Financial advisors depend heavily on referrals, and tax preparers can be valuable sources of such business connections. But advisors might not always understand what a preparer wants to see in such an associate.
Peter DeGregori, CPA and managing partner at Vertical Advisors LLP in Newport Beach, Calif., said he gets “bombarded” by financial advisors wanting referrals. “It is annoying,” he said, adding that when financial advisors approach preparers they should try to discuss how they differentiate themselves from their competition.
“Most call me and just say, ‘We can help your clients. We can help you earn more money,’ and so on,” DeGregori said. “Most can’t differentiate how they’re different.”
“Most financial advisors underestimate how CPAs and tax preparers view their ‘independence’,” said Marc Scudillo, managing officer of EisnerAmper Wealth Management in Iselin, N.J. “It’s important that the advisor not be product-driven. Illustrate to the tax preparer that you don’t sell a product but [instead] incorporate a planning process that will help lead to multiple options for clients. Nothing turns off the CPA or tax preparer more than a product salesperson [offering] limited alternatives.”
The CPA/tax preparer can become concerned that they will appear as a “salesperson” to the client when making introductions for another service, he added.
Steven Rossman, CPA and shareholder at Drucker & Scaccetti in Philadelphia, has seen advisors try many techniques to get business from CPAs. That includes continuing education seminars, free lunches and snacks delivered during tax season, and invitations to sporting events. “While these gestures can certainly influence CPAs to work with certain financial advisors, I’ve found the lasting referrals come from an investment in the partnership to better service the client,” he said.
The keys to that partnership are communication and collaboration, Rossman added. When a financial advisor and a CPA keep each other informed about the financial and tax lives of their clients, this creates opportunities for planning and helps to cement both as trusted advisors to their mutual clients,” he said.
“An example of this is when the financial advisor contacts the CPA before a large, contemplated sale of a business or a stock,” Rossman noted. “Can the CPA suggest ways of making the sale more tax efficient? Would an asset sale result in less tax than a stock sale? Instead of creating a large capital gain from selling Apple stock, would it be better to donate the highly appreciated stock to a charity to get a large donation and not have to recognize the capital gain and pay the tax? These strategies can only happen if the financial advisor is communicating and collaborating with the CPA.”
DeGregori said he looks at an advisor’s track record, and not just in the recent good years. “How did their clients do during the recession and what were the strategies they used? Explain [the] client base. Give us some examples of clients on a no-name basis and tell us how you work with their tax advisor.”
After a connection is made between an advisor and a CPA, CPAs “need to feel confident that the advisor is going to provide the same service and overall client experience that they work hard to deliver,” Scudillo said. He added that advisors should be open to suggestions and feedback for making the tax preparer/CPA stronger in the eyes of the client.
Ultimately, nothing beats mutually achieved success. Establishing client wins is important to create what Scudillo called “a feedback loop” between the tax preparer, the client and the financial advisor. “This will help the CPA see that the client is better served by a joint-team approach versus a simple referral hand-off,” he said.
“As an advisor who’s also a CPA, I recognize the value and potential for this relationship,” Scudillo said. “Tax preparers can be a very helpful referral resource for financial advisors, but a client will receive the greatest value when the tax preparer and advisor relationship goes beyond referrals.”