Should You Outsource the Investment Advisory Function?

Source: The CPA Journal

The idea of getting involved in investment advisory services can be appealing to CPAs. Many see it as an opportunity to guide their clients and protect them from unscrupulous brokers. But there are many disadvantages as well. In addition to strict licensing requirements and the time commitment required to become knowledgeable and stay up-to-date on the securities markets, providing investment advice can disrupt your practice. What if, for example, a market downturn causes investment clients to demand immediate attention during the height of tax season? Also, because the investment industry generally has a less positive professional image than accounting, getting into the field may hurt a CPA's status as a trusted advisor.

The author recommends that CPAs outsource the investment function to a fee-only registered investment advisor (RIA) with whom they feel comfortable and act as a client's advocate by overseeing the RIA and the investment process. This type of arrangement enables CPAs to protect clients and provide them with peace of mind. It also allows CPAs to enhance their income by participating in the RIA's fee (on a fully disclosed basis), generally without the need to become licensed and with a minimal impact on billable hours.

For the complete article, read “CPAs and Investment Compensation: A Better Way” on page 13 of the January 2011 issue.

From The CPA Journal, A Publication of the New York State Society of CPAs, January 2011.