• Colin Doyle CFO

Keep clients coming to you with PFP services

The tax landscape, like many areas of accounting, is changing rapidly. Automation has made it easier for both clients and firms to complete tax work. Consumers have started to expect more from tax practitioners than just compliance. And some financial advisory firms are offering to complete clients' tax returns at little or no cost along with providing them financial planning services, further cutting into tax practitioners' client base.

To diversify their services and make themselves more competitive in this climate, many CPAs specializing in tax services to individuals have started offering clients financial planning services, such as retirement planning, estate planning, risk management, and investments. For the tax CPA with the right blend of technical and people skills, adding financial planning services (or more formally promoting the ones they already offer) can be a compelling option (see the sidebar, "Where to Learn More"). It can help CPAs make their practices more robust and secure, spread out their workload across the calendar year, and experience the rewards of giving clients additional much-needed services.


Automation has taken an increasing share of the tax preparation market in recent years. In 2018, for instance, U.S. taxpayers electronically self-filed 35.9% of all individual tax returns, compared with 17.4% in 2008. They filed 41% of all electronic returns by themselves in 2018, compared with 29.9% in 2008. In contrast, practitioners, including CPAs, filed 59% of electronic individual U.S. tax returns in 2018, down from 70.1% in 2008.

"The reality is that simple tax preparation has become more of a commodity," said Jared Trexler, CPA, shareholder of Trexler & Company PC and founder of Trexler Financial Advisors LLC in Pana, Ill. Trexler is in the process of earning the PFS credential.

Members of younger generations, who are comfortable with technology, may be more willing than their elders to turn to software for their tax needs. They may also choose software, given that they have less discretionary income than older generations and it is typically cheaper than hiring a practitioner. "I don't get younger clients in the door with simple tax needs," Trexler said. "I assume more of them are self-preparing online."

Some financial services firms have started offering to prepare clients' taxes as part of the service packages they provide. In fact, 54% of non-CPA financial planners now offer tax services, and the number of investment advisers offering tax services to individuals almost doubled between 2013 and 2015.

Lyle Benson, CPA/PFS, owner of L.K. Benson & Co. in Baltimore, said he had noticed this trend affecting his own practice. "The clients who are more tax-oriented are doing their own returns or finding cheaper alternatives to getting their compliance work done," he said. "If we're not providing broader services, they don't see the value in the amounts we charge."

At the same time that tax work is becoming automated, the need for financial planning services is growing. The Bureau of Labor Statistics predicts that demand for financial planners will grow 15% between 2016 and 2026 (as opposed to 7% growth across all occupations). In fact, the demand for financial planning is growing two times as fast as that for tax preparation alone.

Changing demographics are driving this trend. Ten thousand Baby Boomers reach retirement age every day, and many of them will seek assistance with their retirement planning. Thirty trillion dollars in wealth will be transferred over the next 20 years, much of it to younger generations, who will also need help handling their newfound assets in a tax-effective manner.

And, often, the first person clients go to for help with these issues is their CPA.

"We've gained the trust of the clients," Trexler said. "They know we will do what's in their best interest. We're usually the first place a client comes with a life event — the death of a spouse or parent, retirement, a new job."

Lori Luck, CPA/PFS, president/shareholder at CLS Financial Advisors in Portland, Ore., said client concerns like these were one reason she got into financial planning. "Clients would ask us questions like 'When can I retire?' and 'When should I start taking Social Security?'" she said. "They thought I'd have the answers. They wanted someone to pull it all together for them."


Proactively offering financial planning services can benefit your practice as well as your clients. If your practice is tax-compliance heavy, financial planning can be a way to balance out your workload across the calendar year.

Doing both financial planning and tax work "makes it easier to regulate your schedule," said Carolyn Larsen-Wieber, CPA/PFS, owner of CLW Financial Planning in the Raleigh/Durham, N.C., area, who points out that you can schedule the bulk of your financial planning meetings during quieter periods of the year. Offering financial planning services has enabled her to serve fewer clients while earning more revenue per client, she said.

Even if you're planning on retiring in the next five to 10 years, incorporating more financial planning into your practice can make your firm more attractive to buyers, Benson noted.

Demographic and technological "changes are coming faster than CPAs think," he said. Even practitioners who are close to retirement "could see their practices being eroded because of these changes," he said. "More business is going to firms that provide broader services."

Adding financial planning services can help you retain clients, Luck said. "You'll definitely find your clients will really value it," she said. "They'll be extremely loyal to you."


Many CPAs who offer financial planning services say they enjoy the chance to become more deeply involved in their clients' personal and financial lives.

"It's phenomenally rewarding," said Luck. "It's fun and engaging to help people reach their financial goals. It's like a puzzle, and every one is different."

As Trexler put it, "It's gratifying because you can make a huge difference in their financial life. It provides them with peace of mind to know a person they trust is handling these [financial] matters. You become indispensable to these clients."

Larsen-Wieber recalled a tax client who asked her to create a retirement plan. "She discovered she could retire at 62. She is now traveling around the world, skiing and biking and scuba diving," Larsen-Wieber said. "We also found that she could meet her charitable goals." The client is planning on giving $25,000 a year over the course of 10 years to her alma mater, her church, and other charities, she said.

"She couldn't have done it without my guidance. I laid it out like a map for her," Larsen-Wieber said.

Sometimes, she observed, CPAs need to help clients with more challenging matters as well. "You need to tell some clients that they need to make difficult decisions, that they need to reduce their expenses or save more, or that they can't retire yet," she said. "That's harder to do, but it makes a big difference."


Having deep tax knowledge gives CPAs an advantage when it comes to financial planning because almost every aspect of financial planning involves tax in some way. "Advisers put together plans which include types of income, dividends, interest, life insurance, and so on," said Mike Baird, CPA, director at Fred A. Marcussen, CPA, and an adviser at Iron Point Financial Advisors, both in San Carlos, Calif. "All of those things have tax implications."

CPAs' depth of knowledge — both of taxes and their clients' financial situations — makes them well suited to creating financial plans, he said. "We understand where clients' income comes from. We understand their cash flow, how their businesses are doing. We bring special perspective with what we have as CPAs," he said.

Clients also value their advisers' tax acumen: Two-thirds of affluent people say tax knowledge is their top consideration when choosing an adviser.

To be successful as a financial planner, though, CPAs need more than technical know-how: They also have to be good with people. The ideal financial planner is "someone who is curious about clients, loves lifelong learning, can pivot, and can handle different personalities," said Larsen-Wieber.

"You need to be someone who's a planner in general — a personality type that sees several steps down the road," said Luck. "You also need to be someone who is a good listener. Every client has a story."


Offering financial planning services may be easier than you think: You may already have taken the first step. For some CPAs, making financial planning part of their practices may simply be a matter of more proactively promoting services they already provide.

Trexler said he is ramping up the financial planning portion of his practice by talking to selected clients about his services during tax meetings. "I tell them, 'After tax season, we should talk about your broader financial picture,'" he said. "It's been very well received. Clients say, 'I wish you started doing this 10 years ago.'"

CPAs also do not have to offer the full spectrum of financial planning services. Some choose not to handle investments or manage assets, for instance. Larsen-Wieber partners with several investment advisers who manage her clients' investments.

CPAs may also work with various professionals, including estate attorneys, life insurance agents, and investment managers, and serve as the primary point of contact, coordinating among them. "You don't have to be an expert in all areas," Trexler pointed out. "You can refer clients out to others."

For CPAs with the right skills and mindset, financial planning can be an opportunity to offer clients needed help while making their practices stronger for years to come. As Benson observed, "Clients are going to demand these services. We can help them address the financial issues they face in a complex world and do that with no built-in biases and no selling. We can give them objective advice."

2 views0 comments