Partnering with Accountants Integrating Financial Planning into a Professional Accounting Practice

Transcription

1 Partnering with Accountants Integrating Financial Planning into a Professional Accounting Practice Presented by: Ken Rousselle, CFP, CLU, Ch.F.C. President & CEO Professional Investment Services

2 Agenda Regulation and Professional Accounting Associations Challenges facing Accountants The Business Model Implementing and Monitoring Best Practices Business Valuation Models Maximising Practice Value

3 CICA Guidelines Rule 215 Contingent Fees Rule 216 Commissions A member engaged in the practice of public accounting.shall not accept directly or indirectly from any person who is not a public accountant a commission or compensation for a referral to a client of products or services to others

4 CGA Guidelines R107 Compatible Activities Professional Practice other than Public Accounting Constraints on a Professional Practice other than Public Accounting Referral for a Commission Use of Normal Business Methods R507 Commissions

5 MFDA Regulations Rule Referral Arrangements A referral arrangement is an arrangement whereby a Member is paid or pays a fee, including fees based on commissions or sharing a commission, for the referral of a client to or from another period; Permitted Arrangements The referral arrangement is only between a Member and another Member or between a Member and an entity that is (d) subject to such other regulatory system as may be prescribed by the Corporation;

6 Other Considerations Assurance Clients Independence Standards Independence of mind Independence of appearance Disclosure of Financial Interest

7 Challenges Facing Accountants Typical Generalist Firms - Revenue Assurance 24% Compilation 33% Tax 28% Bookkeeping 7% General / Consulting 4% Financial services 1% Other 3% Where are the asset value and profit created?

8 Challenges Facing Accountants Keeping current with standards / technical information Attracting & retaining quality clients Hiring and retaining quality staff Effective development of strategy Creating growth Creating value Succession planning

9 Challenges Facing Accountants Meeting client demands for additional services Keeping up with the impact of technology Improving efficiency/productivity Time Management Work life balance

10 CPA s s in the United States 94.0% 93.4% of all CPA s studied added Financial Services to serve their clients better 86.0% of all CPA s studied added Financial Services to become more profitable 92.0% 90.0% 88.0% 86.0% 84.0% 82.0% %'age of CPA's * CEG Worldwide study Capturing the Potential how CPA firms are building successful Financial Services practices

11 Accountant s Choices Grow by acquisition Merge with another practice Grow organically Sell and get out Do nothing* *( in many cases not really an option)

12 Practice Valuation Rule of Thumb 60 cents to $1.50 of Revenue (75 cent average Various factors influence price Size of firm Billing rates Breadth of service offering

13 Maximising Practice Value + Risk + Estate Planning Normal Practice valuation + Financial Planning The full service offering to protect and enhance your clients relationships

14 Business Valuation The future value will not be dependent on the fees the practice generates but on the profitability and the ability of the firm to adapt to the future. CA.com magazine May 2007

15 Benefits to the Practice Grow an alternative and complementary revenue stream Increase the overall value of your practice Provide clients with a comprehensive service offering Increase client loyalty and retention Shield practice from potential liability

16 What do Accountants Value? Trust Professionalism & Ethics Excellent Client Service Education Defined Processes Independent & Objective advice

17 What are Accountants major objection? Aren t all Financial Planners and Insurance sales persons all commissioned product pushers? How do I know you are going to provide sound independent advice? I don t want to become a salesman. What will my institute say about this arrangement?

18 CPA s s in the United States Average Gross Revenue per Firm Smaller Firms with in-house financial services Larger Firms with in-house financial services Smaller Firms using outside financial services providers Larger Firms using outside financial services providers $546,000 $1,037,000 $1,359,000 $2,451,000 * CEG Worldwide study Capturing the Potential how CPA firms are building successful Financial Services practices

19 Why should an Accountant use an independent practitioner? Less overhead Time to market (new products) Expertise in field of study Focus of practice core competency Wide range of products and services

20 The Professional Investment Services Approach Not a Passive Referral Model Accountant too busy Advisor too busy Integrate Financial Planning to Accountants Service Offering

21 The Professional Investment Services Approach Sign Practice Agreements Define Financial Planning Methodology Develop Business Plan and Measurements Integrate Best Practices Train and develop staff Practice Opening Implement and monitor plan/processes

22 The Practice Agreement Outlines roles and responsibilities for each party Professional Services Fee Means fees for professional advice provided by members of the practice or obtained by other professionals outside the practice including lawyers, trust specialists and business valuators attributable to the provision by the representative of the representative s s duties from the practice s s office.

23 The Practice Agreement Value-Added Service Fee Includes without limitation that proportion of the practice s s gross rent and overhead, telephone, internet, computer costs, administrative support (including, but not limited to technical, secretarial and receptionist services), printing, marketing, advertising, photocopying, facsimiles, postage and stationery attributable to the provision by the representative of the representative s s duties from the practice s s office.

24 The Professional Investment Services Approach Financial Planning Methodology Certification of Financial/Estate Planner 10 Step Approach 1. Letter of Engagement 2. Comprehensive Data Gathering 3. Comprehensive Financial Plan including recommendations 4. Investment Policy Statement 5. Review of Financial & Estate Planning Checklist

25 The Professional Investment Services Approach Financial Planning Methodology 10 Step Approach 6. Plan Review and sign-off by Accountant 7. Client Review meeting (with Accountant present) 8. Client Signature of relevant document including disclosure document 9. Implement financial and estate planning recommendations 10. Establish ongoing periodic and annual review

26 The Professional Investment Services Approach Other Services Practice Opening Client Events Referral Process Newsletters Professional Development seminars Educational Conference

27 Case Study Male Age 44 Owns a consulting company Married (wife is wholly dependent) 1 child Accountant currently bills for the return of 1 company

28 Case Study - Opportunities Planning No insurance on client or spouse No Disability on client Bad Debt vs. Good Debt Excess personal & corporate cash for investment Accountant Inefficient Corporate structure Client s s partner is now moving his business to accountant

29 Case Study Year 1 Year 2+ Advisor Planning Revenue $90,673 $14,868+ Accountant Revenue (prior) $1,500 $1,500 Accountant Revenue (post) $33,202 $10,000+

30 Recent Developments

31 Competition Bureau Study Self-regulated professions - Balancing competition and regulation Recommendation The provincial and territorial accounting organizations should consider whether restrictions on compensation for referrals are needed to maintain and preserve public accountants' independence. If so, the organizations should consider whether this restriction could be replaced with self-imposed safeguards.

32 CICA 2008 Spring Survey Commissions & Referral Fees 35% 30% 25% 56% - 63% Strongly or Somewhat Agree 20% 15% 10% All Members 20 staff and under 21 staff and over 5% 0% Strongly Agree Somewhat Agree Somewhat Disagree Strongly Disagree Don't know/no Opinion

33 CICA 2008 Spring Survey Objectivity & Independence 40% 35% 30% 54% - 62% Strongly or Somewhat Agree 25% 20% 15% `` All Members 20 staff and under 21 staff and over 10% 5% 0% Strongly Agree Somewhat Agree Somewhat Disagree Strongly Disagree Don't know/no Opinion 36% - 44% Strongly or Somewhat Disagree

34 Who We Are Australia PIS 2008 Financial advisors 1,543+ / 948 Overseas Accountants 1, ,900 Prof. Staff Staff FUA $18 Billion + In-force Risk Premium $150 Million +

35 Mission Statement MISSION STATEMENT To develop long term strategies to improve the living standards of our clients now and in retirement through innovative products and quality independent professional financial planning. OUR VISION To be the most professional financial planning group globally. OUR MISSION To work as a group to assist our clients to achieve their goals. OUR QUEST To build a profitable business based on: First class services to clients. Educational services to our client base. Maintenance of professional ethics.

36 Who We Are Operate across seven countries. Australia New Zealand Singapore Malaysia Hong Kong China Canada A progressive company in the ever-evolving evolving financial service sector.

37 Who We Are Canada Financial Advisors Staff 15 AUA approx. $1.0 billion Licensed in: BC Alberta Saskatchewan Manitoba Ontario Northwest Territories

38 Thank You If you are interested in learning more about Professional Investment Services (Canada) Inc., please visit our booth before you leave.

39 Questions?