Be An Investment Adviser.

• Author: Bernstein, Phyllis

Financial planning is currently a very popular high-growth service. Your competitors most likely have begun offering some kind of financial advisory services, and government regulations are being relaxed, allowing even the smallest CPA firms to offer their clients one-stop shopping.

What do these changes mean for you? While many CPAs are feeling a bit whipsawed by all that is happening in the marketplace, the opportunities are providing you with great client service options. A sole practitioner who recently expanded into investment advising told me her practice already is growing. "I don't have to refer my clients to the person down the street anymore," she said. "This opens a whole new door for me."

There are plenty of reasons CPAs--large and small--should add investment advice to their list of client services. After all, they traditionally have been asked for financial advice, they customarily charge a fee for their services, their objectivity and integrity are well-recognized, they have the trust of their clients and, most important, they are at the center of their clients' financial universe.

Five models to choose from

A CPA who wishes to add investment services and financial planning to his or her client services can choose from several different business models. Business models help you structure how your firm does business and your relationships in the securities industry. The five most common business models for adding investment services to your financial planning services are described below.

1. Direct affiliation. With this model, your firm will be an official National Association of Securities Dealers (NASD) securities brokerage office. Your employees must be licensed to sell securities and/or registered as investment advisers. Your "payout" would depend on your volume of business. You can choose to work on a commission or fee basis with clients. The broker-dealer for your office provides services, including trading and operations, product and market research, accounting, marketing, compliance, training and advisory services.

   The pros of direct affiliation are these:

   * You have a smaller capital investment.

   * You have a well-capitalized, experienced organization behind you.

   * There usually are no restrictions on ending the relationship with a your broker-dealer if it doesn't work out.

   * The cons are as follows:

   * You and your staff will need additional licensing.

   * You will be governed by the NASD.

   * The broker-dealer controls...