How to Start an Advisory Practice

These six tips will help you hit the ground running. By AICPA | Digital Exclusive - 2017

In order to stand out in a crowded profession, many financial professionals are leveraging the escalating trend toward advisory services. The ability to offer specialized knowledge allows you to differentiate yourself from competitors and position yourself more favorably within the marketplace.

One of the best ways for you to demonstrate your knowledge and expertise in particular areas is through the addition of credentials. The AICPA offers the only credentials built on the foundation of competency, objectivity and integrity. They are: Certified in Financial Forensics (CFF®), Personal Financial Specialist (PFS™), Accredited in Business Valuation (ABV®) and Certified Information Technology Professional (CITP®).

According to an AICPA spokesperson, “Advisory services are one of the biggest growth areas in our profession, and any licensed CPA who wants to take advantage of this opportunity should seriously consider pursuing a credential.”

Think Through Your Game Plan

Let’s face it. Many qualified financial professionals are entrepreneurs at heart, so branching out into an advisory service often feels like the natural evolution of their business. Of course, adding an advisory service to an established practice takes dedication and diligence. But it can be an immensely rewarding pursuit, both professionally and financially.

Before deciding to offer an advisory service, you must be willing to:

1. Commit to spending the time it takes to develop an advisory service practice. As Susan Pierce, CPA/CITP, CGMA, and senior technical manager of the Information Management and Technology Assurance Division at the AICPA said, “You can’t just hang a sign up and be successful; you need to have a plan.” For many established firms, that means writing an entirely new business plan. Consider such things as the market for the services you are considering providing and what competition you might face.

2. Identify your target audience. Adding an advisory service offers the potential to tap into a new client base, which requires careful thought and planning. In some instances, the end-user may not be the person who makes the hiring decision. A lawyer or other accounting firm may be the one to select the valuation, forensics or technology specialists. Keep this in mind when marketing your advisory service.

Sometimes, however, adding an advisory service does not necessarily mean speaking to a new audience. Instead, you could focus on strengthening and deepening your relationships with existing clients. Such is often the case when engaging in personal financial planning services.

3. Reassess your fee structure. With the addition of an advisory service comes the responsibility to your firm for knowing how and what to charge clients for your new offering. You want to remain both competitive and profitable. If you don’t adequately understand all the costs associated with the new service and factor them into every proposal, you may lose money.

4. Consider the technological investment that advisory services require. Research and talking with practitioners will help you assess what you’ll need in your new practice area. The upfront costs of purchasing software or systems and ongoing expenses, such as training and updates, should be factored into your business plan. This investment will more than pay for itself as your practice grows.

5. Follow any applicable standards and regulatory and compliance requirements of your advisory service area. In addition to issuing standards for the audit and attest functions, the AICPA issues standards for business valuation, personal financial planning and consulting services to provide consistency in these areas of practice and to protect the public and the reputation of CPAs. Information technology advisers need to understand the requirements associated with the software products they implement or assess.

And most importantly …

6. Obtain a credential in your advisory area. Here are two ways to look at it: First, you can use an AICPA credential as the pathway to gaining in-depth knowledge as you move toward offering new services. Or, if you already have in-depth knowledge, experience and education in an advisory area, you can use a credential to help market your services and differentiate yourself, your firm or your role within an organization.

It’s worth noting that, even if you have the financial and personnel resources to start an advisory practice, the AICPA Code of Professional Conduct states that you cannot take on a professional engagement without the requisite set of knowledge, skills and competencies. A credential is an official way of demonstrating that you have met these requirements.

What Can Each Credential Do for You?

Most financial professionals are drawn to the credential that naturally complements their professional interests, knowledge and skills. Here is how each credential serves its holder:

The CFF credential encompasses fundamental and specialized forensic accounting skills that you can apply in a variety of service areas, including bankruptcy and insolvency; computer forensic analysis; family law; valuations; economic damages calculations; and fraud prevention, detection and response. This credential also sets you apart as an expert witness in the courtroom.

The PFS credential showcases expertise in personal financial planning. Many financial professionals use this credential to expand or diversify a tax-focused practice by demonstrating a comprehensive knowledge in financial planning and tax, thereby offering a holistic approach to their clients’ financial needs across retirement, estate, tax, risk management and investment planning.

The ABV credential is ideal for financial professionals who want to enter an in-demand area by positioning themselves as an expert business valuation service provider who not only reaches a conclusion of value but also creates value for clients through the strategic application of their analysis.

The CITP credential recognizes financial professionals who have the unique ability to provide technology-related assurance and business insight by demonstrating their knowledge of information, data relationships and supporting technologies. Focus areas include IT risk and IT assurance, security and privacy, business solutions, data analytics and emerging IT trends. CITP credential holders are helping their clients or organization improve operations, ensure financial data integrity, determine risks associated with financial reporting and prevent and detect fraud.

Remember, these credentials are available only to qualified financial professionals who meet the criteria for professional experience and minimum education requirements as outlined by the AICPA, and who pass the required exam.

Additional Resources for Advisory Services

Before obtaining a credential, consider joining an AICPA section. Section membership provides you with access to technical content, advisory practice resources and discounts on credential education materials and exams. Once you hold a credential, the credential fee includes all of the section benefits, including webcasts, practice guides, guidance on hot topics, tools to practice competently and profitably, discounts on conferences and more, plus additional resources developed for you as a credential holder. And you’ll connect with other financial professionals who can offer advice, which can kick-start your advisory practice.

If you decide to pursue a credential as one the first steps to starting an advisory practice, the AICPA will support you every step of the way by providing the resources and tools you need to maintain the highest level of competency in your specialty. When you’re ready to set yourself apart with an AICPA credential and explore starting an advisory service practice, visit us here.