The Big Opportunity Tax Planners are Leaving on the Table w/ Rory Henry

Podcast

Summary

In this episode of Growing Your Firm, host David Cristello welcomes Rory Henry, a certified financial planner and behavioral financial advisor. 

Rory, who is also the director Arrowroot Family Office, co-founder of AFO Wealth Management Forward, and author of the upcoming book, “Holistic Guide to Wealth Management,” discusses the evolving landscape of wealth management and its critical intersection with accounting and tax professionals. 

The conversation explores the integration of technology in financial planning, highlighting how software is making holistic financial strategies more accessible. 

Rory shares insights on the importance of collaboration among financial and accounting professionals and delves into the psychology of financial behavior. Tune in for valuable wisdom that can help accounting professionals enhance their services and better serve their clients.

Guest Bio

Rory Henry is a distinguished certified financial planner and behavioral financial advisor, renowned for his innovative approach to wealth management and his commitment to integrating financial services for a holistic client experience. 

As the Director at Arrowroot Family Office, Rory has dedicated his career to transforming the way financial planning is perceived and delivered, emphasizing the importance of collaboration between accounting and wealth management professionals.

With a rich background in behavioral finance, Rory has developed a unique philosophy that centers around the concept of “advise ROAR,” which stands for “Return on Relationship.” This philosophy underscores his belief that financial advisors are uniquely positioned to provide transformative advice to clients, leveraging their intimate knowledge of clients’ financial situations. 

Rory advocates for a shift away from traditional transactional referral models, which he argues are outdated and ineffective. Instead, he promotes a more integrated approach that fosters long-term relationships and comprehensive financial planning.

He is also the author of the forthcoming book, “Holistic Guide to Wealth Management for Accounting Professionals,” which serves as a comprehensive resource for professionals in the accounting and wealth management fields. This book features contributions from over 24 thought leaders, reflecting Rory’s commitment to collaboration and knowledge sharing within the industry. His work aims to equip accounting professionals with the tools and insights necessary to provide holistic financial plans that encompass tax, investment, insurance, and estate planning.

Throughout his career, Rory has been a vocal advocate for the integration of technology in financial planning. He believes that advancements in software and data analytics will enable professionals to provide more accessible and efficient financial services. By harnessing these tools, Rory envisions a future where financial advisors can seamlessly integrate various aspects of wealth management, ultimately enhancing the client experience.

Rory’s dedication to the field is further exemplified by his focus on the psychology of money. He emphasizes the importance of understanding clients’ emotional relationships with money, which he believes is crucial for effective financial planning. By exploring clients’ past experiences and values, Rory helps them create a vivid picture of their future financial goals, fostering a sense of empowerment and clarity.

In addition to his professional achievements, Rory is a sought-after speaker and educator, sharing his insights on wealth management and behavioral finance at industry conferences and events. His passion for helping others navigate their financial journeys is evident in his approach, which prioritizes empathy, understanding, and a human-first perspective.

Rory Henry’s ethos is rooted in the belief that financial planning is not just about numbers; it’s about people. By integrating wealth management with accounting practices and focusing on the psychological aspects of money, he is paving the way for a new era of financial advisory services that prioritize client well-being and long-term success. 

Through his work, Rory continues to inspire professionals in the industry to embrace a more holistic and collaborative approach to wealth management, ultimately transforming the lives of the clients they serve.

Detailed Synopsis

The Shift from Traditional Referral Models to Transformational Relationships in Wealth Management

In the evolving landscape of wealth management, the traditional referral model is increasingly seen as outdated. This model, characterized by a transactional approach where professionals merely exchange referrals without deeper engagement, fails to meet the growing expectations of clients who seek more integrated and holistic financial solutions.

The Limitations of the Referral Model

As Rory Henry points out in the podcast, the referral model is fundamentally transactional. It often fosters a “please give me one, and I’ll give you one” mentality, which does not cultivate genuine relationships or provide comprehensive solutions for clients. This approach can lead to missed opportunities for both accounting and wealth management professionals to truly understand and address the multifaceted needs of their clients.

The Need for Transformation

Instead of relying on referrals, firms should focus on building transformational relationships with clients. Rory emphasizes the concept of “advise ROAR,” which stands for “return on relationship.” This approach recognizes that accounting and tax professionals are uniquely positioned to provide valuable advice to clients, often from the very beginning of their financial journeys. 

By developing a deeper understanding of clients’ financial situations, firms can offer tailored solutions that encompass not just tax planning, but also wealth management, estate planning, and insurance.

Integrated Services as a Solution

The podcast highlights the importance of integrating various financial services to create a holistic financial plan. Rory suggests that accounting professionals already possess much of the necessary data to provide comprehensive financial advice. 

By asking just 10 to 15 additional questions, they can uncover critical information that allows them to offer a full suite of services, including investment management and estate planning.

This integrated approach not only enhances the client experience but also leads to increased client retention and lifetime value. Clients appreciate having a “dream team” of advisors—accountants and wealth managers—working collaboratively to address their financial needs. This synergy can significantly improve client satisfaction and loyalty.

The Future of Wealth Management

Looking ahead, the industry is moving towards a model where professionals will become integrated life and wealth planners. As Rory mentions, a McKinsey study predicts that by 2030, the lines between different financial services will blur, and professionals will need to provide comprehensive solutions that encompass investments, banking, healthcare, and financial wellness.

The Integration of Wealth Management and Accounting: A Path to Holistic Financial Planning

In the evolving landscape of financial services, the integration of wealth management and accounting is becoming increasingly vital. As discussed in the podcast episode, this integration is not just a trend but a necessary evolution for accounting professionals looking to enhance their service offerings and client relationships.

The Shift from Transactional to Transformational Relationships

Historically, the relationship between accountants and wealth managers has often been transactional, characterized by a simple referral model. Rory emphasizes that this model needs to be “buried” alongside outdated practices like time-based billing. Instead, he advocates for a transformational approach, which he terms “advise ROAR”—a focus on “return on relationship.” 

This perspective highlights the unique position accountants hold in their clients’ financial journeys, often being the first point of contact before clients accumulate significant income or assets.

Building a Collaborative Framework

For accounting professionals, the journey towards integrating wealth management begins with collaboration. Rory suggests a “buy, borrow, build” strategy, where firms can start by partnering with a Registered Investment Advisor (RIA). 

This partnership allows accountants to provide comprehensive services without the immediate need to develop their own wealth management capabilities. 

By working collaboratively, accountants can focus on their core competencies—tax and business advisory work—while leveraging the expertise of wealth managers for holistic financial planning.

The Importance of Communication and Technology

Effective communication between accountants and wealth managers is crucial to ensure a seamless client experience. Rory points out that adopting similar software solutions can facilitate this communication, allowing both parties to stay aligned on client needs and objectives. 

This integration of technology not only streamlines processes but also enhances the overall service delivery to clients.

Understanding Client Needs Through Behavioral Finance

A significant aspect of this integrated approach is understanding the psychology of money. Rory highlights the importance of exploring clients’ past experiences and beliefs about money, which can shape their financial decisions. 

By asking targeted questions about clients’ earliest money memories and influential figures in their financial lives, accountants can gain deeper insights into their clients’ motivations and values. This understanding enables accountants to provide more personalized and effective financial advice.

The Financial Flywheel: Creating Long-Term Value

Rory introduces the concept of the “financial flywheel,” which refers to the continuous cycle of integrating various financial services—tax, accounting, wealth management, estate planning, and more—to create lasting value for clients. 

By focusing on high-value clients and offering a comprehensive suite of services, accounting firms can enhance client retention and drive lifetime revenue. This holistic approach not only meets clients’ immediate needs but also positions firms for sustainable growth in the long term.

Accounting Professionals and Holistic Financial Planning

Accounting professionals are uniquely positioned to provide holistic financial planning due to their intimate knowledge of their clients’ financial situations. They often engage with clients early in their financial journeys, gaining insights into their income, expenses, and overall financial health. 

This foundational relationship allows accountants to understand not just the numbers, but also the personal goals and values that drive their clients’ financial decisions.

Leveraging Intimate Knowledge

1. Early Engagement : Accountants frequently work with clients before they accumulate significant assets or income. This early engagement provides them with a comprehensive view of their clients’ financial landscapes.
2. Understanding Client Goals : By being involved in the day-to-day financial activities of their clients, accountants can uncover what truly matters to them—be it saving for a child’s education, planning for retirement, or managing debt. This understanding is crucial for creating a holistic financial plan that aligns with clients’ long-term objectives.
3. Data Accessibility : Accountants already possess a wealth of financial data about their clients. They are just “10 to 15 questions away” from gathering additional information that could enhance their service offerings, such as insights into estate planning, insurance needs, and investment strategies.

Enhancing Service Offerings through Partnerships

To effectively transition into holistic financial planning, accounting professionals can enhance their service offerings by partnering with Registered Investment Advisors (RIAs). This collaboration can take several forms:

1. Crawl, Walk, Run Approach : Rory Henry suggests a phased approach for accountants looking to integrate wealth management into their services. Starting with a partnership with an RIA allows accountants to collaborate on financial planning without the immediate burden of compliance and regulatory requirements.
2. Shared Expertise : By partnering with RIAs, accountants can provide clients with access to comprehensive wealth management services, including investment management, estate planning, and insurance. This synergy allows both parties to focus on their strengths—accountants on tax and business advisory work, and RIAs on holistic financial planning.
3. Creating a Dream Team : Clients benefit from having a cohesive team of advisors working together. When accountants and RIAs collaborate effectively, clients feel they have a “dream team” managing their financial well-being, which enhances client satisfaction and retention.
4. Revenue Opportunities : The partnership model can also lead to new revenue streams for accounting firms. By integrating wealth management services, accountants can tap into recurring revenue from asset management fees, which can be more lucrative than traditional hourly billing or fixed fees.
5. Future-Proofing the Business : As the financial landscape evolves, the demand for integrated financial services is expected to grow. A McKinsey study predicts that by 2030, professionals will need to become integrated life and wealth planners. By establishing partnerships with RIAs now, accounting firms can position themselves to meet future client needs effectively.

The Integration of Wealth Management and Accounting: A Holistic Approach

In the evolving landscape of financial services, the integration of wealth management and accounting is becoming increasingly vital. As discussed in the podcast episode, this integration is not merely about exchanging referrals; it’s about creating a transformative relationship that enhances client service and drives business growth.

The Shift from Transactional to Transformational Relationships

Historically, the relationship between accountants and wealth managers has often been transactional, characterized by a simple referral model. Rory emphasizes that this model needs to be “buried” alongside outdated practices like time-based billing. 

Instead, he advocates for a more transformational approach, which he terms “advise ROAR”—Return on Relationship. This concept highlights the importance of building deep, meaningful connections with clients, allowing professionals to provide comprehensive advice that encompasses not just taxes, but also investments, insurance, estate planning, and more.

The Role of Technology in Holistic Financial Planning

The podcast also touches on the role of technology in facilitating this integrated approach. With advancements in software systems, accountants can now easily access tools that help them create holistic financial plans. 

Rory mentions that the integration of various financial services—tax planning, investment management, estate planning—can be streamlined through technology, making it more accessible for accounting professionals to offer these services.

Starting the Integration Journey: Crawl, Walk, Run

For accounting professionals looking to integrate wealth management into their practice, Rory suggests a phased approach: “crawl before you walk, before you run.” 

This involves initially partnering with a Registered Investment Advisor (RIA) to collaboratively serve clients. By doing so, accountants can leverage the expertise of wealth managers while gradually building their own capabilities in this area.

1. Crawl : Start by forming partnerships with RIAs. This allows accountants to offer wealth management services without the immediate burden of compliance and regulatory requirements.
2. Walk : As firms gain confidence, they can consider becoming Investment Advisor Representatives (IARs), which allows them to provide investment advice under the compliance umbrella of an RIA.
3. Run : Ultimately, firms may choose to establish their own Registered Investment Advisory (RIA) firm, allowing for complete control over their wealth management services and revenue.

The Importance of Behavioral Finance

Rory also emphasizes the significance of behavioral finance in the client experience. Understanding clients’ psychological relationships with money can lead to more effective financial planning. 

By asking clients about their earliest money memories and influential figures in their financial lives, accountants can gain insights that inform their advisory approach. This human-first strategy not only enhances client satisfaction but also fosters long-term loyalty.

Understanding the Psychology of Money

Understanding the psychology of money is crucial for financial advisors because clients’ past experiences and values significantly influence their financial decisions and behaviors. This understanding allows advisors to tailor their approach to meet the unique needs of each client, ultimately fostering a more effective advisory relationship.

The Impact of Past Experiences

Clients’ relationships with money are often shaped during their childhood. As Rory  points out in the podcast, our earliest money memories can reveal a lot about our beliefs and behaviors regarding finances. 

For instance, a client who remembers earning money through mowing lawns may associate work with financial independence and empowerment. Conversely, a different client might have negative associations with money based on their upbringing, which could lead to anxiety or avoidance in financial matters.

By exploring these past experiences, advisors can gain insights into their clients’ financial behaviors and motivations. This understanding is essential for building trust and rapport, as it allows advisors to address any underlying fears or misconceptions that may hinder clients from making sound financial decisions.

Values-Based Planning

Rory emphasizes the importance of values-based planning, stating that our values shape our goals and, in turn, our behaviors. By helping clients identify their top five values, advisors can align financial strategies with what truly matters to their clients. For example, if a client values family and education, an advisor can create a financial plan that prioritizes saving for children’s education or planning for family vacations.

This alignment not only enhances client satisfaction but also encourages clients to take ownership of their financial decisions. When clients see that their financial plans reflect their values, they are more likely to engage with the process and make positive changes.

Creating a Vivid Picture of the Future

One of the most powerful tools in behavioral finance is the ability to create a vivid picture of clients’ future selves. Rory highlights that many people treat their future selves as strangers, which can lead to procrastination or poor financial planning. 

To combat this, advisors should work with clients to visualize their future—where they want to be in 20 years, what they will be doing, and how they will feel.

By painting this picture, advisors can help clients connect emotionally with their future goals. This emotional connection can motivate clients to make necessary behavior changes in the present, such as saving more or investing wisely. When clients can see the tangible benefits of their financial decisions, they are more likely to commit to their plans and take action.

Timestamps

[00:02:33] Return on relationship in finance.

[00:03:41] Integrated life and wealth planning.

[00:09:25] Holistic financial planning advantages.

[00:12:47] Financial integration in accounting.

[00:14:06] Top clients service strategies.

[00:19:02] Human first approach to finance.

[00:22:11] Values shaping financial decisions.

[00:24:46] Maximizing returns for firms.