Of­fice

Accounting Today - - Financialplanning - From page 20

of cov­ered ser­vices. Some firms will also add fees for as­sets un­der man­age­ment or over­see­ing and help­ing to select the ac­tual as­set man­ager.

If your firm in­tends to of­fer as­set man­age­ment also, con­sider seg­re­gat­ing your fees for AUM ver­sus tra­di­tional fam­ily of­fice ser­vices. If the as­set man­age­ment di­vi­sion be­comes sig­nif­i­cant, per­haps a sep­a­rate en­tity may also make sense.

Whether your fam­ily of­fice fees are based on hours or flat-fee billing, the is­sue of licensing will still ap­ply. CPAS can avoid reg­is­tra­tion as an in­vest­ment ad­vi­sor if their in­vest­ment ad­vice or fi­nan­cial plan­ning ad­vice is merely in­ci­den­tal to the prac­tice of pub­lic ac­count­ing, and not re­ally ad­vi­sory in na­ture.

Naturally, this is a very sub­jec­tive stan­dard and many CPAS that I talk to do not reg­is­ter. For many firms, how­ever, they could be danc­ing on the edge of a highly reg­u­lated in­dus­try and should seek pro­fes­sional coun­sel as to whether reg­is­tra­tion as an in­vest­ment ad­vi­sor would make sense.

Don’t let the name “reg­is­tered in­vest­ment ad­vi­sor” fool you. The reg­is­tered in­vest­ment ad­vi­sor li­cense and reg­is­tra­tion is the same li­cense that cov­ers all fi­nan­cial plan­ners. You may be deemed by reg­u­la­tors to be prac­tic­ing in­vest­ment ad­vice and fi­nan­cial plan­ning to the ex­tent that you get in­volved in mat­ters such as shap­ing goals and ob­jec­tives and pro­vid­ing ad­vice that is more than in­ci­den­tal to the prac­tice of ac­count­ing for the fam­ily wealth.

Reg­is­tra­tion as an in­vest­ment ad­vi­sor will also sub­ject you to the same rules about com­pen­sa­tion, mar­ket­ing and au­dit as other fi­nan­cial ser­vices firms reg­is­tered as RIAS, re­quir­ing a com­pli­ance pro­fes­sional or con­sul­tant.

Some multi-fam­ily of­fices do over­see or ac­tu­ally man­age as­sets for their fam­ily of­fice clients. Of­fer­ing these ser­vices is eas­ier if you’re al­ready a larger in­vest­ment ad­vi­sory firm with ex­pe­ri­enced as­set man­agers on staff. This isn’t the typ­i­cal pro­file of the typ­i­cal CPA fi­nan­cial plan­ning shop, and these are not the types of clients where you should be tech­nol­ogy to val­i­date data as it oc­curs in real time by mak­ing the au­dit on­go­ing, and by au­to­mat­i­cally gen­er­at­ing sam­pling through­out the year and up­dat­ing

Au­di­tors have more time to of­fer valu­able opin­ions and feed­back through­out the year that would dif­fer­en­ti­ate your au­dit from your com­peti­tors.

work­pa­pers. The flow of data be­comes year-round, con­tin­u­ous, and has big ben­e­fits to time sav­ings and prof­itabil­ity by re­duc­ing those non-value-added tasks dur­ing crunch time.

Con­tin­u­ous au­dit reimag­ines the work­flow and can spot trends or miss­ing data be­fore a year-end au­dit. Con­tin­u­ous au­dit spreads the work evenly through­out the year and in­creases ac­cu­racy, as well as stream­lin­ing the work­load for your cut­ting your teeth in the in­vest­ment ad­vi­sory busi­ness.

A model that makes sense here is to af­fil­i­ate with a firm that al­ready serves the types of clients that you are seek­ing to serve — pur­su­ing sub­ject mat­ter pro­fes­sion­als in the ar­eas where you need help. This will shorten your learn­ing curve, cause fewer mis­takes, and al­low you to take ad­van­tage of a sea­soned staff al­ready in place. Of course, you will be shar­ing fees with the firm you choose, but you may net as much uti­liz­ing this method as you would if you built some­thing from scratch, or you are in­vest­ing cap­i­tal in an ad­vi­sory busi­ness.

Whether your CPA firm has a vi­brant wealth man­age­ment di­vi­sion or not is ir­rel­e­vant when it comes to of­fer­ing fam­ily of­fice ser­vices.

The fam­ily of­fice role for a CPA firm is just like out­sourced CFO work, ex­cept for a fam­ily rather than a busi­ness. As that out­sourced CFO, you will rely on other out­side sub­ject mat­ter ex­perts, and co­or­di­nate their ef­forts so that noth­ing falls through the cracks.

Should you choose to work with an­other firm that calls them­selves a multi-fam­ily of­fice, be care­ful. In my ex­pe­ri­ence, I’ve seen many fi­nan­cial ad­vi­sors who want to move up­mar­ket sim­ply call them­selves a fam­ily of­fice with­out the ex­pe­ri­ence, de­sire or ser­vices to war­rant that ti­tle.

AT

John P. Napolitano, CFP, CPA, PFS, MST, is CEO of U.S. Wealth Man­age­ment (www. uswealth­napoli­tano.com) in Brain­tree, Mass. Reach him at Johnpnapoli­tano on Linkedin or (781) 849-9200.

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