Camico Mutual Insurance Company -
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Published on: 8/2/2001
Last Visited: 4/26/2002
Gregory Lane, CPA, CFP, a financial planner since the early 1980s, a registered representative with FSC Securities Corporation, and the owner of Lane Financial in Scottsdale, AZ since 1995 (www.lanefinancial.com), observes that "broker/dealers are primarily interested in gaining access to your clients, and they'll take as much access as you're willing to give them."
His advice is for CPAs to carefully protect their client relationships."Your client relationships are your assets," he said."If you turn your client relationships over to a third party, you're turning your assets over."
Lane's compensation structure is "fees and commissions," as opposed to "fees only" or "commissions only."He charges a fixed fee for his planning services and then additional fees and commissions to implement the plan and manage assets.Commissions include those on securities purchases (through FSC), and split commissions (50 percent) on insurance purchases with independent agents who have extensive experience in the specific type of insurance needed for the client.
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Lane concedes that "if the CPA is not comfortable accepting commissions, the client probably isn't going to be comfortable either."He points out that "most clients are used to the concept of commissioned sales from buying houses, cars, and other retail items.I think it's mainly a matter of the comfort level of the CPA."Lane's own comfort level is reached by fully communicating and disclosing all fees and commissions to the client."Not all financial planners have to do that," he said."State regulations tend to require more disclosure from CPAs, with a client sign-off, but I find that clients appreciate full disclosure."
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Greg Lane has observed numerous CPAs making the adjustment to the sales aspects of financial services."Sometimes getting people to just do the planning can require some selling," he said."But when you complete the planning process and make the recommendations, you're also trying to convince clients that they need to take specific actions in order to reach the goals they expressed to you at the outset.That doesn't mean you have to put any pressure on them to buy specific products, but the client's goals can't be reached unless a plan is implemented, assets re-allocated, and transactions executed."
Lane also follows two other important guidelines:
Screen clients carefully to ensure that they will benefit from your expertise.This litmus test helps to keep client interests a priority before and after they become clients."I look at who the referral was from, the net worth of potential client, assets to manage of client, and the ability for me to provide a service of value to them," Lane said."If there is little that my expertise can add, I will tell them so."Consequently, clients stand to benefit by implementing his plans, and most of them are comfortable with his product recommendations by the time they're presented. Communicate thoroughly and document those communications.Lane logs and documents all conversations with clients on his computer, sometimes keyboarding while talking with them on the phone.Communication helps keep the client "expectation gap" at a minimum, and documentation provides important records in case of a dispute, both crucial loss prevention techniques.Other suggestions made by CPAs in alliances include:
Interview other CPA firms that have entered into alliances to learn from their experiences. Apply a thorough due diligence process to prospective financial services providers, including specific expectations of what providers need from the CPA firm (e.g., mailing lists, seminars, referrals, business plan execution). Determine how much marketing and selling will be required of the CPA firm.
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"You have to study the fields thoroughly until you have enough expertise to evaluate outside vendors and resources yourself," Lane said."Many CPAs don't acquire enough of that expertise to evaluate and sell the resources themselves, so they end up turning the processes and their clients over to other experts."
Financial services alliances can work as long as the clients' best interests remain uppermost.That priority requires the firm to regard issues from the client's point of view, to fully communicate and document all understandings, to fully disclose all compensation arrangements, including value billing, and to avoid using products or providers that are inappropriate."Ethics are paramount," Lane said."If you run your firm in an ethical manner, these problems become less like problems and more like discussion points in the ongoing debate."
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