INDUSTRY TALK

Merchant Invests in CPA to Offer Tax, Accounting Services to RIA Network

Merchant, a New York-based investment firm providing growth capital and other support to independent financial services firms, has taken a minority stake in a full-service CPA in part to offer its registered investment advisor network additional tax, accounting and auditing capabilities.

Merchant, which has over 100 partner firms, has invested in Venning Advisors, a full-service CPA with over 150 employees across 15 U.S. offices.

Venning, headquartered in Agawam, Mass., is the second full-service CPA Merchant has invested in; it took a minority stake in Manning Silverman & Company in the first quarter of 2024. Tim Bello, co-founder and managing partner at Merchant, said the firm went on a “listening tour” in the financial services space about five years ago to gather “granular, detailed” information on the sector.

“We’ve really gone along the lines of, how do we partner to drive the full flywheel of services?” he said. “Not just for the RIA community, but for their clients in terms of the services they need, such as estate planning, trust and accounting services.”

OUR TAKE:

Adding tax preparation is the obvious evolution of the wealth management industry. There’s a growing cohort of clients that are tired of being the “middle-man” between the advisor and CPA, and / or they are tired of not getting the service they expected from their existing CPA. The CPA industry changed for the worse during Covid as I’m hearing more clients complaining about not getting to talk to their CPA than ever before. Now, I know most advisors are giving “tax education”…some are even giving “tax advice” at this point, but most are not generating the actual tax return. They still leave that to the CPA. But doing the actual tax return for the client is what makes the client relationship sticky and allows the advisor to remove the client from the “middle-man” position. Going right up to the proverbial edge but stopping at giving tax advice is also harder to monetize versus simply including the tax return in your deliverables for a slightly higher AUM fee. Clients are willing to pay a premium for this and some will be willing to move their accounts to a firm that can offer it. In the next few years, you’ll see more broker-dealers figure out how to bring this tax prep in-house for clients because the opportunity is massive.

 INDUSTRY TALK

BD Compensation Rankings for 2024

Based on the report from Financial-Planning.com, it looks like EJ remains the highest comp payout amongst the wirehouse and regional firms for advisors grossing $1Million. This continues to reinforce my opinion that EJ is the best place to be an employee advisor!