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May 28, 2007 12:41 am

I'm a CPA adding financial services to my practice. I'm currently with HD Vest but not really very satisfied. I'm series 6 and 65 licensed.  My problem with Vest is low payout (starts at 55%), their advisory fee structure (they want 1% on the 1st 100,000, doesn't leave much for the advisor), and a few picky licensing issues.

I'm considering setting up my own RIA but have a few questions.
1) If I do business through my own RIA can I still deal directly with mutual fund families or will all my client funds have to flow through my selected custodian?

2)I believe if I'm not associated with a B/D, I lose my Series 6 license right? Does that mean I can no longer earn trails?

3) Much of my business is assisting small business clients with SEP's and 401(k)'s and I can't figure out a decent way to work with these clients on a strictly fee basis.  What are common fee structures for work of this nature?

I appreciate any input and recommendations as I explore this avenue. 

May 28, 2007 6:44 am

This isn't answering any of your questions...


If you want to be successful as a fincancial advisor, stop doing any work as a financial advisor.  Focus all of your time on growing your CPA practice.  At the same time, find a good financial advisor.  Refer all of your clients to this financial advisor.  Let him do 100% of the work and split the fees/commissions 50/50.  


If being a financial advisor is your strength, get rid of the CPA practice.   Trying to do both will ultimately hurt your income.   Focus on your strength is the point I'm trying to make.

May 28, 2007 9:15 am

To answer your questions -



1.) Mutual fund trail commissions cannot be paid to your RIA. So, if you

are planning on doing business directly through a mutual fund family

with the expectation that you'll be compensated a trail or commission,

you'll have to run that type of business through a Broker/Dealer

relationship such as your HD Vest.



I would advise you that it would be best to run everything through your

RIA, and just charge an advisory fee. This would put everything on a

single platform... your RIA platform. Transition your trail-based funds

into their institutional counterparts, and charge a percentage fee equal to

what you were receiving as a trail. Or, find better funds now that you

have access to virtually everything under the sun.



2.) You have 2 years (or something like that) to 're-hang' your license

with another eligible BD firm in order for you to continue to earn trails. If

you don't affiliate with a new BD immediately, you no longer earn trail

commissions.



3.) SEP and 401K clients - you have the ability to open accounts with the

custodian for each participant. Bill each account a percentage of the

assets within the account. I don't see an issue with this.



Lastly, I don't totally disagree with the above post - you might be further

ahead, and your clients better served, if you focused on your tax practice

and initiated a sharing arrangement with another advisor who can

manage the money. I've always thought of CPAs who manage the assets

as providing conflicting advice. If they are dedicated to the money

management process, how are they to be considered fully-functioning

financial advisors? I can say with 100% assurance that I wouldn't refer my

client to a tax professional who is 50/50 between two different types of

responsibilities.



Good luck.



C

May 28, 2007 9:26 am

I take a different approach to things. My strength is taking care of my clients. I contemplated adding financial services to my business for over a year and finally decided it was the right thing to do.  My customers were not getting good advice locally.  I don't know of a "good" financial planner in this area (rural about 1 1/2 hours from major city).  I have no problem consulting with someone else or even referring my client to someone else if their situation presents something I cannot handle.

For me a successful practice will not be the one with the most AUM nor will success be defined in $.  Success will be knowing I have done a good job for my clients.  If I net $100K from both of my practices I will be more than happy.

I already have the confidence of my clients and have always enjoyed the planning end of things.  I'm getting a little tired of the pressures of tax season and would like to focus on servicing my existing clients on all financial fronts rather than being just their tax advisor.

Just the other day I had a client call me to discuss weather or not he should take an offer on his house. My knee jerk  reaction was to tell him not to accept the offer. But we discussed his situation at length, came up with a couple of ways to make the offer acceptable and he hung up the phone very satisfied. This is what I'm about -finding the right solutions to financial situations.

My heart is set on this - I just need to choose wisely the path I will follow. As I mentioned in my original post, I'm finding a few to many obstacles in my current situation, and the "haircut" is rather short!  The advisory fees are rather steep which I feel is not in my clients best interest as are a few other issues such as if my client wants to incorporate ETF's they have to do so outside of my advisory account as I'm not series 7 licensed.  Yes I could get my series 7, but is that the best answer? I'm thinking not...perhaps my own RIA would be a better option, hence the questions I posted.

I don't care how much an individual client brings me to invest, I want to assist them in whatever manner is best for them. I'm almost sure a fee only practice will the best solution but I want to be sure of that before proceeding.

May 28, 2007 9:46 am

I'm getting a little tired of the pressures of tax season


How will this solve the problem.  Won't you still have the pressure of tax season combined with no time to help clients with other issues during tax time?


I'm almost sure a fee only practice will the best solution but I want to be sure of that before proceeding.


Do you ignore insurance issues?  I ask because the best solutions for your clients when it comes to insurance involve commissions. 

May 28, 2007 9:47 am

Captain;

You posted your reply while I was typing the above response. I'm glad you took the time to reply as I have read your thread about setting up an RIA. I appreciate your to the point answers.

I believe I am facing several of the issues you faced. I asked about setting up accounts directly with mutual fund companies, as I currently am in the process of setting up a couple of SEPS for clients directly with the fund company.  I don't want to have to "move" these clients in a couple of months if I go the RIA route - if I don't have to. If its unavoidable, I will do it, and reimburse my clients for any fees incurred in the transfer.

Can you elaborate on why you feel being a CPA is a conflict of interest? Is it that you don't feel a CPA can be well rounded enough to be a good financial planner?

I believe we all have our strengths and weaknesses.  I know one of my weaknesses is currently insurance - I refer that business to someone else.  That said, I know enough to identify the need for insurance and can also review solutions offered to assist my client in identifying the best solution for their individual needs.  I am also working on strengthening my knowledge in that area.

May 28, 2007 9:56 am

I wish we could edit posts in this board. I knew when I typed "I'm getting a little tired of the pressures of tax season" that I would get called on that statement.

What I meant is: I don't want to grow that side of my practice anymore, I want to work with my existing clients and a few selected new ones. I may even choose to let a few of the pain in neck customers go. I want to evolve my business, take it to the next step.

Anonymous: Do you ignore insurance issues?  I ask because the best solutions for
your clients when it comes to insurance involve commissions.

Does this mean that you think all of the fee only planners in this world ignore insurance issues?  But your reply does lead me to another question: Does the ADV deal with insurance issues?

May 28, 2007 10:34 am


Does this mean that you think all of the fee only planners in this world ignore insurance issues?


It's not that they all ignore insurance issues.  Rather, they are incapable of giving the clients the best solutions.  Even if you become the greatest expert in this area you will have to continue to refer this business to others.


I think that my point is that if you want to do what is in your clients best interest, you may want to be fee-based.  This way, you can use commissioned products when those products are in your clients best interest.

May 28, 2007 10:37 am

Ahh...thanks for clarifying that...that's exactly what I'm trying to explore...fee based or fee only...

Fee based sounds like it leaves more doors open yet how on earth do you incorporate that into your ADV if you haven't so to speak opened that door yet?


May 28, 2007 11:14 am

Ask God to direct your thinking then follow your intuitive thoughts. It works every time.

May 28, 2007 11:29 am

I'd like to preface my post by saying that I am probably not as familiar with the different structures (RIA vs other structures) as maybe I should be, as I've been with a wirehouse my entire (relatively short 7 year) career.


Seems like working through a B/D gives you a lot more flexibility than going RIA. Maybe you just need to find the right B/D. Why not look at one of the other large ones as an alternative to B/D, like LPL or Commonwealth? Or, is there an alternative, like fee + comm as opposed to one or the other. Fee for the planning, then comm for the OPTION of executing thru you.


Either way, it does seem to me you need to focus on one or the other. Doing a great job on both might entail hiring either a S7 type or a jr CPA, to work alonside you.


JMHO

May 28, 2007 12:22 pm

Doesn't your B/D have a RIA as well as the brokerage side.  Mine does. I'm sitting for the 65 in a few weeks and it is my understanding that I can operate in several ways.  Commission brokerage based business for some clients, fee based for those that would benefit by that and charging by the hour or project for others. 


I would think that trying to establish your OWN RIA firm would be time consuming and paperwork/compliance intensive.  I plan to use the various RIA platforms for fee schedules within my B/D and possibly the money managers that have already been approved.  I'm more of a hands on advisor so I really don't see myself turning over my clients to a money manager instead of being  myself.


For the guys already holding their  65/66,  correct my if my vision of this process is wrong.


Probably the reason you have such a low pay out is that you have low volume of brokerage business?

May 29, 2007 1:20 pm

i think cpa's should stick to what they do best...preparing tax returns. cpa's should not provide investment advice.  


financial advisors dont give tax advice, why should cpa's select investments for clients?

May 29, 2007 2:09 pm
Vin Diesel:

i think cpa's should stick to what they do best...preparing tax returns. cpa's should not provide investment advice.  


financial advisors dont give tax advice, why should cpa's select investments for clients?



There is one CPA/financial advisor I have worked with that I think does a reasonably good job at both.  His situation is that he used to be a full time CPA and still does some of that work on the side for his clients, but mostly he has hired a couple of full time CPA's in his office to do 90% of the accounting work so he can focus on the investments.


For the most part, I have been unimpressed with financial advisor work done by CPA's, they seem to have a level of understanding and sofistication (sp) that you usually see with Primerica or some of the other untrained part timers out there.  They also tend to let the tax tail wag the performance dog.


Not sure if that adds to the discussion, other than my advice to pick a horse and ride it.  If you try to do both, you will do neither particuarly well, and your more desiriable clients and prospects will notice.

May 29, 2007 3:06 pm

[quote]i think cpa's should stick to what they do best...preparing tax returns. cpa's should not provide investment advice.  


financial advisors dont give tax advice, why should cpa's select investments for clients?[\quote]

Hmm..perhaps it's some of your clients whom I'm helping out...those who have been sold regular IRA's who don't even have taxable income, Roth IRA's when their income is too high...

Pardon me but I believe tax planning and financial planning should be integrated...whether you choose to wear all hats or some is up to each individual as long as you keep your client's best interest in mind. I don't hold myself out as an expert in all fields but I can assist my clients with an investment/financial/tax plan and draw on experts for those area where I'm not fully experienced.

Why do you think CPA's are just tax return preparers?  Please qualify your statement why you think CPA's should not provide investment advice? Do you truly believe they can't and don't have the skills? I see many recognized financial planners have their CPA designation.

Perhaps I should add to this conversation that outside of tax season I only need to currently put in approximately 20 hours per week with my CPA practice. So let's get back on track with this discussion.

Some have suggested searching out a better broker/dealer and that may be a wise idea.  Any recommendations on BD's that offer quite a bit of flexibility?

If registered at the state level is RIA compliance really that cumbersome?

May 29, 2007 3:12 pm

I didn't learn anything from the coursework that I took for my accounting degrees that qualified me to give investment advice. However, it sure helped me learn what I needed to know for this business a lot more quickly. Also, I can communicate with business people with a higher level of sophisitcation than most brokers. Also, I don't believe that I could be very good at trying to do both at the same time.

May 29, 2007 3:12 pm

Perhaps I should add to this conversation that outside of tax season I only need to currently put in approximately 20 hours per week with my CPA practice.


During tax season, how many hours will you be able to devote to your financial planning clients?


May 29, 2007 3:36 pm

My tax clients are my financial planning clients they are not mutually exclusive...so as much as they need. 

My question is not can I it is how best can I serve my clients.  I took over 2 years to come to the decision to add these services to my practice -it was no overnight decision. I reviewed alternatives and concluded that this was the best solution.

So please forget that I'm a CPA, as far as I'm concerned its a moot issue.


May 29, 2007 3:55 pm

I do both, although it didn't take long for me to determine that I like the investment business a whole lot better.  If I could fire my family and friends, I'd be completely out of the accounting business.


...not to mention that the pay in the accounting business sucks in comparison.

May 29, 2007 3:59 pm
Indyone:

I do both, although it didn't take long for me to determine that I like the investment business a whole lot better.  If I could fire my family and friends, I'd be completely out of the accounting business.


...not to mention that the pay in the accounting business sucks in comparison.



Accountants don't make nearly as much as people think.