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.
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.