i wonder if there has been any research done on the retention rate of guys going out on their own. honestly i dont even know what ballpark it would be in. also breakdown of CFA v non CFA because we know you are not allowed to solicit clients before you leave or make client lists before leaving.
I don’t think Greenman has enough clients yet to make such a move. By his account, the boss keeps cock blocking him. You need to gradually work yourself into a bigger part of the organization, like a hidden virus or threadworm, before setting out on your own.
The key is to build a book of clients, and to have enough capital for the basic infrastructure, plus a cushion for the little snafus that come up. It also helps in a business like yours to have a partner with complimentary skills. That’s because running-the-business and doing-the-business (and arguably getting-the-business) are different skill sets, and a successful small shop (or large shop) needs success on both (all). It’s pretty rare that all those skills show up in the same person, and even then, you often need a division of labor because there are only so many hours in a day.
I’m good at my work, but I am not good at finding my work, and my skills are specialized enough that it can be long periods between landing contracts. Also the things I do are varied enough (writing, coding, recommending, translating, teaching, speaking, etc) that I haven’t found a good way to package them coherently. I can’t say that I’m making it rain, but the work is at least interesting. The biggest challenge for me is that I’m tired of searching for the next project all the time and it’s vey feast-or-famine for me, and it makes it hard to plan.
The work you do is easier to describe, I think. If you want to head out on your own, maybe the task is to find a partner, perhaps one that wants to stay with the accounting side while you branch out into more of an investments role. You do need to ask yourself if your current location has enough potential clients to support another business and if not, then perhaps consider moving.
If you just want to do accounting, you probably can strike out on your own after locating enough clients. If you want to do the investment with accounting as a client gathering tool, you likely need a partner that will not mind if you start leaving more accounting work with them while you do investments. The trick might be how to project enough financial expertise to seduce your clients away from their existing advisors. Your letters can help but I think at least reading the CFP material on estates and insurance would be useful. CFA stuff is completely useless there and yet it’s pretty relevant to your likely clientele. Then you can offer a free planning session to clients after you do their taxes or something based on what you’ve learned from their accounting.
What it really comes down to is this: Greenie, can you build a book of clients in a relatively short period of time? To be more specific, if you want to focus more on investments, can you raise $25mm in AUM in one year? If you think you can do that while also providing accounting services, you should quit and form your own RIA.
Your first $25 mil is the toughest to get. You’ll be doing new things and asking people for their money can be awkward at first. But, once you reach that number, you basically have enough income to scrape by. And, the next $25 mil is much easier to attain.
If I were you, I’d start my own firm as a full-service financial planning company. Your lead-in is accounting. Do taxes for individuals and companies like you always have. During your sessions with them you offer up your investment advisory services. This works particularly well if you work with some small business owners. Do their taxes and wealth business plus you have a chance to go after their company retirement plan.
Nail down your value prop and set up shop.
Greenie: have you considered talking to the other “good ole boys” in town to get a sense of how they run their shops? There may be an opportunity to join one of their firms and do more of the “Accounting” type work (charging fees for returns / bookkeeping etc…and keeping all the revenue, and simply pay the owner a desk fee to cover the cost of overhead) and slowly develop your investment clientele under their b/d.
Greenie: have you considered starting a cult? It might go against all your religious beliefs, but there is good money in cultivating worship of space lord Xenu.
It’s 70 - 80%. Source: Me; my experience watching it happen many times.
This is a really tough aspect of consulting. You just never know when the projects are coming. If you commit elsewhere when times are lean, you could miss out on something relatively big. If you hold out for the next big project, you have the potential to die a slow death. It’s also really difficult to hire when you don’t know if you’ll be able to carry them for a significant period of time after the current need is completed. Tough business. My wife knows these headaches very well and I wouldn’t want to be the one having to make those decisions.
I always thought it would make sense to try and pull together some recurring income no matter how minimal to smooth out operations. easier said than done. Probably makes sense to be strategic about choosing clients and make it clear that you would be interested in cultivating a long term relationship so they will come back with work as a matter of course.
Project-based professional services is tough business for sure.
Here we go again. Atush is easily the best AF user.
Wow. So many ways to go. Let me address these one at a time. (I’m probably talking to myself as much as anything here. Plus, I’ve learned that it’s fun to go back and see what you were thinking a few years later.)
@Bchad - Tax/accounting/investments are recurring revenue, so once you get a client, you’ve probably got them for a long time. In that sense, your job is probably very different. But I have thought about trying to find a CPA firm where I fit in and could do this kind of word–either by building my own book, or by soliciting their clients. (In fact, that’s what I wanted to do here. It’s just not working.) And there’s plenty of work to do here, and there’s plenty of money. (Remember that Midland is one of the wealthiest communities in the US, even in the middle of an oil price slump.)
@Sweep - the way you describe the full-service financial planning company is exactly what I want to do. The focus is on the financial plan–not the books. (In most CPA firms, the books/financial statements are the most important thing. From the books, we create financial statements, which you use to prepare a tax return. Your “financial advice” is generally limited to tax deductions and other tax-minimization strategies.) Bookkeeping and tax work would be tangential to the financial plan, not the other way around.
But to answer your other question - I think it would be difficult to raise $25m. Heck, I doubt I think I’d be lucky to get $5m in my first year, especially with no existing client base.
@@Ohai - That hadn’t crossed my mind, but I will certainly do some research into the matter. If there is a religious conflict, maybe I could start my own NO MA’AM club or something.
In my younger days I would have pinged Topperharley to alert him to this topic. I’m above all that now.
What we do is different, I agree. You just mentioned that I hadn’t said much about life under my own shingle, so I figured I’d fill you in.
Your clients are stickier (at least for the accounting stuff). Mine are actually reasonably sticky (they do come back), but it’s hard to predict when and how much they are going to need when they do. Plus, one of my clients is no longer at her position and so doesn’t need me anymore (she did put a good word in for me with her replacement, but it will be a while before I know if it did any good).
I didn’t really aim for the consulting kind of life. I did have experience with it in earlier parts of my career. Mostly I started down that road as a way to demonstrate skill without high risk to clients when I moved from my academic past. But unfortunately the financial crisis came by and then the Great Recession hit where there was no hiring for several years, and then when hiring did start up again, it became impossible to compete with the mountain of laid off people ready to get back in with more recent experience. By the time all that cleared out, I was really too old for the standard kinds of positions, so I just kept with the consulting. There are definitely positive aspects to it, but it’s been hard to grow at the necessary rates. My situation is kinda unique, and more a function of really bad timing in my career. But I’m Gen-X, so we’re used to having the rug pulled out from under us and it’s become a kind of sport.
As for your clients, the challenge I see for you is that I am not sure you can do a good job at the accounting side AND the financial side without having a partner to divvy up the workload with so you can specialize. If you do that, then there’s the issue that your partner may be in control of the repeatable revenue stream while you work on the more challenging streams. If you don’t get enough investment clients fast enough, the partner could look at you as a drag on firm profitability and walk. I’m just thinking out loud here.
Don’t think this will happen. The “good ol’ boys” at Merrill/Morgan/RBC/RJ all refer business back and forth to the “traditional” CPA firms. Neither the brokers nor the CPAs want to jeopardize their referral source.
From the CPA side, I am constantly baffled by the idea that they would rather refer out their invesment business rather than do it themselves.
- You can do a better job for your clients as both CPA+FA
- Even if you don’t get any referrals, you’ll still make better money, because the investment business have very little incremental costs, and
- Clients generally trust their accountant a whole lot more than their FA.
One issue to deal with is if your investment returns underperform for whatever reason, will they take their accounting business elsewhere? That may be why CPA firms stick with just CPA stuff. Again, just thinking out loud.
It’s probably to avoid conflicts of interest. If big accounting firm gets paid by ML for audits, they aren’t going to open a competing brokerage.
@ bchad - not likely. Greenie would want to integrate the Accounting from the bookkeeping, preparing the financial statements, filing the returns and coordinating the business planning with the owners personal planning and investments (and insurance).
Am I reading this right? Royal Bank of Canada has a WM arm in Midland, TX?
My point is that I as a business owner have Greenie as my CPA, and I try using him as a FA.
I like the CPA work, but for whatever reason, the FA stuff is not satisfying (bad year, market crash happens and I blame Greenie for not seeing it in his crystal ball, etc.).
Now the question is whether to fire Greenie as a FA but keep him as my CPA, or maybe it’s just easier to cut the whole relationship and have separate FAs and CPAs. If you cut the whole relationship, you don’t have to spend time explaining constantly why you aren’t interested in the FA stuff anymore…
Anyway, just a scenario going through my head. Maybe it’s not that likely.
any chance greenman ends up on american greed?
I’ve heard of that happening, but I haven’t witnessed it. That’s a common reason CPA’s give for not wanting to do investment work.
I think the real reason is because they don’t know anything about it and they don’t want to venture outside of their comfort zone. They feel like filling out a business return every year is more lucrative than landing a $1m account.