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Personal Financial Planning: A Golden Opportunity for CPAs


Are you considering adding financial planning as a service offering? You are not alone. Many CPAs have found it to be an effective path to providing holistic client service and smoothing out seasonal revenue spikes and troughs that are natural for a tax practice.

What does it take to succeed as a financial planner? Here are four things to consider.

1. Be clear whether financial planning is a good fit for your practice

Financial planning is not the right fit for every tax practice or CPA because it requires a significant amount of prospecting and outreach. After all, only one or two life events will force people to a financial planner’s door! Short of an inheritance or a pending retirement, the responsibility for inviting prospects to have a conversation about their financial situation will rest on you. Do you have the bandwidth, time, and resilience to handle that? Many CPAs invest time and money into obtaining financial planner licenses just to have them framed on the wall as office decoration. If you are not serious about making a commitment to grow a financial planning practice, it may be best to not go down that path at all.

2. Choose your pricing model

There are three broad categories of fee models used by financial planners and financial advisors.

A fee based on AUM (or Assets Under Management) pays the advisor a small percentage of the assets that the client has invested with him. This fee structure is effective for Baby Boomers who are in the final stages of accumulating wealth. It is not as effective for most Gen X or Millennial clients, as most of them do not have the liquid wealth to meet AUM minimums.

The hourly fee model is one where the financial planner charges for the time he or she spends with the client. This model is simple to use, and many CPAs choose it because it is similar to how they currently bill for their tax preparation services.

The major drawback of this model is that it places a transactional cost on what is fundamentally a relationship business. The hourly model can work well in situations where the client’s needs are purely transactional and finite (such as offering a second option on a pre-existing retirement plan, helping the client strategize on debt reduction, or comparing insurance plans). However, it is not as effective in situations that call for ongoing monitoring and course-correction because it financially penalizes the client for talking with the advisor.

The other problem with the hourly fee model is that it can make it difficult to generate a sufficient ROI on marketing. The time and expense of reaching prospects can be significant. In the case of a primarily transactional client, billable work is finite by definition. Combine that with the inherent limitation of only 24 hours available in a day, and it becomes difficult to generate a sustainable income.

A monthly retainer model offers an alternative. While not the most common in the industry today, it is becoming more popular. The idea is to break the annual fee down into bite-sized monthly pieces, set it up as an ongoing relationship, and automate billings for a year (unless the client opts out).

This approach offers several advantages. It encourages the client to talk to the financial planner more frequently because an extra phone call doesn’t trigger an extra bill. It puts the advisor’s focus on delivering value, not trying to sell the next transaction. It can also allow the advisor to scale the practice. For example, a monthly fee of $100 per household (about the price of the monthly cable bill), times 100 clients, times 12 months, generates $120,000 for the year – and a lot of it is from recurring clients who don’t need to be “closed” over and over to assure financial flow.

3. Commit to a plan

Once you have made a decision to add financial planning to your professional offering and have selected and acquired the necessary certifications, you must commit to a business development plan. What is your dream revenue level from financial planning in the next two to three years? How many clients would you have to add every month? Given your fees, what kind of a client would get the most value from working with you? Set measurable goals to build and maintain momentum.

4. Commit to working on the financial planning practice year round

Financial planning isn’t something that you occasionally dabble in. In order to stay current and sharp, you must remain actively involved in this side of your practice year-round. Some CPAs ignore financial planning between January and May. While that allows them to focus on tax returns, it can also derail their practice-building momentum and be a disservice to clients. Commit to staying involved and engaged during the busy season. Some professionals have found it helpful to allocate one day (or even a portion of one day) per week to their financial planning work during the busy season.

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This article contains general information only. Sunflower Bank is not, by means of this article, rendering accounting, financial, investment, legal, tax, or other professional advice or services. This article is not a substitute for such professional advice or services, before making any decisions related to these matters, you should consult a qualified professional advisor.