Written by Louis Rosalez, Avantax Planning Partners
As featured in Accounting Today
Tax professionals (including CPA, Enrolled Agents and others) and financial advisors play critical roles in guiding their clients through complex financial matters. Whether it's managing and optimizing tax efficiency or creating comprehensive financial plans, these highly trusted professionals bring immense value to their clients' financial lives. So why do the two services so often remain siloed?
The reality is that some tax professionals are unaware of the potential benefits that can be gained by partnering with a wealth manager. The process may seem too daunting, but by combining their expertise and embracing a holistic approach, tax professionals and financial advisors have the opportunity to enhance their services, boost their respective practices' profitability and further deepen the tax professional's client relationships.
Financial advisors face numerous time-consuming challenges, from crafting personalized financial plans to staying compliant amidst ever-changing regulations. Wealth managers don't always have the ability or time to assist clients in preparing their taxes. Tax pros also have very demanding schedules, and some may be wary about the additional commitment involved in onboarding an advisor into their practice, or are uncomfortable "selling" non-accounting services, like financial planning, to clients.
Despite these concerns, many tax pros shifted their focus from whether a tax practice should collaborate with advisory firms to how they can craft a financial planning relationship and decide what kind of partnership is best for them. By exploring the possibilities and embracing collaboration, tax professionals and wealth managers can unlock new avenues for growth and provide even greater value to their clients.
If you're thinking about partnering with a wealth manager, here are some key components to consider.
It's all about the client
Successful partnerships hinge on achieving a transparent, two-way collaboration with financial planners and wealth managers, while always committing to the tax pro keeping control of the client relationship. When working together, both parties must prioritize the client's best interests above all else. This commitment to client-centricity ensures ethics and trust form the core of the partnership, which is ultimately integral to the long-term success of the relationship.
Optimally, tax experts and financial advisors work together to gain a shared understanding of the client's financial goals, risk tolerance and overall life situation. Aligning their efforts fosters trust with the client and ensures that recommendations and strategies align with the client's financial goals. Maintaining open lines of communication, including the exchange of insights and proposed tactics, is critical.
Clients often will quickly recognize the benefits of having a team of trusted professionals who prioritize the relationship over transactions. It emphasizes long-term, mutually beneficial partnerships so that clients experience the advantages of a cohesive team.
Benefits of holistic financial planning
Embracing a coordinated, holistic approach to tackling a client's goals — encompassing tax planning, and tax-focused financial planning and investment management — fuels the pursuit of better financial outcomes for the client, who will have access to a more comprehensive array of services and strategies than a financial advisor or tax professional could deliver on their own. By combining their respective areas of expertise, advisors and tax professionals can deliver a seamless and integrated plan that addresses all aspects of a client's financial life, adding significant value. This collaboration helps ensure that important details are not overlooked and that all relevant financial factors are considered.
When considering the complete financial landscape, including portfolio tax optimization and investment modeling aligned with present and future income needs, advisors can develop more robust and personalized planning strategies. Through the consideration of multiple factors, and the alignment of tax and investment strategies, clients can pursue tax-optimized returns and enhanced financial security.
Another notable advantage is the potential for tax professionals to experience increased realization rates. While the floor for the tax pro's realization rates from wealth management services is typically around 5x, it's often much greater, up to 12x, with the right wealth management partner. By providing comprehensive financial planning and investment management services, the collaboration adds value to the client relationship and increases the scope for billable services. This expanded service offering allows tax professionals to manage a larger portion of their clients' financial needs, leading to higher realization rates.
The partnership can also open new growth opportunities, increasing the practice's bottom line. By tapping into the wealth manager's client base, tax specialists can expand their reach and offer their accounting expertise to a broader audience. It also serves to deepen the relationship with existing clients, making a long-term relationship more likely. This level of care and attention strengthens trust and loyalty among clients and presents opportunities for growth, making it a win-win for tax and wealth advisors as well as clients.
What does the relationship with a wealth manager look like?
The tax professional who cultivated the client relationship should retain control of that client relationship — period. The financial advisor partner is an extension of their practice. From the financial advisor's standpoint, it's like being a guest in a friend's home. The end goal of this dynamic is to enable clients to recognize the value derived from the collaborative efforts of the team, while further enhancing the tax professional's status as clients' most trusted advisor.
There are many options to weigh when adding a wealth management component to a tax professional's practice, including building their own from the ground up or via partnership with the right firm. The former can be extremely time-consuming and burdensome, while the latter can provide an immediate lift, preserving a tax practice's culture while still giving the advisor ample leeway to create plans based on clients' needs. This also ensures all three parties — the client, the tax pro and the financial advisor — have a seat at the table.
Above all else, mutual respect stands as the cornerstone for the enduring success of the model. Its impact extends to the client, fostering a sense of ease and confidence in their newly enhanced team, thus establishing a solid foundation for long-term collaboration.
The bottom line
Partnering with a wealth manager can elevate a tax practice's value proposition — and its value — while introducing more effective financial planning and a wider array of investment and wealth management options to clients that can even help the tax practice grow. A wealth manager should seamlessly integrate into the accounting practice, deepening client relationships and potentially leading to greater retention and referrals.
As advisors, assisting clients with their most important goals and financial decisions can be life-altering and incredibly rewarding personally. This collaborative tack defines true advisory support, strengthening the client relationship and adding immeasurable value. A successful partnership stands to benefit every party involved — the tax pro, the financial advisor and, most important, the client — so long as the client's needs and best interests drive every action.