CPA with existing clients - Lousy Payout?

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Feb 21, 2010 7:23 pm

From my perspective, I bring the clients to the table (which arguably is the most important factor!) and then THE FIRM processes all the paperwork, sets up the new accounts, manages the investments, etc.


THE FIRM earns too much of the fee. I appreciate any perspective/thoughts you can provide.
Feb 21, 2010 7:29 pm

Form your own RIA.  Take the series 65.  Do it yourself. 

That would be a better way of doing it.

Feb 21, 2010 7:31 pm

Only 66bps. I would keep looking, or do what Morean stated - get your Series 65. Then you will be able to take 100% of the legwork instead of 55%.



Keep looking!

Feb 21, 2010 7:34 pm

I'm open to taking the 65, that's no problem. Am also wondering what I might be able to expect at other national firms (e.g., LPL, etc.) Thanks for any feedback/input.

Feb 21, 2010 7:42 pm

If you worked with a national firm, and was not involved in the investment decisions, i.e. got paid to "bring the client to the table", it can vary, but from my experience both at a wirehouse and at an independent firm, you could expect 25% of the fee. So on 1.9% it would be just under 50 bps.
But it sounds like you are servicing the clients on the investment side. If you were doing that, and also managing the investments, or putting the investments into a wrap account, i.e. charging them a fee to invest in a preset asset allocatin of mutual funds, you would get in the neighborhood of 85% (might be a bit lower after the firm takes an admin fee.) But you would be doing the paperwork, etc. Your situation is a bit unusual, from what i have seen
But i have a question...how can you service 550 clients as a cpa, and at the same time properly service them, (or even 20% of them) at the same time, as an investment advisor. What happens when you are buried with tax returns, on April 1st, and the market is tanking?
No disrespect meant whatsoever, it is just something i am always curious about when i run into CPA's who are also investment advisors, registered reps, whatever. 

Feb 21, 2010 7:44 pm

If you've got a 7 and 66, you don't need the 65.  Email Zach Gronich at [email protected] He is a CPA helps people set up RIA's. 

66 bps sucks.  You can always farm out the asset management and make at least 1.25%.  I know a guy in Ohio that runs a decent SMA.  Or hell, I'll run it and give you 90 bps.

Feb 21, 2010 8:04 pm

Preparing the returns is simple. 

 
Just seems like 66 bps is low.
Feb 21, 2010 8:10 pm

If I farmed out the asset management, don't I have to do all the paperwork (hassle)? I want to avoid that apsect of the job.

Feb 21, 2010 8:25 pm

Then 66 bps may be the best you can get if you are not planning on doing any paperwork.  Most of what needs to be done your assistant can do.

Feb 21, 2010 8:41 pm

Thanks for the excellent feedback gents. "Icecold", I don't mind your envy, it's perfectly understandable. Attaining the CPA certificate is a great achievement. I fully appreciate the terrific lifestyle I have -I don't take that for granted.

 
Thanks for the great input everyone! 8 more weeks until freedom!
Feb 21, 2010 8:57 pm

You shouldn't tap into your client's assets because a one-size fits all portfolio is not the answer.  Keep in mind if things go south, you're the one to blame.  It's not like being a CPA.  You would find out very quickly that clients don't like losing money.

Ice is right.  A CPA shouldn't just willy-nilly think that they can do financial planning.  I can't do taxes, even though I understand how they work. 

It seems that you think that our profession is "easy". 

Feb 21, 2010 9:12 pm

I have many transferable skills for the financial planning side of the business.

 
Ice is bitter cold.
That's OK.
 
I completely enjoy what I do and love the lifestyle it provides for me.  
 
I think everyone on this board would agree that it is extremely difficult getting new FP clients. No question. 

Feb 22, 2010 8:58 pm
iceco1d:

I don't mean to sound like a prick here...but what
exactly are YOU doing?  You don't do the taxes.  You don't run the
money.  All of your investment clients go into the same portfolio, and
pay the same fee.  You aren't doing any financial planning.  What is
the problem?  What do you mean that "the broker takes his standard 24
bps?"  Is this for unlimited trading?  If it is, you can't complain
about that.  Then the 45 bps goes to the SMA manager for investment
management?  That's normal too.  So then you split the actual fee with
your investment firm, which is 1.21%. 

1.21% GDC is pretty
good average GDC, especially if you're dealing with big clients.  Most
mature books with upstream clients average less than 1% from what I've
seen. 

Your 50% payout with "the firm" could probably go up to 65, maybe 70% over time, if you bring in enough assets & production.

You don't have a S24, so you are getting your supervision elsewhere, which is worth 10 bps easily. 

If you want more, go RIA.  But be prepared to do everything yourself. 

On
a side note, the CPA going investment advisor really f*cking annoys
me.  It's like even you guys don't realize how different being an
accountant is from being an FA - and in your case, much less a money
manager.  I know, I know, CPAs can walk on water.

I think all of
the "strong relationships" I have with clients, that I send to my CPA,
I'm going to start asking for 50% of the tax prep fee.  I mean, I don't
actually want to DO the taxes.  Or put any numbers in the software.  Or
file them.  I just want to leverage my relationships and get some extra
$$$.

I may see about getting licensed as a dentist, too.  I
mean, I send plenty of people to my guy.  I mean, I don't wanna clean
any teeth.  Nor do I want to hand out free floss & toothpaste.  I
just want half of the fee.  Accountant.  FA.  Dentist.  All the same.

I digress.





Here here brother . . . I had a CPA argue with me that C shares, over
the long haul, were right for the client.  He said A shares were a way
that us "brokers" ripped off the client.  So, after I told him he was
an idiot, I went to the FINRA website and did a comparison for him on
an A and C share over certain time period and emailed it to him.  When
I did email it, I told him to stick to taxes. 

Feb 22, 2010 11:14 pm

Well Mr CPA, I guess you sort of walked into a hornets nest.
So i go back to my previous post and a question that, as i said before, I have wondered for a long time.
That is, if its April 5th, and you are sort of busy, since you are a CPA, and the market is tanking, and your clietnts want to know what is happening with their portfolios, what do you do? What do you tell them? Do you tell them that you will get back to them after the 15th?
Like i said before, i was always curious to know what the thought process is of CPA's who think you can do bothh, even if you arent managing the money.
By the way, doing the calculations, the answer to your original question is that at 66 bps, you are overpaid. All you are doing is making a referral. The CPA's i work with take 25% of my net, which works out to around 33 bps. They are happy with that, since i am doing all the work. Like your guy is doing.
Now that i answered your original question, could you answer mine?

Feb 23, 2010 7:33 am

I have more than enough time to talk with my clients throughout the day because my staff prepares the returns. I walk out the door every single night at 5:00 PM -- no exceptions....and here's the best part....all the returns received from clients that day are done! We're good, we're REAL good. So I have plenty of time to spin my FP web (like you all do). I also only plan on taking on clients with $500K or more, so I don't intend on wasting my time with small portfolios. All clients get a return phone call within the hour - -never had an exception to that rule. Why you might ask? Because I know how to run a business.

 
BTW, you're missing one important point. In fact THE most important point. You know better than anyone how hard it is to actually get a client to walk through your door -- it's next to impossible because people aren't REQUIRED to do financial planning (but they are REQUIRED to file a tax return, which is why I have so much business). You should be kissing the feet of the CPAs who refer business to you. You would have zero incremental revenue from their clients if they made no referral to you -- which is why they deserve far more than 33 bps. Don't bite the hand that feeds you!
 
I love the jealousy that exists, and the animosity between, FPs and CPAs. You guys really hate CPAs -- very funny!  It is kind of hilarious when you think about it. Wonder what the genesis of that anger is....because CPAs don't despise FPs like FPs hate CPAs. Pretty funny stuff indeed. Must suck being so angry in life. Cheer up!
 
I got your hornet's nest right here pal.
Feb 23, 2010 7:35 am
newrep:

I have more than enough time to talk with my clients throughout the day because my staff prepares the returns. I walk out the door every single night at 5:00 PM -- no exceptions....and here's the best part....all the returns received from clients that day are done! We're good, we're REAL good. So I have plenty of time to spin my FP web (like you all do). I also only plan on taking on clients with $500K or more, so I don't intend on wasting my time with small portfolios. All clients get a return phone call within the hour - -never had an exception to that rule. Why you might ask? Because I know how to run a business.

 
BTW, you're missing one important point. In fact THE most important point. You know better than anyone how hard it is to actually get a client to walk through your door -- it's next to impossible because people aren't REQUIRED to do financial planning (but they are REQUIRED to file a tax return, which is why I have so much business). You should be kissing the feet of the CPAs who refer business to you. You would have zero incremental revenue from their clients if they made no referral to you -- which is why they deserve far more than 33 bps. Don't bite the hand that feeds you!
 
I love the jealousy that exists, and the animosity between, FPs and CPAs. You guys really hate CPAs -- very funny!  It is kind of hilarious when you think about it. Wonder what the genesis of that anger is....because CPAs don't despise FPs like FPs hate CPAs. Pretty funny stuff indeed. Must suck being so angry in life. Cheer up!
 
I got your hornet's nest right here pal.



People aren't required pay CPAs either.  They can use TurboTax or an EA (someone who really knows how to do taxes).

Only 13% of the CPA exam is taxes.  Wow.  I'm impressed.

Feb 23, 2010 9:42 am
mlgone:
newrep:

I have more than enough time to talk with my clients throughout the day because my staff prepares the returns. I walk out the door every single night at 5:00 PM -- no exceptions....and here's the best part....all the returns received from clients that day are done! We're good, we're REAL good. So I have plenty of time to spin my FP web (like you all do). I also only plan on taking on clients with $500K or more, so I don't intend on wasting my time with small portfolios. All clients get a return phone call within the hour - -never had an exception to that rule. Why you might ask? Because I know how to run a business.

 
BTW, you're missing one important point. In fact THE most important point. You know better than anyone how hard it is to actually get a client to walk through your door -- it's next to impossible because people aren't REQUIRED to do financial planning (but they are REQUIRED to file a tax return, which is why I have so much business). You should be kissing the feet of the CPAs who refer business to you. You would have zero incremental revenue from their clients if they made no referral to you -- which is why they deserve far more than 33 bps. Don't bite the hand that feeds you!
 
I love the jealousy that exists, and the animosity between, FPs and CPAs. You guys really hate CPAs -- very funny!  It is kind of hilarious when you think about it. Wonder what the genesis of that anger is....because CPAs don't despise FPs like FPs hate CPAs. Pretty funny stuff indeed. Must suck being so angry in life. Cheer up!
 
I got your hornet's nest right here pal.
 
It's going to be great to watch you fail miserably in the fp business.   News update idoit.........you plug numbers in a computer program......your not a fp.  Put your superman tshirt back on and do another return numbers boy.




Feb 23, 2010 11:10 am

And that would be the final nail in your piker coffin, newrep.  Go on the CPA boards and hang out there.  It's too brutal for you here. 

Our big hitters haven't even gotten involved yet.  Save yourself some time and tears and move on.

Feb 23, 2010 11:19 am

me and you both.  lol!

Feb 23, 2010 1:53 pm

Oh man I'd be dead without CPA referrals, thank god for CPA referrals. I THRIVE off CPA referrals, oh man.

 
newrep - Most of us don't require immediate bps kickbacks because we know the relationships we establish will last past the first referral. Think about it.