“Getting in to bed with Accountants”

Paul Lothian BA (Hons), FPFS, ACII, CFPcm

Chartered Financial Planner

Director, Verus Wealth and A2+B Wealth

How to engage accountants formally and maximise the value of the relationship . . .

• Why bother engaging with accountants?

• Formalising the relationship

• Maximising the impact and adding value

is a joint venture with: is a joint venture with:

• Established 2005• 50/50 ownership split• 2 advisers plus 3 staff• 85% recurring income• C 120 clients• AUA C£55M• Typical AUA per client = £200,000• 35% of income attributable to client

referrals from JV partners

• Established 1933• Two offices (Dundee and Montrose)• 5 partners• 33 staff• Turnover C£1.6M

• Established 2011• 40/60 ownership split• 2 advisers plus 3 staff• 35% recurring income• C 30 clients• AUA C£17M• Typical AUA per client = £400,000• 95% of income attributable to client

referrals from JV partners

• Established 1992• 13 partners• C150 staff• Turnover C£18M

Surrounding A2+B Wealth

VAT

Personal

Tax

Payroll

Outsourcing

Finance

EETS!

Corporate

Tax

Corporate

Finance

Audit

Accounting

Services

Wealth

Directly authorised

Appointed Representative

Why bother engaging with accountants?

• Unlike most solicitors, accountants see most of their clients on a regular basis

• They are ideally placed to identify client needs/ planning opportunities• They understand and appreciate the value of good financial planning and

investment management• Their clients are used to paying fees for professional services• Many accountants used to offer financial advice (pre-FSMA 2000) but no

longer can• There is great deal of “crossover” between what accountants do for their

clients and what financial planners do for clients• Joint consulting opportunities (especially in the corporate and Trustee

space, but also to provide “family office” services)• Your knowledge and expertise WILL increase!/ CPD

Why bother engaging with accountants? (continued)

• Joint seminar opportunities (eg Corporate tax compliance matters along with Business Protection, Auto-enrolment etc)

• “Symbiosis” – planners and their clients will also benefit from having the accountants’ expertise and services “close to hand”

• Accountants value the convenience of having financial planning experts close to hand

• Referrals generally come with trust and respect already a “given”

• Increase your “professional standing” by association

• Be introduced to their professional connections as well as their clients

• Professional introducers who could have a financial incentive to actively refer business, regardless of referrals being made in the opposite direction

“Our books are balanced. 50% of the numbers are real and 50% are made up!”

Challenges• The accountant “archetype”

Thinking

Feeling

ExtravertIntrovert

Interactive Exercise!

ExtravertedThinking

IntrovertedFeeling

Extraverted Feeling

Introverted Thinking

ExtravertedThinking

IntrovertedFeeling

Extraverted Feeling

Introverted Thinking

On a good day…

CompetitiveDemandingDetermined

Strong-willedPurposeful

SociableDynamic

DemonstrativeEnthusiasticPersuasive

CaringEncouraging

SharingPatientRelaxed

CautiousPrecise

DeliberateQuestioning

Formal

On a bad day…

AggressiveControlling

DrivingOverbearing

Intolerant

ExcitableFrantic

IndiscreetFlamboyant

Hasty

DocileBland

PloddingReliant

Stubborn

StuffyIndecisiveSuspicious

ColdReserved

Challenges• The accountant “archetype”

• Differences in “Corporate Culture”

• (some) CA’s perception/ pre-conception of IFA’s

• Accountant’s existing IFA connections

• Fees: ad-valorem not favoured by many CAs

• Generally reactive rather than proactive

• Partner buy-in/ support varies

• Can be “protective” of client bank

• Aligning with the CA’s practices/ staff policy etc

• Level and nature of CA firm’s involvement in strategy/ business management

• “Fair and equitable” division of profits

Joint Venture Considerations• Chartered Accountants and/or Solicitors?

• Preferably with no existing financial planning offering

• Firm size? – 5 partners : 1 planner

• Format:• Introducer arrangement?• New service offering (branding)?• New company?• On-site or off-site?

• FSA authorisation e.g. AR or direct?

• Incorporated or partnership/ LLP?

IFA Ltd Accountancy Partnership

NEW CO

Holding Co.

(or LLP)

Shareholders in IFA

AR of IFA or directly

authorised?

• Chartered Accountants and/or Solicitors?• Preferably with no existing financial planning offering

• Firm size? – 5 partners : 1 planner

• Format:• Introducer arrangement?• New service offering (branding)?• New company?• On-site or off-site?

• FSA authorisation e.g. AR or direct? • Incorporated or partnership/ LLP?

• If on-site, rent/ management charge (what’s included?)

• Directors/ Board members?

Joint Venture Considerations

Joint Venture Considerations continued

• Shareholding structure (eg “alphabet” shares)

• Equity participation

• Profit share formula/ mechanism

• Costs control

• Exit strategy/ mechanisms

• Valuation of shares on leaving (Good leaver/ bad leaver)

• Restrictive covenants. (Who owns the client relationship?)

• Capitalisation (eg equity and /or loans)

• Principal’s contract for services / contract of Employment

• Principal’s remuneration / flexibility

“Explain to me again why enjoying my life when I retire is more important than enjoying life now.”

The Approach

“Dear Mr Accountant,

If I can show you a way that your firm could:

- Increase its revenue and profit

- Build a valuable business with high levels of recurring income

- Widen your firm’s service offering / add an extra dimension to your portfolio of services

- Provide a service that is highly appreciated by individuals and companies

- Increase your clients’ loyalty / “stickability”

- Improve the visability / oversight of the quality of financial planning and investmentadvice your clients are receiving

- Provide opportunities for collaboration and joint marketing initiatives

Would you be interested?”

The proposal stage

• Make a business case (why should the accountants consider doing it? – “WIIFM?”)

• Have a clearly articulated client service proposition(including an investment “philosophy” and basis of fees/ charges)

• Have letters of commendation/ client testimonials

• Suggest that the key decision maker(s) becomes a “client”

• Business plan

- What will the business do? (Purpose). What’s its “USP”?

- For whom? (Target markets)

- How?

- Projected P/L and cash-flow for 3 years

• Marketing plan (more detail on how the business plan will be achieved)

- Internal and external marketing strategies

The proposal stage (some tips for dealing with “Cool Blue” energy)

• PATIENCE IS REQUIRED!

• DON’T APPEAR PUSHY

• PROVIDE DETAIL

• BE PREPARED/ ORGANISED

• BE PUNCTUAL

• DELIVER WHAT YOU PROMISE (ON TIME)

• KEEP IT FORMAL and “BUSINESS-LIKE”

Maximising the Impact and Adding Value • Client seminars

• Internal knowledge briefings

• Client mailers/ e-mailers

• Client segmentation/ information “mining”

• Seek introductions to their professional contacts

• The service should be part of their client “on-boarding” and review processes

CREATE ADVOCATES:

• Staff pension scheme, DIS, BUPA, Denplan etc

• Partners should be encouraged to become clients of the service (at discounted rates!)

• Actively encourage clients to recommend you to others

COMMUNICATION IS KEY:

• Regular group meetings and “1-to-1s” with partners/ managers

• Regular and frequent client “touch points”

Hear it from the horse’s mouth!

“Financial advisers looking to have clients referred to them by accountants should exhibit the highest professional standards and all that that entails: technical knowledge and expertise, advanced-level qualifications, discretion, integrity, fair and reasonable fees, proper management of any conflicts of interest, professional communications and an adequately-resourced service proposition. They should ensure that they can deliver what they promise. In essence, they must demonstrate that they are worthy of the trust of other professionals and their clients.”

Michael Brown Founding and Managing PartnerAnderson, Anderson & Brown LLPChartered Accountants

Questions?

pmlothian@veruswealth.co.uk

THANKS FOR LISTENING!