Accounting firms frequently offer wealth management services and products. They either hire experts to work in-house or set up joint ventures or strategic alliances with other wealth managers (or do some combination of the two). But as we have studied these firms over the last decade, it’s clear to us that more of them are missing out on an opportunity rather than seizing the day.

That might be a cultural problem. Some accounting firms simply aren’t concerned about wealth management as part of their businesses. They see it as marginal to their core activities—maybe something just nice to have when clients ask for it. Yet the wealth management pieces of their business could be a much bigger part of revenues if they wanted it to be.

The Accounting Firm Advantage
Accounting firms boast two advantages. One is that they already have a lot of great clients that could be potential wealth management users. And individual accountants generally have good relationships with clients who are ripe for that kind of help.

It’s also very likely that accounting clients already have wealth management relationships with other firms—ones who aren’t serving them very well. Because accountants already have these clients’ ears, they are well positioned to capitalize on any unhappiness the client is feeling toward another professional.

One of the fastest and easiest ways to seize on this situation is for the wealth management practice to stress-test those potential clients at the firm. This means evaluating what the clients are currently doing to achieve their desired goals and objectives. The test allows the accounting firm to discern whether there are better solutions that their clients could be using to achieve their agendas and make sure they are not missing out on anything.

There’s both a formal and informal way to go about this. Informal stress-testing tends to get much faster results in winning wealth management business (and more accounting business). A more formal process can initially be more profitable when fees are charged for the service. However, the client must make the decision to engage, which often takes time and does not always happen. But in many cases, such tests will uncover ways the accounting firm can add value quickly.

As part of the stress-testing, professionals need to develop a deeper understanding of clients than many wealth managers and accountants are used to. This understanding, coupled with the greater value provided to clients, can easily translate into more high-quality client referrals.

Supercharging An Accounting Firm Wealth Management Practice
How lucrative is wealth management for accounting firms? Well, when we take out the attestation and strict tax compliance work, we have found it’s reasonable to generate between $1 million and $3 million annually in new wealth management revenues for every $10 million in annual accounting revenues.

Depending on the circumstances, CPA firms charge accounting services fees in addition to wealth management fees to facilitate certain wealth management strategies.

Most wealth management revenues are recurring (and potentially growing) because clients regularly contribute additional monies. And if the investment performance is good, those revenues go up.

Using the same processes, the wealth management practice will be able to source new clients, often through client referrals and referrals from other professionals (for instance, lawyers). And a percentage of these new wealth management clients will also become clients for the accounting services.

To achieve these or better revenues, accounting firms need to adopt four main guidelines.

Master discovery and framing: Discovery is the process in which professionals develop a deep understanding of prospects and clients. Here, advisors must be intensely attentive and skillfully ask questions to learn about the people they are working with.

Being empathetic is also a critical component here. Not only must you understand your client, but your clients need to know you understand.

Discovery allows you to find ways to add value, and it’s usually the case that you’ll find new opportunities for both wealth management and accounting services.

If you not only know how to add value but also know how to position services and products in ways that resonate with the clients, you’ll see more business. This is known as framing. The aim is to show that a client’s interests are being best served by the wealth management and accounting services. It’s not selling. On the contrary, it means meeting client needs both because you know the clients and because you have the technical expertise to help them. It’s the process of discovery that gives you insights to make framing so effective.

Focus on client relationships, not services or products: Everything in the wealth management universe at this point is commoditized or fairly close to being so. The same can be said about accounting: Some services and products are better than others, and some professionals are better. But it’s very likely that any high-quality wealth management practice can provide the same services and products (or comparable ones) that other firms do. The most successful wealth managers, then, are not focusing on their investment strategy or platform. The most successful ones (the most successful accountants, too) recognize that it’s the quality of the relationships they have that drive their success.

If an accounting firm can build these strong relationships with clients, prospects and other professionals, they will make their wealth management practices extremely valuable and profitable—regardless of market changes. That will also translate into client referrals, even for accounting services.

Reward accountants referring their clients to the wealth management practice: Many times, accountants don’t want to refer their clients to the wealth managers at their firms. It’s easier not to. They often fear that they’ll hurt the relationships they’ve built if the wealth managers don’t deliver. What’s more, a number of firms lack incentives for their accountants to make the introductions. It’s easier for the accountant to sit back and let peers at the firm take the referral risks while he or she benefits. It’s the free rider principle in action.

If firms want their accountants to make the referrals, it’s useful to have concrete rewards attached. One good way is to offer the accountant a percentage of the additional revenue generated. Other worthwhile approaches reward accountants for the potential risks they are taking with their prized client relationships.

Build strategic partnerships with other non-competing professionals: A well-performing wealth management practice at an accounting firm not only gets clients from its accountants but also creates pipelines of new clients from strategic partnerships with lawyers, bankers and other professionals that don’t provide accounting or wealth management services.

There are systematic ways to build prosperous client referral networks with other professionals. Many accountants and wealth managers refer their clients to attorneys, for example, and hope they will get a referral in return. But that’s a fatally flawed idea for the most part.

Instead, advisors should be able to discern the attorneys’ interests and tactically help them achieve their agendas. This strategy, which we call “Everyone Wins,” is exponentially more effective.

What is important to realize is that the accounting firm’s wealth management practice should not be solely dependent on referrals from its accountants. Although they will be a significant source, they aren’t the only ones, and over time they will provide a smaller and smaller percentage of new wealth management clients.

Wealth management practices at a great many accounting firms are not anywhere close to reaching their potential. Moreover, many of them are severely underperforming. While the opportunities with clients of the accounting firms are usually tremendous, a lack of strategic direction or a lack of operational proficiencies can easily limit the success of the wealth management practice.

By concentrating on addressing the four guidelines discussed here, however, many accounting firm wealth management practices can considerably increase the revenues they contribute to their firms. None of the guidelines are that difficult to follow. It is all a matter of what the accounting firm wants from its wealth management practice.

Russ alan prince is president of R.A. Prince & Associates.