5 keys to integrating a tax firm into your wealth management practice

Wealth management firms are expanding their service offerings to include tax planning and accounting services to better serve investors who increasingly seek comprehensive financial guidance under one roof.

With tax planning the most demanded service among financial consumers with more than $250,000 in AUM, according to a Herbers & Company survey, buying a certified public accountant firm has become a growing trend among advisory practices. It's also in line with an almost doubled client preference for holistic wealth management between the years 2018 and 2023, according to a Statista study.

However, successfully integrating a CPA firm into a wealth management practice is a long-term endeavor. When I joined my financial planning firm to lead the tax solutions division, it had already spent nearly a decade preparing for this transition, planting the seeds with clients and helping them understand how they could benefit from these additional services. 

READ MORE: Taxes + wealth: 2 connected but still (for now) distinct fields are merging

The cultural, operational and technological differences between the two firms must be addressed to ensure a seamless experience for clients. While a well-prepared firm can enhance client services by adding a tax component, poorly executed integration risks complicating the client experience.

Once your firm has educated clients on the benefits of an integrated offering, you can then shift the focus to executing the acquisition successfully. In doing so, consider focusing on these five key areas.

Operational readiness

When acquiring a CPA firm, operational readiness is a crucial consideration for success and many firms may need to invest years into building the infrastructure and technology necessary for a smooth transition.

CPA firms often lag behind in technology compared to wealth management firms, so it's important to have a plan in place to align processes and procedures. This can involve updating outdated systems, streamlining workflows and ensuring both teams are equipped to work together efficiently.

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Cultural integration

CPA and wealth management firms often operate with different mindsets. CPA firms tend to be more methodical and compliance-driven, while wealth management firms focus on relationship-building and strategic financial planning. Fostering collaboration between teams and aligning everyone with the firm's mission of delivering comprehensive financial advice is key to bridging these cultural differences and ensuring a unified service model that benefits clients.

Regulatory compliance

Regulatory considerations are another critical factor when integrating a CPA firm. While the SEC does not oversee tax firms, wealth management firms must be careful to disclose any potential conflicts of interest when referring clients between the two sides of the business.

To avoid potential client dissatisfaction, it's recommended that firms obtain explicit approval before sharing financial information between the wealth management and tax divisions. Ensuring transparency and compliance builds trust and protects both the firm and its clients.

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Talent acquisition

Recruiting top-tier professionals in both divisions ensures clients receive the best possible advice from the most qualified individuals. 

Developing effective recruitment strategies and allocating the necessary resources to build a strong, integrated team will position the firm to fully capitalize on the advantages of combining these services. Building a focused and talented team can also differentiate the firm in an increasingly competitive marketplace.

Managing client expectations

Clients rely heavily on their CPAs for tax advice, which can make it challenging for them to understand the expanded role a wealth management firm can play by integrating tax strategy with investment, estate and financial planning. 

Additionally, CPAs — who usually focus on tax preparation and basic tax strategies — may view the long-term strategic tax planning offered by wealth management firms as outside their traditional scope. It's essential to strike a balance between taxes and wealth management, ensuring clients appreciate the added value wealth management firms bring to the table without diminishing the role of their trusted CPAs. Clear communication is key to managing expectations and demonstrating how the combined services benefit the client's overall financial strategy.

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In today's competitive landscape, adding tax professionals to the financial advisory firm mix can lead to increased client retention and referrals, enhanced client satisfaction and improved business outcomes. By focusing on operational readiness, cultural alignment, regulatory compliance, developing a top-tier team and managing client expectations, wealth management firms position themselves for long-term success. 

As clients experience the advantages of combining wealth management and tax planning, the true value of this partnership will become clear.