Most Effective Strategies for Launching a Financial Services Practice

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1 SPONSORED BY Most Effective Strategies for Launching a Financial Services Practice PRESENTED BY

2 Accountants at successful tax and financial services practices don t wait long to begin offering investment planning to clients. When you think about offering financial services to your tax clients, it s wise to draw on the experience of other accountants who have taken a similar journey. Some strategies have proven to be more effective at helping you move your practice to the next level. A survey commissioned by HD Vest Financial Services and conducted by SourceMedia/ Accounting Today reveals that accountants and tax professionals with successful financial services practices don t wait long to begin offering investment planning. They act quickly to identify the clients who could benefit from the new service (Figure 1). n addition, research shows that targeted marketing and casting a wide net are effective methods to promote and attract clients into this service arena. The best case scenario would be to have a tax client [in the financial services offering], so we could merge the two [services] and customize the advice given, one advisor in the survey says. This white paper outlines why these strategies work so well and how to implement them. We also provide you with conversation starters for how to introduce the concepts to clients. STRATEGY #1: ACT NOW, DON T WAT As an accountant or a tax professional, you are probably thoughtful and methodical. That s why clients come to you. But in this case, deliberating isn t always best. Sometimes it s better to move fast. The research shows that accounting firms that reduce their cross-sell time are more successful at moving their tax clients into financial services. The sooner in the relationship you explain how clients can benefit from financial services, the more likely they are to engage you for that service. By waiting, you run the risk of clients pigeonholing you into the role of tax professional only. They may believe they have to go elsewhere for financial services. Since you already have access to your clients financial background by way of their tax returns, there s much you can infer about their planning needs. For example, a trained professional can easily spot retirement saving shortfalls or whether clients are using appropriate saving vehicles. FGURE 1: Financial Services Clients Acquisition Q. How did you acquire the majority of your firm s best financial services clients? Select all that apply. (Chart shows top four methods selected) Converted tax clients 75% New clients came as both tax and financial services clients Family referral Non-family third-party referral 37% 46% 45% n = 308 Source: HD Vest Segmentation Study, SourceMedia Research

3 Accounting firms that reduce their cross-sell time are more successful at moving clients into financial services, research shows. All too often, you can also see tax missteps perhaps a failure to harvest tax losses or too many tax inefficient holdings in non-qualified accounts. We see an abundance of unnecessary trading activity on client investment portfolios, states one accountant respondent. A financial services practice lets you articulate the value you can bring to client relationships and helps improve outcomes (Figure 2) early on in the engagement. CONVERSATON STARTERS Use clients top concerns to introduce the topic of financial services during or soon after tax engagements begin. According to the survey results, clients are most concerned with: The Affordable Care Act. Explain the tax implications of the health care law, such as net investment income limits and penalties for foregoing coverage and how you can help your clients minimize these taxes. Tax-related identity theft. Following the RS cyber breach in 2015, consumers are increasingly concerned about the vulnerability of their financial information. Give clients practical advice about how to protect themselves online against all forms of identity theft. STRATEGY #2: MARKETNG WORKS Accountants may shy away from directly promoting their financial services offerings for fear of appearing heavy-handed. The reality is that you need to market your services so prospects can find you. The research shows that tax firms which actively promote financial services have a higher proportion of financial services clients (25%) than those that do not market (10%) those services. n fact, survey respondents say that a marketing campaign has resulted in the highest proportion of clients engaged in both tax and financial services clients than other factors. FGURE 2: Successful Accountants Don t Hesitate to Offer Financial Services Q. Among your firm s best financial services clients, how would you describe the typical length of your firm s current relationship with them for tax services and for financial services? (Average number of years) Cross-sell time (years) % 20% 40% 60% 80% 100% Cross-sell rate n = 308 Source: HD Vest Segmentation Study, SourceMedia Research

4 Marketing helps to introduce financial solutions that tax clients haven t previously considered. When asked about the biggest obstacle to offering financial services advice, one survey responded says it was getting clients to be more open with their investments so we can help them rather than only having a portion of their picture. Marketing enables you to have deeper conversations with prospects, which in turns helps you better understand their planning goals for future financial service engagements (Figure 3). Marketing also helps to introduce financial solutions that tax clients haven t previously considered. For example, a client may not have realized that shifting interest-bearing investments into qualified accounts can result in tax savings. Because you re continually marketing and providing more services and value-adds, in effect, the practice moves upmarket over time, notes Chad Smith, Wealth Management Strategist, HD Vest Financial Services. Our firm has focused on tailored and ease-of-entry marketing platforms specifically for tax professionals who have incorporated financial services into their practices, they do not have to go out on their own to leverage these tools. CONVERSATON STARTERS Marketing is most effective when it s targeted toward your clients unique needs and concerns. Find out what they re most concerned about and design marketing programs that address those issues. Retirement planning. The research shows that accountants and tax professionals routinely discuss the state of their clients retirement savings during tax engagements. Explain how your financial services offering can help clients maximize their retirement savings. Wealth preservation. The research also shows that protecting wealth is a top concern for advisors best financial services clients, and therefore likely to also be important to prospects. Show them how your philosophy and approach aligns to their long-term wealth goals. Marketing campaign FGURE 3: Key Methods for Acquiring Financial Services Clients Key client acquistion methods for tax firms with 51% or more tax/financial services clients. (Diagram shows most successful methods, clockwise.) Referred clients to personal finance tools Financial service client acquisition methods Convinced clients that could help them achieve results Source: HD Vest Segmentation Study, SourceMedia Research 2015 Provided clients with solutions they hadn t considered Discussed financial services offerings faceto-face Spent more time getting to know clients 4

5 Launching and growing a tax and financial services practice means building strategic partnerships with a wider range of tax clients. STRATEGY #3: LOOK BEYOND YOUR CLOSEST CLENT RELATONSHPS Your closest clients are likely the ones you enjoy talking to the most; or they may be the ones who have been with you the longest. However, there may not be enough of them to build your financial services offering. Tax firms with high cross-sell rates make a point of targeting clients with these characteristics: high net worth, low maintenance and likely to follow advice. Your own client roster may also have plenty of clients with these attributes, too. Launching and growing a tax and financial services practice means building strategic partnerships with a wider range of tax clients. [My best clients] know they have a need but are not sure how to proceed, one accountant in the survey says. They are open to direction and options. Accountants and tax professionals rely on this strategy because they recognize that many clients have unmet financial needs. n fact, you may have been referring these clients elsewhere for years. Now you ll be able to give them more services and deepen the relationship you already have with them. What s more, these clients can also be a good source of referrals. The first generation of [financial services] clients you get are from converted tax clients, and that leads to the next generation of client acquisition, which comes from new clients that come in both as tax and financial services client, says Smith. CONVERSATON STARTERS Start with a client segmentation strategy to help you identify clients who are high net worth, low maintenance and likely to follow your advice. Having a strategy is an effective way to identify the clients you can provide the greatest value to and who are most likely to have financial services engagements. Broaden the dialogue. During tax engagements, make a point of broadening the conversation beyond taxes. These conversations can reveal if clients possess the qualities you are seeking in your financial services clients. Expand your network. Ask for referrals, even if it feels uncomfortable. Chances are, the people in your best clients circles have similar qualities and may be right for your practice. CONCLUSON Once you re offering financial services to your clients, you must think carefully about focusing on the strategies that will be most effective to grow this part of your business. Acting quickly, marketing and reaching out to a broader range of clients are all strategies that have proven to be effective in establishing financial services. Employing these strategies may take you out of your comfort zone and require a learning curve; however, the accountants and tax professionals who focused on these areas say it was worth the effort. 5

6 METHODOLOGY n December 2015, SourceMedia Research conducted a study among 308 accounting and tax professionals who are offering or planning to offer financial services in The study segmented and profiled the audience according to key predictors related to financial planning adoption. Respondents were drawn from Accounting Today subscribers. ABOUT HD VEST Since its inception in 1983, HD Vest Financial Services has supported an independent network of tax and non-tax professionals who provide comprehensive financial services including securities, insurance, money management services, and banking solutions. Ranked as one of the top 20 independent broker-dealer firms 1, with 4,600 independent contractors managing over $37 billion in assets for individuals, families and small businesses in all 50 states. 2 *Subject to appropriate licensing, HD Vest offers different types of accounts and levels of service that can have important implications in terms of the legal rights and responsibilities that attach to your relationship with HD Vest. Unless you have separately contracted for investment advisory or financial planning services, any analysis performed is not an investment advisory account or a comprehensive review of all of your financial needs in connection with a financial plan. Not all HD Vest Advisors are licensed to offer all products or services. HD Vest Financial Services and its affiliates (collectively, HD Vest ) do not provide tax or accounting services. You should consult your tax professional regarding the tax implications of any investments. HD Vest Advisors are independent contractors affiliated with HD Vest solely for the purpose of conducting securities-related activities. n addition to the brokerage or investment advisory products or services provided through HD Vest (which you must sign a specific written contract with an HD Vest company to receive), Advisors may separately provide legal, tax, accounting, audit, payroll or other products or services that are not affiliated in any way with HD Vest. HD Vest does not endorse or supervise any activities conducted outside of HD Vest, including tax or accounting services. HD Vest Financial Services is the holding company for the group of companies providing financial services under the HD Vest name. Securities offered through HD Vest nvestment Services SM, Member: SPC, Advisory services offered through HD Vest Advisory Services SM, 6333 N. State Highway 161, Fourth Floor, rving, TX 75038, (972) Think Advisor 2015 Broker-Dealer Reference Guide, which measured/ranked the top 25 independent broker-dealers by annual revenue. 2 As of January 1, 2016 ABOUT SOURCEMEDA RESEARCH SourceMedia Research provides full custom B2B research solutions for marketers, agencies and other targeting business sectors, such as accounting, banking, payments, mortgage, insurance, HR/employee benefits and wealth management. SourceMedia Research is a unit of SourceMedia nc., whose B2B media brands include Accounting Today, Financial Planning, American Banker, The Bond Buyer and Employee Benefit News. 6