The concept of financial advisors partnering with CPAs is not a new one. In its consulting business, Moss Adams has been receiving inquiries from both advisors and CPAs for many years about how each can partner with the other. The fit between the two professions and their ability to provide a comprehensive suite of services by partnering is great-at least in concept. Unfortunately, if the strategic fit isn't good and if the partnership has not been forged with deliberate, thoughtful planning, the results won't be merely disappointing, but disastrous.

Advisors and CPAs are partnering through different modes, and each has its own advantages and challenges. The most common models are:

Referrals. In this arrangement, an advisor or advisory firm finds a CPA to whom it refers accounting business and (what is more common) from whom they receive referrals for financial planning and/or investment management. This may or may not involve fee sharing.

Double duty. Here, one or more advisors personally provide both accounting services and financial advisory services (financial planning, asset management and/or insurance).

Multiservice Business. This is when there is a single organization that has one or more CPAs providing accounting services and has one or more advisors providing financial advice.
The success of the partnership is never as much about the structure chosen-any of them can be successful and any of them can fail-as it is about the strategic fit and the planning done before and during the partnership. As with any big strategic question-which this is-if you are considering creating a relationship with a CPA firm, you need to consider:

Why would I consider establishing this

What are my clients' needs?

What would I hope to accomplish?

What would I consider a successful relationship? A failed one?

How will I measure the success of the relationship?

What are they expecting from me? Can I deliver?

What's Driving You?

For some advisors, the motivation to find a partner is strategically driven in that they want to be able to deliver a more comprehensive suite of services to their clients. And in this case, they will typically seek an internal solution-either by using the double duty model or creating a multiservice business. If an advisor is really looking to expand his offering to clients and provide accounting, bookkeeping, estate planning, tax planning, business planning or the other services offered by CPAs, then his desire will typically be to control these services within his own organization. Such advisors usually want to integrate these services into the platform of a single firm as opposed to creating a multifirm platform, simply because the closer relationship they want to have with clients requires a comprehensive, integrated service offering.

I have seen more firms succeed with the multiservice business approach than the double-duty method, because the former approach brings together multiple specialists with complementary expertise as opposed to relying on individuals who are experts in every discipline. While it is certainly possible to find individuals who can deliver all three things-accounting, financial planning and investment management-I would say they are difficult to find, and that their business model can be more difficult to grow. We certainly see advisory firms increasingly specialize, even adding CPA services. But any firm that relies on the skills of one or more jacks-of-all-trades-as opposed to a team of experts-will be challenged to build on the skills of those individuals in every area and will likely see some balls drop over time.

I have, of course, known advisors who believed their clients really expected them to be experts in everything. They personally delivered accounting services, estate planning, retirement planning, education planning, investment management and everything else their client needed because their biggest fear was having to tell a client "that's not my area of expertise, but I can introduce you to one of my colleagues who has deep expertise in that area." Yet client feedback consistently shows that's actually what clients want: They want to know they are being served by a team of experts.
There is also a marketing driver that leads advisors to partner: They believe a CPA could provide good referrals, which might create a "warmer" method of finding new clients. In this case, the partnering solution comes from outside rather than inside the firm.

What's Driving Them?
There are a few possible reasons why CPAs would like to partner with a financial advisor or provide the services themselves. They want to:

Respond to client needs

Build on existing relationships

Diversify the service offering of the overall firm

Increase revenue and profitability

This list should sound pretty similar to yours. The financial question is certainly on the list, though it is not likely at the top. When CPAs partner with financial advisors, it is more about their supporting client needs than seeking financial or marketing advantages.

The economics do, however, need to work in favor of both sides, and financial advisory-related revenue (for all three models) has become substantial at many CPA practices. In the 2007 CPA Financial Planning Practice Study, conducted by Moss Adams LLP and AICPA (, the average CPA respondent showed a 34.9% growth rate in their financial advisory revenues from 2004 to 2006, and had 2006 financial advisory revenues of $462,011.

Establishing A Good Referral Arrangement

When I was a consultant, the No. 1 question I heard about advisors partnering with CPA firms was, "How much should I pay them for the referrals?" How most people are structuring these payments is actually different from what seems to be working best. I have seen advisory firms pay referral fees of as little as 10% of the revenue generated by the referred client in the first year to as much as 50% of the revenue generated on an ongoing basis (which was an economic disaster, by the way). I have also known advisors who won't pay anything for referrals and I have known CPAs that won't accept referral fees from advisors because they believe it creates a conflict of interest. Probably the most common structures are somewhere in the range of 10%-25% of continuing revenue, or a three-year schedule that slides down each year from 25% to 15% and then 10% or down from 15% to 10% to 5%.

The questions to think about when determining the appropriate fee to a CPA who refers you clients are:

What is their role? Are they only helping one time or continuing to help?

-I prefer a one-time payment for help to an ongoing payment, so I prefer short-term arrangements to perpetual ones, unless you are asking the CPA to play an ongoing role in the implementation and delivery of your work.

What are your economics?

-Remember, for every $1 of revenue you generate, you have only 40 cents available to pay, in aggregate, to all of the people (inside and outside your business) who develop business and deliver advice. If you are paying a 15% ongoing slice to the CPA who referred the business, you have only 25% to pay to the people inside your business who are delivering the advice, at all levels. In some firms, this is a winning proposition; in others, their service model, marketing expenses and business development compensation to internal advisors is such that even a 15% referral fee is too expensive a way to acquire clients.

Will you pay only for those clients who meet your defined target client profile? Or are you obligated to accept-and pay for-any referrals the CPA makes?

(Also, make sure you make the appropriate disclosures in your ADV if you are paying solicitation fees to CPAs or anyone else.)
In my opinion, though, most partnerships spend too much time focused on the compensation question. I find it difficult to answer the question "How much should we pay?" before you have answered "What do we expect them to do?" I would always encourage advisors to ask:

Are referrals from a CPA (and this CPA in particular) the best way to build the business we are trying to build?

Will this be an accidental/incidental arrangement, or a primary focus in the way we build our business?

-If it is a primary focus, what is our plan to nurture the relationship? What is the investment it will require? Is it worth it?

If establishing a relationship with a CPA firm is the right approach, is this the right firm?

-Will their reputation enhance yours or diminish it?

-If it is a multiple partner firm, are all of the partners in support of the relationship?

-What kind of clients do you want and are those the kind of clients the CPA has to refer?

Especially if you seem to have just stumbled into a relationship, make sure you do your due diligence and make sure you are partnering with the firm with the best possible fit. Don't just be opportunistic.

What do they expect in return?

-Fee-sharing? Is that acceptable to you?

-Reciprocal referrals? Is that acceptable to you?

I have seen dozens of advisory firms jump into relationships with CPA firms-whether it is through referrals or it is much more formal in nature-because of the great theoretical opportunity. In almost every case, their success is determined by the strategic thinking they did in establishing the right relationship, with the right CPA firm, in the right structure. Enthusiasm about a potential opportunity will only get you part of the way there. Deliberate, thoughtful planning will ensure that the relationship you establish is one that enhances your strategic focus instead of diluting your efforts and energy.

Rebecca Pomering is the CEO of Moss Adams Wealth Advisors LLC, the wealth management division of Moss Adams LLP, the 11th largest accounting firm in the United States. Ms. Pomering began her career as a consultant with Moss Adams LLP, where she provided practice management consulting to advisory firms across the country.