Although most Certified Public Accountants and Enrolled Agents have not expanded the scope of their services to include wealth management advice, virtually every one has considered it. I would guess that 99% have been approached by a firm seeking to monetize a relationship involving the tax pro’s clients.
There are many reasons why CPAs and EAs shy away. They worry about the distractions and productivity hit involved with training up for a new role. They’re concerned about the costs and resource requirements. And, of course, they understand the value of their reputation as a true fiduciary, and don’t want to risk it by getting involved in sales schemes.
Putting aside those considerable barriers to entry, it might make sense to start by asking some simple question: “Would I be a good advisor?” “Would I be competitive versus the horde of salespeople from the insurance and brokerage firms?” I’ve put together a simple test to help you answer these questions.
This test is grounded in the real world. I created it from a large consulting firm’s lists of attributes for an ideal client-facing wealth advisor. It’s a simple yes/no format. If you answer “yes” to all of these, you would be considered well qualified.
Eight Question Wealth Advisor Qualification Test
- Do you possess a long track record of good judgment?
- Does confidentiality come naturally to you?
- Do you remove your ego from your problem solving process?
- Do you possess authentic confidence in your work product?
- Can you deliver bad news when necessary?
- Are you a good communicator, and a great listener?
- Is your background free from ethical or legal lapses?
- Are you a person of high integrity?
If you’re a tax pro, I’m guessing you passed this test with flying colors. In my view, you are highly qualified to advise individuals and families in the area of wealth management. Note that the test has no questions about persuasion, influence or sales ability. Those things, while important in some careers, are not relevant to a true fiduciary.
Having observed virtually every model of financial product distribution, there is no doubt in my mind that the single and multi-family office is the most successful and sustainable model of wealth management in the world. By a mile, and for good reason: family offices are staffed by fiduciaries, not salespeople. As a result, there is no conflict among any of the players, and certainly none with the clients.
Giving tax advice is giving financial advice. This is why tax pros are so often approached by their tax clients with questions about other financial services and products. Clients understand and appreciate that the tax professional’s decision making process is driven by data, objectivity and math.
Thousands of CPAs Are Already in Wealth Advisory
Credit Suisse has estimated that there may be as many as 10,000 family offices in the United States, and while data are difficult to come by, it seems anecdotally true that every one of those offices has at least one tax professional in a director role. Some have a dozen or more.
Why do tax professionals fit so seamlessly into family offices? For the simple reason that they tend (overwhelmingly) to pass the qualification test above, and their expertise in tax strategy is vital to directing the affairs of wealthy client families. In family offices, tax policy is upstream from investment policy.
While the millionaire next door and the mass affluent probably don’t and won’t need help avoiding estate taxes, nearly everyone needs help with income and capital gains. And everyone would benefit from a taxes-first-then-investment allocation approach. But in the world of financial services, the rule is sales first, last and always.
It’s common knowledge that the average equity fund investor in the U.S. woefully underperforms the S&P 500. To my knowledge, that average person has never enjoyed the market averages in any year, and I’d assert that they’d do much, much better with the advice of a seasoned tax professional on their wealth management team. It’s a given that billionaires can have anything they want, and they overwhelmingly choose the family office model to manage their affairs. Democratizing that simple equation represents the biggest opportunity for accountants since the invention of dual-entry bookkeeping.
Tax pros do not need to change a thing about their personality or approach to decision making; quite the opposite is true. They need only to retain what and who they already are, and then surround themselves with other fiduciaries from across the spectrum of wealth management, from holistic planning to risk management to asset allocation. Above all, tax pros should reject any business proposition that relies on sales and selling.
The best news, and the surest way to sidestep any threats from AI, is to work with a multi-family office charter company, an organization built around the tax professional and dedicated to the success of his or her clients. I recommend that tax pros begin their search for this type of partner, and put aside any worries about their qualifications for the job.