Successful Professional Alliances

Successful Successful Professional Professional

AlliancesAlliances

Creating Winning Strategic Alliances Creating Winning Strategic Alliances

with Other Professionalswith Other Professionals

Win Win Situation For All Involved-CPAs, Win Win Situation For All Involved-CPAs, Attorneys, AdvisorsAttorneys, Advisors

Leverage your business and make a quantum Leverage your business and make a quantum leapleap in your business in your business

To Succeed, what you need and want is an To Succeed, what you need and want is an existing trusted professional advisor who can existing trusted professional advisor who can provide provide HONEST, INDEPENDENT AND HONEST, INDEPENDENT AND UNBIASED UNBIASED ADVISEADVISE

The Range of Potential Professional The Range of Potential Professional

Advisor PartnersAdvisor Partners There are abundant opportunities for working with There are abundant opportunities for working with other professional advisors. Specific opportunities other professional advisors. Specific opportunities include many types of professionals, including:include many types of professionals, including: Accountants (CPAs)Accountants (CPAs) Attorneys Attorneys Association executivesAssociation executives BankersBankers Business brokersBusiness brokers Consultants Consultants Casualty agentsCasualty agents Human resource directors Human resource directors Investment bankersInvestment bankers Life insurance agentsLife insurance agents

Options for Alliances with Options for Alliances with Professional AdvisorsProfessional Advisors

1.1.BuyBuy.. Buy a financial advisory firm.Buy a financial advisory firm.

2.2.BuildBuild.. Develops its own financial services expertise and Develops its own financial services expertise and builds from scratch builds from scratch

3.3.ReferralsReferrals.. Provide clients to financial advisors for Provide clients to financial advisors for predetermined compensation.predetermined compensation.

4.4.Strategic AlliancesStrategic Alliances.. Create a formal contractual agreement Create a formal contractual agreement featuring a share of featuring a share of revenue, but not revenue, but not

of equity. of equity.

5.5.Joint VentureJoint Venture.. A formal revenue-sharing and equity-sharing A formal revenue-sharing and equity-sharing legal entity.legal entity.

While all five models offer entry points into financial services, each offers the While all five models offer entry points into financial services, each offers the other professional firm distinct advantages and disadvantages.other professional firm distinct advantages and disadvantages.

What Is a Strategic Alliance?What Is a Strategic Alliance?

A revenue-sharing agreement that creates a vested A revenue-sharing agreement that creates a vested interest in each partner to help the other to grow.interest in each partner to help the other to grow.

A formalized, ongoing, long-term, mutually-beneficial A formalized, ongoing, long-term, mutually-beneficial and mutually-profitable relationship that has been and mutually-profitable relationship that has been clearly spelled out and committed to by both sides.clearly spelled out and committed to by both sides.

Partners in a successful strategic alliance may Partners in a successful strategic alliance may eventually form a formal joint venture by sharing eventually form a formal joint venture by sharing equity in a business entity together. We recommend equity in a business entity together. We recommend this, however, only after the strategic alliance has this, however, only after the strategic alliance has been smoothly and profitably operating for at least been smoothly and profitably operating for at least one year.one year.

Why Strategic Alliances with CPAs?Why Strategic Alliances with CPAs?

Is the interest of these CPAs in providing investment and insurance products Is the interest of these CPAs in providing investment and insurance products matched by an interest from clients in obtaining these products from accountants? matched by an interest from clients in obtaining these products from accountants?

Research found that there is considerable inclination on the part of prospects to Research found that there is considerable inclination on the part of prospects to obtain investments and insurance products through their accountants. obtain investments and insurance products through their accountants.

Source: Accountants as Wealth Managers. Analysis: CEG Worldwide.

Prospects Very Likely to Obtain Financial Products From Their Accountant

52.6%

68.8%

47.1%

86.9%

50.9%

74.6%

0%

10%20%

30%40%

50%

60%70%

80%90%

100%

Investmentproducts

Insuranceproducts

Investmentproducts

Insuranceproducts

Investmentproducts

Insuranceproducts

Individuals Small business ow ners All prospects


Number of Professionals at Each Number of Professionals at Each CPA Firm SurveyedCPA Firm Surveyed

– CEG,s nationwide CEG,s nationwide survey of 1,685 survey of 1,685 partners, from different partners, from different CPA firms, from CPA firms, from January 23 to January January 23 to January 26, 2002. 26, 2002.

– Slightly over half of this Slightly over half of this group (51.9 percent) group (51.9 percent) was made up of sole was made up of sole proprietors.proprietors.

– Another 27.6 percent Another 27.6 percent were practicing in firms were practicing in firms of less than 30 of less than 30 professionals. professionals.

Source: CEG Worldwide, Realizing the Opportunity

Single Professional

51.9%2 to 30 Professionals

27.6%

31 to 50 Professionals

19.3%

50+ Professsionals

1.2%


Segmentation of CPA FirmsSegmentation of CPA Firms

CEG segmented the survey group as follows: CEG segmented the survey group as follows: – Significant ProvidersSignificant Providers: CPAs who get : CPAs who get more than 40 more than 40

percent of their revenuepercent of their revenue from providing either from providing either insurance or investment products for a fee or insurance or investment products for a fee or commission.commission.

– ProvidersProviders: CPAs who derive : CPAs who derive between one and 40 between one and 40 percentpercent of their revenue from providing either of their revenue from providing either insurance or investment products for a fee or insurance or investment products for a fee or commission.commission.

– Non-providersNon-providers: CPAs who : CPAs who do not providedo not provide either either insurance or investment products for a fee or insurance or investment products for a fee or commission. commission.

CPAs Plan to Offer InvestmentsCPAs Plan to Offer InvestmentsCEG discovered that the CEG discovered that the number of CPAs providing number of CPAs providing financial services today is financial services today is

relatively smallrelatively small compared to the compared to the universe of CPAsuniverse of CPAs..

However, However, substantial substantial numbersnumbers expect to begin expect to begin offeringoffering them within the them within the next three years. next three years.

If If these CPAs actually do these CPAs actually do move forwardmove forward with their with their current plans, we will see a current plans, we will see a

dramatic growthdramatic growth in the in the total number of CPAs offering total number of CPAs offering financial servicesfinancial services over the over the next three years. next three years. Source: CEG Worldwide, Realizing the Opportunity

Reasons For Not Providing Financial ServicesReasons For Not Providing Financial Services

Source: CEG Worldwide, Realizing the Opportunity.

95.4%

81.5%

76.5%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Conflict of interest

Not professionals in theinvestment or insurance

fields

Would damage their positionas the trusted advisor

CPAs who choose not to offer their clients financial CPAs who choose not to offer their clients financial services have services have clear reasonsclear reasons for their decisions. for their decisions.

Overwhelmingly Overwhelmingly (95.4 percent),(95.4 percent), these non-providers see a these non-providers see a conflict of interestconflict of interest in offering financial services. in offering financial services.

Slightly over Slightly over 75 percent75 percent believebelieve that doing so that doing so would would harmharm their positiontheir position as their clients' trusted advisor. as their clients' trusted advisor. Source: CEG Worldwide, Source: CEG Worldwide, Realizing the Opportunity.Realizing the Opportunity.

Reasons For Providing Financial ServicesReasons For Providing Financial Services

CPAs have solid business reasons for offering financial services:CPAs have solid business reasons for offering financial services: CPAs are also feeling the competitive heat. CPAs are also feeling the competitive heat. 61.2 percent cited "competitive 61.2 percent cited "competitive

pressure"pressure" as a reason for providing financial services. as a reason for providing financial services. CPAs see financial services as an opportunity to tap into a new market. CPAs see financial services as an opportunity to tap into a new market. 37.3 percent 37.3 percent

report that growing their businessesreport that growing their businesses is one of their reasons for offering financial is one of their reasons for offering financial services.services.

77.5%

60.1%

50.9%

46.8%

20.2%

76.3%

66.2%

63.9%

34.7%

31.8%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Better serve their clients

Earn increased revenue

Competitive pressures

In order to grow theirbusinesses

Will otherwise lose clients

SignificantProvidersProvidersSource: CEG Worldwide, Realizing the Opportunity

Partnerships with Other Professionals:Partnerships with Other Professionals: Factors for Successfully Providing Insurance and/or Investment ManagementFactors for Successfully Providing Insurance and/or Investment Management

65.9 percent and 77.1 percent see strategic alliances65.9 percent and 77.1 percent see strategic alliances with insurance or with insurance or investment experts to be important to their success. investment experts to be important to their success.

Similarly, Similarly, 59.5 percent of Significant Providers and 73.4 percent of 59.5 percent of Significant Providers and 73.4 percent of ProvidersProviders depend on depend on accessing these experts on a case-by-case basisaccessing these experts on a case-by-case basis for successfully providing financial services.for successfully providing financial services.

65.9%

59.5%

77.1%

73.4%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Creating strategicalliances w ith experts

in insurance and/orinvestments

Being able to accessfinancial servicesprofessionals on a

case-by-case basis

Signif icant Providers

Providers

Source: CEG Worldwide, Realizing the Opportunity.

Ingredients for a Successful AllianceIngredients for a Successful AllianceEconomic glueEconomic glue.. We will not form a strategic alliance We will not form a strategic alliance

unless there is revenue share that creates economic unless there is revenue share that creates economic glue. We have simply found that without this glue. We have simply found that without this economic glue, parties quickly drift apart.economic glue, parties quickly drift apart.

Help from complianceHelp from compliance.. Remember to work with Remember to work with your compliance department to make sure any your compliance department to make sure any agreement is properly drafted. It is important to note agreement is properly drafted. It is important to note that accountants will need to be licensed.that accountants will need to be licensed.

No shortcutsNo shortcuts.. Don’t be tempted to try to do a Don’t be tempted to try to do a workaround such as renting space or paying for their workaround such as renting space or paying for their review of an investment plan. Don’t work with anyone review of an investment plan. Don’t work with anyone who’s willing to cut corners. You’re in this for the long who’s willing to cut corners. You’re in this for the long haul–haul–do it rightdo it right..

Perpetually Getting ReadyPerpetually Getting Ready

Careful, reasoned, and thoughtful planning and implementationCareful, reasoned, and thoughtful planning and implementation are essential for any accounting firm.are essential for any accounting firm.That’s why CEG says that That’s why CEG says that another major determinant of success is another major determinant of success is actually taking action. actually taking action. Quite a few accountants Quite a few accountants have spent yearshave spent years preparing preparing to enterto enter the the financial services business financial services business but have yet to do sobut have yet to do so. .

Between 3 and 5 years, 37.3%

Over 5 years, 9.8%

Between 1 and 3 years, 52.9%


What’s Holding Them Back?What’s Holding Them Back?

So how have these accountants been spending their time? So how have these accountants been spending their time? 67.6% of them said they were 67.6% of them said they were preoccupied with learningpreoccupied with learning how all of the financial how all of the financial

products worked. products worked. Another oft-cited reason for delay was Another oft-cited reason for delay was getting the right human resources in placegetting the right human resources in place. .

More than half of the firms said that More than half of the firms said that no one in the firm has taken “ownership” of the no one in the firm has taken “ownership” of the financial services practice. financial services practice.

Finally, nearly Finally, nearly half said that it takes time to find the right financial half said that it takes time to find the right financial partners to team up with. partners to team up with.

18.6%

42.2%

48.0%

57.8%

67.6%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Becoming adept at the various types of planning.

Making sure all the accountants in the firm are 100% onboard.

Finding the best financial advisor to team up with.

No one in the firm has taken “ownership” of the financialservices practice.

Learning how all the products work.


Successful Strategic AlliancesSuccessful Strategic Alliances Successful strategic alliances between financial Successful strategic alliances between financial

advisors and other professional advisors such as advisors and other professional advisors such as CPAs and attorneys CPAs and attorneys are a win-win situation for all are a win-win situation for all involvedinvolved. .

The other professional is able to offer a more complete The other professional is able to offer a more complete offering of financial services, resulting in better service offering of financial services, resulting in better service to their clients, to their clients, increased revenue and an edge over increased revenue and an edge over the competition for gaining new clients.the competition for gaining new clients.

At the same time, you will obtain At the same time, you will obtain significant new significant new

assets under managementassets under management, and do so , and do so in an in an extremely cost-effective manner.extremely cost-effective manner.

Through such a strategic alliance, Through such a strategic alliance, you will open you will open doors, build trust and create new business doors, build trust and create new business opportunitiesopportunities for both you and your alliance partner. for both you and your alliance partner.

Successful Professional Alliances

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