Plus, bean counters typically own their clients' unwavering trust, a key for success in planning. However, the time that someone with a full-blown tax practice can devote to planning is necessarily limited. Yet because compensation isn't tied to the timeclock, even a part-time commitment can efficiently leverage hourly earnings. "A successful CPA may be billing $150 an hour, but there's potential for increasing that when you add financial services," Mindel says. "Even in the early days, our business model was [speaking to an accountant], 'Why don't you get licensed with us and incrementally increase your revenue?'"
The prospect of tiptoeing into planning on a part-time basis has worked out spectacularly in certain cases. "We've had some reps sell their accounting practices and live off of trails and fee income from our money management business," Mindel says. But more commonly, Terra is left to persuade the accountant-rep to reorient his practice in order to free up time. "We try to get them to either raise their billable rate to (eliminate) some of their marginal tax clients, or take on a younger associate to handle that lower-end tax practice," Mindel says.
Terra executives also discovered that mining an existing client roster breeds a certain conservatism. "An accountant's greatest fear is losing a tax client (someone who is paying the rent) over bad investment advice," says Mindel. "The accountant never wants to do anything wrong" as a money manager.
Terra's response was to construct well-balanced, diversified, sensible portfolios in the home office and disseminate the recommendations to the field. Today on the fee side of the business, for example, Terra has a proprietary program that places clients in the passively managed, index-like asset-class funds of Dimensional Fund Advisors. "We've been taking an asset allocation approach since the mid-1980s," Mindel says. "Reps who followed our models avoided the Internet bubble."
Recommendations are restricted to mutual funds-no individual securities, hedge funds or private placements. Mindel says that this conservative, long-time-horizon approach to investing "gives the reps a tremendous degree of comfort." Eschewing exotics undoubtedly contributes to Terra's pristine compliance history, something that made it attractive to image-conscious GE.
Intensive field support is obviously essential with such centralization, and Terra bombards its representatives with teleconferences, regional meetings and national conclaves covering all areas of financial planning as well as practice management issues. When clients require sophisticated solutions, reps can draw on the advanced marketing resources of Genworth's life and annuity companies.
Looking For A Few Good Planners
Non-tax professionals have always comprised a small proportion of Terra's representatives. In 2002, however, the broker-dealer started recruiting financial advisors in earnest. After selling Terra to GE in 1998, Reedy was charged with expanding the then-385-rep B-D beyond the borders of Illinois. But wouldn't new markets require a local presence to provide the high-touch field support that had become Terra's hallmark?
Enter the regional director (RD) program, an initiative designed to marry the broker-dealer's well-honed compliance infrastructure and training methodology with seasoned financial planners such as Terry Kingsbery of Norman, Okla., who had more than three decades of advising under his belt when he transferred his book of business to Terra about a year ago. "My responsibility as a regional director is to recruit, hire, train and assist in any way the (accountant-reps') transition from just doing tax planning. I am constantly in their offices providing on-going training," says Kingsbery, adding that his career move "is paying off handsomely."
Planners have long viewed associating with accountants as a path to a larger practice. "And we have those centers of influence," says Mindel, noting that the typical accountant-rep has been practicing for more than a decade and maintains at least 300 to 500 client relationships. "We can say to a financial advisor, 'You're looking to expand your practice. We've got tax professionals in your community who need help. Let's put you together.' That increases our revenue potential in that area, and everybody wins."
Terra's presence in central and eastern Oklahoma has grown considerably. After starting with five reps in mid-2003, he had 16 one year later. "We'll have 30 by the end of 2004," he projects. Besides earning overrides, Kingsbery works jointly on cases with reps. To introduce an accountant's client to the products and services available through Terra, Kingsbery typically prepares a financial plan for the client and co-presents it with the accountant (which further trains the tax practitioner). The pair split any revenue generated.