to have a clear picture of a client’s current overall financial situation. Start by gathering documents related to financial obligations as well as insurance, taxes, retirement accounts, banking, investments and legal matters. Ideally, a client will have taken this step before the life transition event has occurred as part of their ongoing financial planning, but be prepared to perform at least some level of document gathering and organization.

2.) Make sure your client understands the importance of credit scores and credit reports.

Credit scores may take a hit during a life transition, typically due to a drop in income or an increase in expenses that are no longer being split with a spouse.

In some situations, creditworthiness may have been built under the name of only one spouse; in that case, your client may need to start building a credit history in order to meet the minimum standards required to establish a credit score. (The FICO scoring formula requires at least one recently-reported account opened more than six months ago.)

Additionally, lower credit scores may result in denied loan applications or having to pay high interest rates and extra fees—all of which can derail a client’s financial goals. Obtaining a current credit report is the best way to properly assess the situation. Remind clients that they can obtain one free credit report from each of the three major credit reporting bureaus (Experian, TransUnion and Equifax) every 12 months.

3.) Pay bills on time.

A third of one’s credit score is based on whether an individual pays bills on time, and all it takes is one missed payment to make a credit score drop. Work with your client to help ensure all their bills continue to be paid in a timely fashion. If an ex-spouse is responsible for a debt, it is beneficial to include an indemnity clause in the settlement, in the event of default.

4.) Make rational decisions about the family home.

Often, there will be an emotional attachment to the family home following a life transition. Your client may want to remain in it, particularly if there are children involved. While the sentimental aspect cannot be avoided, your role is to take the lead on having a rational, in-depth discussion on the practical considerations of maintaining ownership of a house or property. A mortgage is typically a client’s largest expense, and the decisions made on this front could affect his or her ability to make on-time payments.

Ultimately, creating a comprehensive plan for your client that includes a detailed discussion about credit will provide the necessary backdrop to build a solid plan for their financial future.

Let Us Help You with the Tough Conversations

Help clients turn a trying life event into an opportunity for a fresh start and financial empowerment with tips from the Knowledge Labs™ Women and Divorce and Women and Widowhood Adviser Meeting Guides.

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Marquette Payton, CDFA®, is an associate retirement director for the Defined Contribution and Wealth Advisor Services Team at Janus Henderson Investors. In this role, she works with financial advisers, Janus Henderson colleagues and clients to find solutions to today’s increasingly difficult retirement issues, whether within retirement plans or with individuals preparing for retirement. Payton also delivers women-specific content nationally to client audiences.  Prior to joining Janus in 2011, she worked as a manager at American Century Investments, where she led and coached a team that focused on consultative sales with retail clients. Ms. Payton received a bachelor of science degree in microbiology with a minor in chemistry from New Mexico State University, where she was recognized as a Crimson Scholar. She holds FINRA Series 7, 63 and 26 securities licenses and has 20 years of financial industry experience.

The information contained herein is for educational purposes only and should not be construed as financial, legal or tax advice. Circumstances may change over time so it may be appropriate to evaluate strategy with the assistance of a professional advisor. Federal and state laws and regulations are complex and subject to change. Laws of a particular state or laws that may be applicable to a particular situation may have an impact on the applicability, accuracy, or completeness of the information provided. Janus Henderson does not have information related to and does not review or verify particular financial or tax situations, and is not liable for use of, or any position taken in reliance on, such information. C-0519-23971 09-30-20