Getting a Office With a Financial Advisory Firm

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#1
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Southeastern Wisconsin
I have a small tax practice that I started about two years ago and have grown to roughly 100 clients. To make ends meet I take contract work on the side and operate this out of my home.

I recently had a business acquaintance that runs a financial planning service business offer to lease me an office space on his floor for roughly $1,000 a month with the understanding that we will exclusively recommend our clients to one another. He currently has approximately 500 clients. As well, the only other accounting office in town is closing and he'll be getting the client list of roughly 400 people. So I'll be essentially the only tax/accounting practice in the town and probably be getting hundreds of new clients to boot.

I am closer to the beginning of my career and this seems like an amazing opportunity with the only risk if things go belly up is the $1,000 in monthly lease payments on the one-year lease.

Should I or should I not say yes and are there pitfalls to look out for?
 

#2
sjrcpa  
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UncleSam wrote:we will exclusively recommend our clients to one another

Is that legal?
Can you afford $12,000 rent on the off chance you don't pick up business?
Otherwise sounds like a great opportunity.
 

#3
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The Office
Do you need an office and $12,000 a year is reasonable in your area? If yes, the only pitfall I can imagine is that boundaries will have to be respected. You'd have to determine how much free advice you're willing to give each week, month, etc or how many "quick questions" you're willing to answer. Being right next door, it'll be hard to control that dynamic vs if the FA can only reach you via phone or email.

If you don't need an office or the rent isn't reasonable, I wouldn't do it. You can establish a referral relationship without being right next to each other.
 

#4
smtcpa  
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He sounds more interested in cutting his expenses and getting new business. There are plenty of ways to grow faster without the overhead and potential friction with another person you may not know well. I wouldn't even give it a second thought.

By the way, why will HE, a financial planner, be getting the list of tax clients? Does he do tax work too? Why aren't YOU going after those clients?
 

#5
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North Shore, Oahu
Pitfall:

The financial advisor does a bad job managing risk and expectations for his clients, his clients lose more money than they expected in a market down turn, and you end up being associated with it. Not so much legally, but form a goodwill standpoint.

Also, how well do you know him? Is he always polite and professional?

Expectation:

"Meet and greet" with his clients to discuss your services and your prices and to see if you are a good fit?

Free.

Tax advice?

Not free.

You will get better clients by not giving our free tax advise. Please trust that I know this form experience and that giving out free tax advice is a huge mistake.
 

#6
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WA
I'd do it. You said it's just a one-year lease. Do you think it will go belly up the first month? Doubtful.

The referral agreement is likely just a verbal agreement, and it could just be as simple as mentioning that you have a financial advisor to whom you can refer them. It's still their job to "shop around." If the guy is a crook, just don't say anything to your clients until the lease is up and bail.
 

#7
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Southeastern Wisconsin
The guy is getting the client list because he used to work at the firm before he left and wanted to go into financial planning. Rent would be reasonable though comparably for the area it does seem a little high. Even if things go South it's only a year's commitment and we should be able to shake hands and walk away. The agreement between us would just be if the client is looking for a financial advisor or CPA to make sure we point them to each other.

One of the biggest reasons I'd do this, besides getting the new clients, is also I kind of see this as part of the future in the tax/accounting profession where people really are looking for one stop shops with their finances. With their financial planning and taxes being taken care of by people who work together.
 

#8
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Lower 48
I don't like the exclusive requirement and would never undertake it. Not sure whether that is ethically allowed but you could end up with egg on your face if the nature of the relationship became known to the public. A client could feel betrayed as your referral of the financial-planning firm might be viewed as being in your best interest not theirs.
 

#9
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Northern MI and Coastal SC
I don't do exclusivity with anyone because each professional may not be the ideal fit for each client. That is why I introduce them to several so they can choose the one they're most comfortable with as far as personality, background, etc.
 


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