Setting up a wealth advisory arm within a CPA firm can provide promising opportunities for both parties, but is not without its challenges, says Jack Thurman, president of BKD Wealth Advisors. What’s required, he says, is commitment.

Editor’s Note: This is the first part of an interview on the ups, and downs, of setting up a wealth advisory arm at a CPA firm; the second part will feature in tomorrow’s Family Wealth Report.

Setting up a wealth advisory arm within a CPA firm can provide promising opportunities for both parties, but is not without its challenges, says Jack Thurman, president of BKD Wealth Advisors. What’s required, he says, is commitment.

Thurman set up the wealth advisory arm at BKD after 14 years as a consultant at Merrill Lynch, 10 of which were spent advising BKD on its retirement plan and cash flow, as well as its partners’ personal assets. Around 13 years ago the Midwestern firm asked him to join as president of a newly set up $14 million wealth business and, following discussions lasting around a year on the exact structure, he took on this role in February 2000.

It’s now a $2 billion practice, due to steady organic growth – a trajectory the firm is keen to continue on. What has helped it get there?

“It’s probably two dynamics – one is being linked to an accounting firm, and two is an implosion of the brokerage and banking models,” says Thurman. “When we win wealth management clients we’re not winning them from other wealth management firms like ours.”

His firm, an RIA, views clients in the brokerage model as “ripe for the picking”. But he acknowledges a big debt to the accounting arm – both in terms of winning clients and the way it has informed processes on the wealth side.

“We’ve tried to build as professional a staff and conflict free structure as a CPA has on the accounting and audit side,” he says.

“We take it to a further extreme and on the investments, our portfolio managers can’t even have an investment company… pay for their lunch. They can’t accept golf balls and free dinners from a mutual fund company.

“I mean you’re always going to have some little conflicts here and there, but you try and avoid any significant ones that might affect the structure of a client’s wealth management portfolio,” he adds.

This kind of independence has gained significant traction within the wealth industry – with new RIA firms popping up regularly as others grow their teams with hires from Wall Street. Yet debate lingers about the message: is the industry differentiating itself well enough? Do consumers understand its message? In light of this, industry group Advizent is looking to more effectively market RIAs collectively.

At a firm level, Thurman says there’s more BKD could do on this, and it hired a marketing firm in the summer to help it develop its “messaging”. While its message has been subtle in the past, in needs to develop as the firm does.

“As we go out to the open market place we need to make that a stronger message, because we don’t always want to rely on the CPA side for developing new business. We’re right at $2 billion after 12 years and we feel we have just begun to build this practice, and if we’re going to develop it the way we want [to] we’re going to have to get the message out. Pretty much 75-80 per cent of our referrals are coming from the CPA side,” he says.  

BKD has used the Franklin Covey group, which utilizes the “7 Habits of Highly Effective People” theory from Stephen Covey’s bestselling book.

“One of the terms within the book is: seek first to understand, seek second to be understood,” says Thurman. “If you think about the marketing process, the best way to market is to understand who you’re talking to first, and be understood second.

“This group…basically trained us to understand our clients better, to understand our prospects better, and close business that way. And to close better business,” he adds.

“Better business” is a big focus. Thurman believes the sales mentality of wealth management can lead to bad business. “Too often people…try to sell to bad prospects, because they’re hungry and they think they’ll turn them into good clients, when in all truthfulness it’s not a good match,” he says. “Bad prospects never turn into good business.”

In fact, BKD has invested around $100,000 just in training its staff on understanding prospects better.

The ideal client

Perhaps because of this, Thurman has a pretty good idea about the kind of clients that fit with BKD: “the millionaire next door” – a term coined from another well-known book. Successful professionals – doctors, lawyers, businessmen and woman – who live within their means and invest, and who want to focus on their career while letting “the professionals do their job,” are an ideal fit for this wealth advisory firm.

“We’re not looking for the gentleman that drives up in the Porsche and gets out wearing a giant Rolex. We’re looking for the gentleman that might have a Rolex, but for the most part only wears it out on Friday nights. For the most part, day in and day out, it’s pretty low key.

“We’re looking for the delegators, the businessmen, professional ladies [who]…love what they do and say ‘take care of my money, give me a plan and I’ll let you run it with my banker and my attorney’,” says Thurman.

He describes himself as “blue collar” and says that as he wasn’t raised with wealth, and as many BKD employees are “first-generation college educated, very driven,” the team works well with clients who have a similar ethos.

The second part of this interview – on talent management, targets and the “bumpy ride” of the market since BKD Wealth Advisors’ inception – will be published tomorrow.