In this video and podcast, Randy Johnston and Brian Tankersley, CPA, discuss the fundamentals of the technology needed to efficiently run a family tax and accounting practice. Watch the video, listen to the audio podcast below, or read the transcript.
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Transcript
(Note: There may be typos due to automated transcription errors.)
SPEAKERS: Brian F. Tankersley, CPA.CITP, CGMA, Randy Johnston
Brian F. Tankersley, CPA.CITP, CGMA 00:00
Ryan, welcome to the accounting Technology Lab, sponsored by CPA practice advisor. With your hosts, Randy Johnston and Brian Tankersley, welcome
Randy Johnston 00:11
to the accounting Technology Lab. I’m Randy Johnston with co host Brian Tankersley and on today’s session, what we’d like to do is talk a little bit about family office and the fundamentals behind that. Now, the thinking here is pretty straightforward. There are around 30 service offerings for most CPA firms. Obviously, the biggies are tax and audit and client accounting services has certainly been growing up. And of course, you have the evolution into advisory services. And you know, for about the 25 years, at this point, some firms have gotten into wealth management and other areas. But to me, family office holds kind of a special position. Personally, I have been lucky enough to work in and for multiple different family offices, usually as a technology advisor, and what is offered by family offices as services, I think are critical. And what I’m trying to make sure is that family office strategies don’t just become sales strategy for an RIA or a BD. And, you know, Brian and I are lucky enough to have a long history in these technologies because one of our now unfortunately deceased friends actually created data faction, and Mary Austin was just a fine, fine person, and his goal was to make it easier for accountants to do the technical accounting. So that’s maybe too much of a setup today, but I wanted to you to have this thinking, because we want you to continue to reflect on what your service offering should be, we suspect most of you have one or more high net wealth individuals that maybe need some help. And the question is, what type of services or help do they need, and where do you go to get it? So Brian, that’s kind of the setup and the thinking. So what might you say about family offices? And I’ll cycle back and throw a little bit more color on too. Well,
Brian F. Tankersley, CPA.CITP, CGMA 02:27
you talked about investment advisor and broker dealer, broker dealers. And I think the, I think the investment side of thing is certainly important. But you know, you think about folks that have, you know, eight and nine figure fortunes, and the thing about it is that they have, they also have a lot of assets that have to be taken care of. And a lot of you know, you have five homes, you have five electric bills and five handymen, and you know, five, five lawns they have to get cut, and all of the things that are associated with that. You also have family members that you know, maybe, maybe are allowed. You know that that aren’t you know that get out and they, they are trying to figure out how to, you know, how to how to do, how to do their life, and how to how to grow in and what it means to be a member of this very successful family. And sometimes they feel a lot of pressure, and we have to, we have to work with them, and we we need to realistically make this, make life easier for these people, so that, so that they can do the thing they did that made them so fabulously wealthy, so they can become even more fabulously wealthy, and they can create a, create multi generational benefits for their for their children, grandchildren, great grandchildren, hopefully.
Randy Johnston 03:46
So sorry to interrupt you and talk over the top of you there, Brian, but you know, as you’re talking about those types of issues, you know, a lot of times there’s too much focus on operational sides. I’m just going to call it the accounting. I started my comment with the you know, data faction, you know the the accounting software that has been purchased by Century National Bank and now morphed into something else. But honestly, my journey on this personally came from a little bit different area, because I got to meet ketley, who did the ketley backroom technician software, brilliant guy. It was a fun conference, and it’s like, so insightful. And his software led me to create my original trust structures, because I modeled it. And then I went to professionals and said, you know, based on my current situation, I think we need to have generation skipping trust in place. And here’s how the structure works. And you know, I was looked at like I had three eyes. And you know, that was in 1998 when we. Did that. And you know, it turns out that there are the transactional accounting, but there’s also the legacy planning, the the trust work, and actually the trust administration, and so so many of those other things that are in play. But as accounting professionals, much of the time, it seems like we’re focused on the transactional pieces and maybe not so much on the advisory pieces. So when you look at the types of family offices out there, you’ve got the traditional family office, typically a wealthy individual, a single family’s wealth that might have a staff of experts. I’ve got one of those here in my hometown of Kent Hutchinson, and there’s multi family offices, which are managing the wealth for multiple families, and then just pure old outsourcing as well.
Brian F. Tankersley, CPA.CITP, CGMA 05:50
And I would say that the investments that the family offices get into are much more interesting than the than the traditional, you know, traditional investments that, you know, that you buy off Wall Street or whatever, because they can do private placements. They can do they can do private they can do private equity things. They can do hedge funds. They can do venture capital. You know, one of the, one of the more interesting, some of the more interesting things I’ve seen have been these Moon these venture capital moon shots, where they, you know, they think there’s a two in 10 chance that they’re going to be successful at this moonshot they’re going at, but if they do, if they are successful, they’re going to get 100x 200x 500x return off of it. And so this, it’s, it’s very interesting, because you, can really these people, you know, these these clients, have enough in the way of assets that that they can make these big bets that are moon shots. And so you have a huge amount of opportunity to advise and make a huge difference for them. As long as you don’t get hung up on, I just do accounting okay, because you deliver services and you get it done right every time before the deadline without fail. And so if you can apply those same skills to the property tax bill for the the home in in Vail, and you can you know when somebody has a problem with a leaky faucet. You have a you have, you have one of your admin people or a property manager that you work with that can, that can get that fixed for them, you know. So I want you to understand that it is, it is kind of a stretch and there, there. But there are a lot of interesting investment opportunities that do need accounting help, because in many cases, they are startups or or again acquisitions that have happened. And so there’s, there are a lot of interesting opportunities that come up in here, but unfortunately, you may have to deal with some lawn people and some plumbers and some electricians as part of that. But this is a very profitable segment, and people, and you know, people that have this kind of wealth that I all the ones I’ve known have have relied on these people heavily to make problems go away for them and to to help them, help them navigate the complexities and the challenges that come with that come with this level of success. So
Randy Johnston 08:26
Brian, as you were explaining that, I was reflecting on and you and I have been in some of these together, where I have worked with CPA firms that have family office offerings, and I have been in family offices directly helping them with technology. But again, I’m trying not to disclose where any of these are, what they would do, but I’m going to name some cities to give you a sense, because I’ve worked with family office groups in Seattle and San Francisco and LA and Austin and Houston and Boston and Philadelphia and Chicago and and Nashville and and and and and so you kind of almost picture those little pockets of wealth. But I’m going to go further saying that, you know, if you were trying to run a family office, you need to be thoughtful about what your offering is. And you know, in the old days, citity National Bank did a lot of private banking, if you will. There’s a lot of banks with private banking resources today. And of course, City National bought that data faction software, which became agile link. And of course, citity National Bank got bought by RBC, and so this whole roll up of technologies and banking is affecting the way the family office offerings can be offered. And you know, conflict of interest is not really a good thing in the family office environment. A. Uh, we are. Now, I shouldn’t speak for you, Brian, but I think you’re of the same mold. I am adamant that advisory services should be people centric and business centric, and that you your focus is on the client, not on your firm or yourself. And when you’re doing family office, you have to be of that same milk, and that’s exactly what you were describing. You know, you’re making problems go away for these high net wealth individuals. Now, as a CPA professional, you can help a lot with, you know, tax implications. Certainly you may have the background or a relationship with trust attorneys, and maybe you can do trust accounting and so forth. But you know, bottom line is that there’s far more services that are needed that are helpful for these high net wealth individuals. You know, sometimes you’re doing lifestyle management, you know, which, as unscrupulous as people can be, they will try to manipulate high net wealth individuals to, you know, get some of their goods for themselves. You know, we’ve seen that in baseball, obviously, with the, you know, the managers and so forth, and it’s like, Who you going to trust? And in family office, each one of you that are listening, I’m sure, are picturing 123, high net wealth individuals that you’re dealing with, and how can you help them? Very effectively, and they’re probably pretty good clients of yours, not to say they aren’t demanding, but they’re probably pretty good clients. So you know when I when I’m setting this up with you, not suggesting you should be in the family office business, but I’m saying that you probably have high net wealth clients that you may want to look at a strategy to satisfy their needs and maintain the relationship that you have with them as the professional accountant involved. So Brian, are there other services that we should be mentioning again? We’re not trying to teach our listeners today how to do family office work. We could go into all sorts of illustrations of the things that we’ve seen, but it’s the need is great, and the providers are few.
Brian F. Tankersley, CPA.CITP, CGMA 12:30
Well, if you think about it, these are people that have balance sheets that are 3050, plus million. And so they realistically need a CEO, a COO and a, you know, they, they need and a CFO, you know, they so. So you may be functioning today as this CFO for these folks, but they’re going to acquire and sell businesses, and that they’re going to need due diligence on. They’re going to, you know, they’re going to operate businesses. And when those businesses have problems, it’s going to be you have some very delicate opportunities there where you need to advise them, maybe that, you know, maybe this child that’s that’s running this business, that’s having a hard time with it, you know, maybe it’s time for them to do something different, or for them to to hire a professional manager in under that person you know. So you have some very delicate things that can not only mess up their their their business lives, but can also mess up Thanksgiving. And so we have to, we have to be sensitive to all of those things. And I think really, we you have to, you know, what’s what’s different about it is that during tax season, when you’re a tax professional, you cannot take the call from somebody, okay? The difference here is that you have to find a way to take that call, because this is, you are the person that makes that go away for them. And if you don’t take many, you know, if there are many calls you miss from this person you know, from the folks in this group, it’s it’s a problem. So
Randy Johnston 14:03
it’s not only tax season. Timing, Brian, it’s 24 by seven. Timing,
Brian F. Tankersley, CPA.CITP, CGMA 14:08
yeah, yeah. My child got arrested at college at three in the morning. Who do you know that can bail them out in Sacramento, California? Yeah.
Randy Johnston 14:16
And you know, again, in this particular case, we’re not used to that in the accounting profession, most accountants that I know are honest people that work hard, but they tend to have a fairly limited window that they’re actually working now it may start early 6am and it might might end late at night, 11pm but most accountants, nobody’s going to die if you don’t get the work done today. You know, in this particular case, somebody might die if you don’t get the work done today.
Brian F. Tankersley, CPA.CITP, CGMA 14:49
Or, oh my gosh, we’re fogged in in veil, I can’t get home. Can you make sure somebody goes and feeds my dogs? You know? And admittedly, you’re looking at this thinking. I went to college for this? Yes, you absolutely did, because they called everybody they knew to call before you, and you have to now stand up and make this go away, because you are the trust. You are the person that they trust the most, and they waited to call you on this, and now they’ve called you, and now you have to stand and deliver.
Randy Johnston 15:21
Yeah, well, so as you’re thinking about different service offerings that you can do, you know family office is one of those, you will see us revisit these type of service offerings in future technology labs, because we know that as client accounting services becomes more commoditized. As tax becomes more commoditized, as audit becomes more commoditized, what are you going to do? Where is the value going to be? Now, you did not hear Randy say tax is going away, audit is going away or CAS is going away, they’re absolutely not. But what I believe is going to have to happen is you’re going to have to look and say, you know, I’m more interested in doing this rather than that, and my clients need this rather than that, and the change over the next five or 10 years. Because what I’m trying to get you to do now is think out to 2035, or 2040, what is it that you want your career and your clients to feel like? 510, 1525, years from now? That’s a lot longer haul thinking than our typical reactionary accounting Technology Lab, where, like, hey, this happened last week, and this is what you need to do next week for it.
Brian F. Tankersley, CPA.CITP, CGMA 16:48
Yeah, I think it’s a and, but I think, I think it gives you an opportunity to have all kinds of new experiences. And, you know, again, it lets you, I think you’re going to have to learn. I think you’ll, you’ll have to have different skills, but I think that it gives you a, I think it’ll make you a more well rounded professional. I think dealing with these other things that we don’t normally have to deal with in accounting, you know, I think it’s a and I think you can make a huge difference in people’s lives. And that’s ultimately, you know, it’s funny, most of the, a lot of most of the accountants I know, got into it to make a difference for people. In many cases, they wanted to make money, sure they wanted to work hard, sure they wanted to have opportunities, but at the end of the day, they wanted to make a difference and help people. And I think this is a great way to do that that has been very profitable for a lot of people.
Randy Johnston 17:48
And with that as kind of a thinking, I’m not even going to ask you to summarize Brian, because here in the accounting Technology Lab, Brian and I are trying to help you think about topics where you can make a difference, and we’re trying to summarize and maybe light a little fuse here and there that you hadn’t thought about before. So perhaps family office advisory services is in your future. Well, we appreciate you listening in today, and we’ll talk to you again soon in another accounting Technology Lab, good day.
Brian F. Tankersley, CPA.CITP, CGMA 18:23
Thank you for sharing your time with us. We’ll be back next Saturday with a new episode of the technology lab from CPA practice advisor. Have a great week. Bye.
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