CPA firm pursues wealth management

August 23, 2009
| By Pete Daly |
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Bernard Madoff, R. Allen Stanford and the stock market plunge of ’08 led to a general loss of trust in financial advisers — and now Rehmann and other CPA firms believe they've found that trust.

Rehmann, a Michigan-based company and one of the largest independent CPA firms in the state, held a "CEO Summit" last week in Grand Rapids, focused on ways CPA firms can best serve their clients’ wealth management needs.

Ron Knipping, managing principal of the Rehmann office in Grand Rapids, told the Business Journal that over the past year, many high net-worth individuals have been left wondering, "Who do I have left to trust?"

"Decade after decade, the most trusted adviser has always been the CPA," said Knipping.

Knipping said that over the last 18 months, "the traditional financial services delivery model in the U.S. has been incredibly disrupted or in some parts destroyed." Some major "wirehouses"  — large brokerage firms with offices around the country — "have basically gone bankrupt and been absorbed by major banks."

"The wirehouses are taking it on the chin," said Knipping. "The level of trust people used to have in their investment advisers has been decimated with Madoff and Stanford (and) with the 58 other SEC enforcement actions going on (regarding) Ponzi schemes," he said.

Rehmann has more than 600 employees, with anticipated revenue in 2009 of $72 million to $74 million. Its clients include small and medium-sized business that are owned and operated by individuals and families, plus some publicly traded companies — "and a lot of governments and nonprofits," said Knipping. It specializes in serving high net-worth families and individuals and “medical professionals,” he said.

"We have a bigger tax department in the state of Michigan than does Deloitte," said Knipping.

Rehmann provides standard CPA services plus business consulting and financial adviser services.

Cerulli Associates, a Boston-based research firm specializing exclusively in the financial services industry, just issued a report on the state of the major wirehouse firms. Their strength is being threatened by a wide variety of market forces, according to Cerulli researchers.

"There's been a huge migration of wealth and clients out of the traditional delivery models, whether it’s banks or wirehouses, to independent (investment) advisers," said Knipping.

One of those forces is companies like Rehmann, which has added a wealth management service called Rehmann Financial, said Knipping. Rehmann Financial is an SEC Registered Investment Advisor, with securities offered through Triad Advisors Inc., a broker/dealer.

RIA firms are overseen by the SEC and offer a "fiduciary level of care," according to Knipping, which requires them to disclose all fees and any conflicts of interest. Brokers are only required to operate in a manner deemed "suitable" for the client but are not necessarily required to reveal all fees involved in a transaction or conflicts of interest, he said.

One of several companies that Rehmann partners with is Pershing Advisory Solutions, part of Pershing LLC, a New Jersey firm that completes securities trades for major broker-dealers and investment advisers. Pershing Advisory Solutions serves registered investment advisers and acts as a custodian, holding the investments Rehmann makes for its clients.

The team approach at Rehmann makes it a virtual one-stop shop for its clients' tax, investments and financial matters.

"Other CPA firms around the country are seeing value in that, and the top wealth managers are also seeing the value in teaming up with the trusted tax adviser/business adviser," said Knipping.

Some of the focus at the CEO Summit was on maximizing the value of "tax-managed investing."

"We're able to manage equities with an eye to after-tax return for our clients. The vast majority of assets managers are managing it for total return — meaning they don't care what you pay in taxes. We manage it with an eye to what you keep after taxes."

An anticipated increase in the capital gains tax is on the radar at all CPA firms.

"All the tax increases they are talking about include an increase in the long-term capital gains rate. They're going to do it — it's just a matter of what the numbers are going to be, and when. So (tax considerations in investing are) going to become even more important.”

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