Offering investment advice alongside estate and tax planning wasn't always the common practice that it is nowadays. In fact, attorney and CPA Richard E. Thibodeau, the 61-year-old managing director of Filomeno Wealth Management LLC in West Hartford, Conn., remembers that his professional goal circa 1990-to advise successful individuals about their investments, taxes and estates, and to serve as a financial coach to them-was way outside the box. Thibodeau, a graduate of West Point, had become a tax partner at Coopers & Lybrand (now PricewaterhouseCoopers) and the big accounting firms of the day wanted nothing to do with the investment business. They were leery of the potential liability.

Still, demand existed, Thibodeau knew. As head of the executive services group in Coopers & Lybrand's Hartford office, he saw firsthand that high-income clients could benefit from advice that synced their investments to their tax and estate plans. So after tax season in 1992, Thibodeau split C&L to go solo. It was the initial step in a long, sometimes tortuous trek that has turned his dream practice into reality.

First, A State-Registered Advisor
He registered his consultancy, dubbed Thibodeau Financial Advisors, as an investment advisor with the Connecticut Department of Banking. He didn't intend to manage money. "I simply charged an hourly rate for providing investment advice, primarily developing asset allocation strategies and selecting mutual funds to implement those strategies."

Early clients were individuals who came over with him from Coopers. Referrals from these clients and attorneys flowed naturally. In some respects, he was working with his clientele as a tax accountant might. "We would get together once a year and there would be little contact until the next year."

And that's how Thibodeau practiced for a dozen years. It was a successful period for him. Too successful, in fact. With a mountain of profitable work occupying him 24-7, he became concerned about maintaining quality service.

Besides Himself
To prevent the practice from buckling under the workload, Thibodeau knew he needed professional and administrative support.

Rather than hire and manage his own staff (which didn't play to his strengths or preferences), he decided to try joining up with an organization that had the resources he needed already in place. Thus he engaged a former colleague from his C&L days as a consultant to identify potential merger candidates, be they investment advisory shops, CPA practices or law firms, in the Hartford area.

"I would only consider organizations that had demonstrated some interest in providing investment advisory services," Thibodeau vowed, never forgetting the constraints he faced at Coopers. He was in no mood now for any partners who might resist his ambition to offer investment advice.

Thibodeau hoped a merger would make him a big fish in a small sea. But joining a leviathan like C&L was out of the question. "I wanted to go somewhere I thought I could make an impact."

Enter Filomeno
His C&L consultant presented a fact sheet about the firm (without using its name) to Tom Filomeno, president of Filomeno & Co., a 40-person accounting firm whose eight principals were registered representatives of a broker-dealer. The team at Filomeno wasn't actively seeking a merger when contacted by Thibodeau's friend, but took a closer look at Thibodeau's firm when they understood what he was seeking.

"We saw the numbers and were excited," Tom Filomeno says. "We also liked the type of business it was. Most accounting firms, including us, primarily handle businesses. Rick was handling mostly individuals, and we really liked the combination of things he was doing for them. It was unusual."

When Thibodeau merged his practice into Filomeno & Co. on November 1, 2004, the first order of business was clear. Three individuals from the Filomeno side were tapped to start spending time in the new Thibodeau-led investment advisory division, and they had to get up to speed. Thibodeau wanted his cadre to be as expert in investments as they were in tax and other traditional CPA services.

Money was spent on Morningstar classes in Chicago while Thibodeau developed and conducted in-house training. "He would meet with us every couple of weeks," says Kathleen Christensen, a Filomeno & Co. manager. "Each time, we spent several hours going through various investment topics." In between sessions, there were articles, books and more to consume, supplemented with on-the-job training. "I worked with Rick literally step by step on investment plans for client after client," Christensen says.

"We would walk through his thought process and how he analyzes investments." She was present in client meetings, too.
The other two Filomeno CPAs who migrated to the firm's new investments arm, manager Elizabeth DeBassio (who holds a master's in personal financial planning) and partner Mike Tedone, earned, as Thibodeau had, a "personal financial specialist" designation. Tedone says, "I thought having people in our group with that designation would give us added credibility as financial advisors."

Thibodeau ended up becoming securities licensed at this time, since Filomeno & Co. was set up to do business as broker/dealer registered reps. After all, he had to continue serving the clients he brought over. But Thibodeau and his new partners agreed from the beginning that they would ultimately depart the commission-based world.

The Transition To Independence
Three years after Thibodeau joined the accounting firm, it formed a subsidiary, Filomeno Wealth Management LLC, which was registered with the Securities and Exchange Commission as an investment advisor. At the same time, a decision was made to move clients' assets to a new custodian, Schwab Institutional.

"I knew the conversion of the business model and the transfer of assets between custodians was going to be a stressful time for our clients, so it had to be handled extremely well," Thibodeau says.

The task of making the changeover as seamless for clients as possible fell to Kim Lockwood, Filomeno Wealth's administrator (and, according to her colleagues, its MVP). Lockwood, who worked closely with the Schwab team, says clients remained calm and cooperative throughout the potentially painful process and she credits that to a blizzard of communications the advisory firm sent out. It started with a letter describing the new RIA and custodian and explaining what it meant to clients. "And then we explained everything along the way," Lockwood says. "I think keeping our clients informed throughout the entire process made it easier for all parties."

All but two clients made the leap to ongoing investment management (and those two chose merely to continue consulting with the firm). Such a high conversion rate surprised Thibodeau a little bit. "Paying us a fee based on the assets managed increased the cost for most clients, although of course they're getting more service than before," he says.

Filomeno Wealth Management is now fee-only and manages about $80 million. The clients now receive the kind of integrated services that Thibodeau envisioned when he forayed out on his own all those years ago, and the "financial coach" aspect of planning he originally sought thrives at the firm, too. The advisors consider themselves educators. Christensen says, "We provide clients with a lot of charts, graphs and articles written by external investment experts because we want them to understand what we're doing and why. Each year we try to get more detailed and broaden their knowledge."

The firm focuses on tax-efficient, low-cost investing and maintaining a prudent cash allocation. "More than anything, we make sure we completely understand the client's cash flow needs for the next one to two years and set that aside in cash," Christensen says. "For some retirees, that could be $250,000, but they really benefited last fall because no one had to sell anything when the markets were down in order to meet their short-term needs."

Of course, independence isn't entirely a bed of roses. As Thibodeau points out, "You became responsible for what technology you use, developing a Web site, doing all your own marketing and compliance. It all takes time."

Taking the Show on the Road
Thibodeau's mission to bring comprehensive advice to high-income clients isn't over yet. Now he's trying to forge strategic alliances with small- and medium-size accounting firms in the Hartford area that he hopes will refer clients to Filomeno Wealth, since the clients of those firms need investment advice from someone.

Why partner with Filomeno Wealth? The independence, for one thing. Some accountants maintain broker-dealer affiliations simply to share in commissions on business referred out, even though they are uneasy with the notion of commissions in the first place, Thibodeau says. "But when a CPA firm does business with an SEC-registered investment advisor, the principals don't have to get licensed to share in fees, although obviously certain client disclosures are required."

Thibodeau also believes his organization's background is attractive. "As CPAs ourselves," he says, "we share the service, culture and ethical standards of other CPAs, and we think that-coupled with our investment experience-is valuable to both accounting firms and their clients."