Professional Advisors Alliance

• Our Approach
• The PAA Process
  • Firm Assessment
  • Define the Opportunity
  • Develop a Marketing Plan
  • Marketing Products and Services
  • Implement a Turnkey Program
  • Practice Management and Support
• Partnering With PAA
  • Benefits of Partnership
  • Compensation Options
  • Compliance and Regulation

Compensation Options

Four Compensation Options for CPAs

The four structural options for CPA alliances vary in terms of scope, complexity, permanence, and revenue-sharing potential. Casual referrals are the quickest and easiest types of relationships to create, but they offer limited potential. The more formal types of relationships require CPAs to become licensed and/or registered.

Option 1 Casual Referral

The CPA refers clients to an outside preferred partner and declines participation in fees and commissions, in favor of creating cross-referrals with the partner.

The CPA cannot receive fees or commissions under this arrangement, which is a form of “professional-courtesy” friendship. It does not require the CPA to be licensed or registered.

Option 2 Referral for Fee

The CPA refers clients to an outside preferred partner and receives remuneration for the referral from the partner as a fixed flat dollar amount, which may be capped by regulations. Fees must be paid for referrals alone and cannot be contingent on sales or results. The CPA may have limited ability to review or recommend investment or insurance products or services. The CPA cannot receive commissions or fees for service under this arrangement.

This arrangement is approved under the AICPA’s Code of Professional Conduct, providing that the CPA covers all engagement responsibilities. It does not require the CPA to be licensed or registered; however, it must be approved in advance by the strategic partner’s broker-dealer.

Option 3 Expense Reimbursement

The CPA forms an informal alliance with a financial services firm or representative and is reimbursed for expenses incurred in the course of business. Reimbursed expenses must be clearly described in an agreement that delineates between fixed and variable expenses. Reimbursements are allowed for billable hours in connection with general financial planning and specific items such as phone charges.

The CPA cannot receive fees or commissions under this arrangement, and there can be no direct relationship between expenses reimbursed and revenue generated.

Option 4 Investment Advisor Representative (IAR), Licensed Insurance Agent and Registered Representative

In this option, a CPA becomes registered to sell securities, including variable insurance products, by affiliating with a broker-dealer and passing the Series 6 or Series 7 exam. The CPA also becomes life insurance licensed and appointed. The CPA must be licensed/registered in each state through which they wish to conduct securities and insurance business. The CPA becomes subject to all rules and requirements of the broker-dealer, including mandated annual Regulatory and Firm Element training. Usually, CPAs affiliate with just one broker-dealer and commissions may be shared between the registered CPA and another registered representative, according to SEC rules and broker-dealer guidelines. CPAs may participate in the delivery of services and they are held responsible for assuring the suitability of investments sold to their clients.

Key issues involved in this option include:

• Outside business activities, which may be restricted by the broker-dealer
• Selling away—failing to obtain the broker-dealers prior review and approval of all investment-related activities
• Annual ongoing compliance requirements, including reports, books, records, and inspections
• Compliance with Financial Industry Regulatory Authority (FINRA) and state insurance requirements for incoming and outgoing correspondence (including e-mail), advertising, and sales literature

When an LLC is properly established, it helps differentiate between the CPA firm's business and the additional financial services offered through its affiliation with PAA. Once the LLC is established, the CPA firm itself is generally not subject to these requirements.

How Professional Advisors Alliance Can Help You Make the Best Choice

PAA can help your firms understand and evaluate the variety of choices available for the structural options. Our consultative process, including a comprehensive Firm Assessment, will identify the strengths of your firm, the needs of your clients, and the specific goals of your partners.

Contact us today for more information on compensation options and expanding your financial services.