The accounting industry is under pressure. For example, fee compression is an issue for many accounting firms. Competition for many accounting firm services is intensifying. Meanwhile, certain types of clients prove exceedingly profitable for accounting firms. The wealthy, who are individuals and families with a net worth of US $10 million or more, are very profitable.
The number of wealthy individuals and families and the monies they control continue to increase, and they require the expertise of accountants. Even in difficult times, the wealthy as a cohort is growing. At the same time, the wealthy have diverse and multiple needs and wants that accounting firms can address. When the accounting firm’s expertise is positioned correctly for the wealthy, the fees are not a problem. The wealthy can also be a great source of referrals to accounting firms.
According to Paul Saganey, founder and president of Integrated Partners and co-author of Optimizing the Financial Lives of Clients: Harness the Power of an Accounting Firm’s Elite Wealth Management Practice, “For many accounting firms, there is an untapped treasure chest of opportunities and profits in their current wealthy clientele. Many times this means determining ways to add value to their clients. It also involves facilitating introductions to new wealthy clients.”
“Consider the ever-present situation where wealthy small business owners want to lower their income taxes. There are several ways to help them accomplish this goal. Still, an often overlooked possibility is qualified defined benefit plans, particularly the more sophisticated versions of these plans,” says Frank Seneco, president of the advanced life insurance planning boutique Seneco Global Advisors.
For accounting firms who have wealthy small business owner clients and are knowledgeable about these sophisticated defined benefit retirement plans, not only are they adding significant value to their clients, they can generate meaningful revenues. If the accounting firm is involved in wealth management, the revenues are a function of implementing the plan and managing the assets in the retirement plan. Otherwise, accounting firms often charge a project fee to manage the process. It is also justified to do both, manage the assets and charge a project fee to put everything in place.
When the process is well managed by the accounting firm, every wealthy small business owner client who implements a sophisticated defined benefit retirement plan can expect two or more referrals to other wealthy small business owners. This is one example of where accounting firms can become more successful working with the wealthy.
Because the number of wealthy individuals and families is multiplying, there is an excellent opportunity for accounting firms that understand this cohort and have the capabilities to serve them well.
Russ Alan Prince is the executive director of Private Wealth magazine and chief content officer for High-Net-Worth Genius. He is a strategist for family offices and the ultra-wealthy.