What a Tax Advisory Specialty Looks Like with Tom Wheelwright

So I want to welcome you to the Radical Ideas where we deep dive into a topic that will help you better manage and grow your firm. And I'm Jody Padar, the Radical cpa. And I'm on a mission to foster real change in the accounting profession. And in this session of the Radical Ideas, we're rethinking tax Advisory. Yesterday we found out how to build a tax advisory mindset, and today we're talking about how to use that mindset to build a tax advisory specialty practice. I'm talking with my friend Tom Wheelwright, who among many things, teaches CPAs how to build a tax advisory practice. And he's the founder of the Wealthability Network. Hey, Tom, how are you?

I'm great, Jodi. So good to be with you today. Thank you.

Awesome. I also want us to thank the sponsor of today's show, the Wealthability Network, a network of CPAs and financial professionals focused on building profitable businesses and helping clients build a rock solid financial legacy. So, Tom, glad to have you here. Can you give our audience just a brief introduction of yourself and what it is you do?

Yeah. So I've been in the tax advisory business for over 40 years. So I, I have a undergraduate degree from the University of Utah, graduate degree from the University of Texas in tax, seven years with Ernst & Young, including three years in their national tax office, four years with a Fortune 1000 company as the in house tax advisor. And then the rest of my time I've spent really doing building, buying, selling CPA firms and now building this network. So I live the tax advisory life. I've written books on this that are, have been very big successes. Tax Free wealth and the new one, the Win Win wealth Strategy. And I love talking, I mean, everybody knows you talk about tax. And I'm going to light up.

That's awesome. So we're going to specifically be talking about tax advisory today. So accountants are like bombarded with all this marketing and stuff that they need to be advisory. And, and some people even struggle with what that even means. So let's just start with basics. And what's the difference between tax prep and tax advisory and how do you distinguish the two?

Well, you know, tax prep, I distinguish them between what does the client care about and what they don't care about. And so clients don't care about tax prep because they just want it done. They want it off their plate. They want to sleep at night. What they really care about is reducing their taxes. So tax advisory is really about, it's really focused on the clients. What the client's needs are. We take, I look at a very holistic viewpoint. You can't just answer questions. That is not tax advisory. That's a transaction practice that is most CPAs. And in tax advisory is a much bigger, broader area includes. You have to understand where they're going to invest their money. You have to understand their business, you have to understand their relationships with their children and their, their spouse. You have to understand what their goals are in their legacy. Tax Advis is a very comprehensive service that helps clients build wealth by having more money to build wealth with because they're reducing tax.

Okay, so that's a really big distinguisher because I think a lot of times people think, oh, they're already doing advisory, maybe they just don't charge for it. But it sounds like when you're starting, you really have a deep understanding of where you're going, or I should say where the client wants to go as opposed to kind of this post mortem after the fact, or I'm looking at a tax return and I see some, you know, things that jump out at you that are like, I would say the way a traditional tax practice or someone looks at it.

Yeah, for sure. I think that's the biggest mistake that we make as CPAs is we believe that it's up to the client to ask questions. And really our job, just like a physician's job would be, our job is to diagnose, ask the questions, but not just ask questions about that specific situation. Like somebody comes up to you and says, well, is this, you know, is this mug deductible? I don't know if this mug is deductible, but what I can tell you is how to make it deductible. So it's a really, it's a very different mindset. It's shifting from what is and isn't to what can be and what the client wants it to be. And I think that's, to me, that's the biggest distinction. It's focused on the client, not on the transaction.

Yeah, no, I think that's a really good distinguisher and I think it's been one that's been missing in the space. Right. Like, I think a lot of people, again, everyone says advisory, but like, what exactly is advisory? And I think you did a really good job of defining advisory. So let's talk about examples of tax advisory services. So you're starting with this kind of holistic approach in this broad base. But you know, where do you begin with when you start about like, are you going to charge for it? Are you going to get paid for it? And how do you provide advisory services year after year? Because I think again, in the traditional tax practice, you think, oh, I did planning and that's it. Or like, how does it continue on? And like, how do you turn it from a transaction of tax planning to an advisory relationship? I think that's probably.

I, I think that's the right question, Jody, is how do you make it an advisory relationship? Because what you have to do is you, you have to start with that plan. You know, where do they want to go? Where do they want to end up? You know, it's like, you know, I hear people always say, well, you know, you should do real estate because it's great tax advantages. Well, so does oil and gas have great tax advantages? So does agriculture have great tax advantages? So first of all, we have to understand what is it that they're trying to accomplish in the first place? What do they want? You know, I'll give you an example. From a legacy standpoint, my mother wanted to break even. She, she didn't want to leave us any money, but she didn't want to leave us any debt. Okay. I have other clients that they want to leave their, their children and grandchildren a hundred million dollar business. So if, you know. So the answers are different, right? I mean, like I always like to say, if you want to change your tax, you have to change your facts. Well, we need to understand the facts. I think the most important skill set of a tax advisor is the ability to ask probing questions to find out really, what's the why behind the why. Everybody says, I want to reduce taxes. Okay, why do you want to reduce taxes? Because that's where you start looking at, okay? That's the relationship. If I ask the, if I just answer their question, that's a transaction. But if I ask the why behind, and not just one why, I've got to ask at least two whys. Okay, why do you want to use taxes? Well, I want to pay less tax. Why do you want to pay less tax? It could be that they just hate paying taxes because they hate the government. It could be that they want to pay less taxes because it's soaking, it's keeping them from building wealth. It could be, you know, there's every number of reasons. But once you understand why behind the why now you can start looking at. All right, wait a minute. So this is the direction we should go, right? If your goal is. My goal is to be produce this charitable foundation, okay, well, we should work our tax plan towards that charitable foundation. If my goal is to leave everything to my children, we should work to that direction. But you can't do it isolated situations, you cannot do it even in a year.

If you're isolated in a year, which I think is where most practitioners stop, they're like, oh, I have my tax plan for this year and next year I'll create a new plan. But what you're saying is like, hey, step back. Let's make a multi year plan. Let's really talk about where we want to go. And then it's not so transactional or it's not every year. It just, it's the ongoing relationship, which again, I think this is the first time I've ever heard it expressed this way versus just tax planning, which is, I think sometimes people confuse the two. They're like, oh, I already do tax planning. Well, tax planning is not tax advisory.

Let me give you an example. So right now in the US last year, 2022, we had 100% bonus depreciation on investment real estate. This year it's 80%. Next year it's 60, goes 40, 20, 0. All right, well, if you're doing tax planning just for this year, what are you going to do next year when it's down to 60, or the year after that when it's down to 40? You've really got to project out. We actually project out for years what the investment strategy needs to be in order to do the tax strategy. Because if you don't do that, I really think you're hurting your clients. And you are, you're giving them, okay, advice, maybe, but you're certainly not changing their life, which is really what they want. Clients want a relationship, they want to go. Not only do I want to be able to ask this person any question, I want to know that we've got a plan of action and I can go to them every month, every quarter. I mean, this is a long term lifetime, literally lifetime. Because we want lifetime clients, right? So if you want lifetime clients, focus on their lifetime. If you want a client for three months, focus on three months.

Yeah, I really like that. And I like the way too. It fits more into again when you say like financial planning or that tax advisory, it's that holistic approach to say, where are you today? But where are you going to be in five years, 10 years? And again, that that makes it where it's not so much the year because I think again, too often, like tax practitioners get caught in the year as opposed to the lifetime value of the client. Which is where we should be thinking. And just because a client comes back to every year, that doesn't mean that you've been really a strong advisor for them every year. Which I think is something accountants have to look at themselves in the mirror and think about. Right? Like, are they really a strong advisor? Are they really just doing kind of, you know, the. The day in. Kind of enough. Which may not be. That. That doesn't create a raving fan. It creates someone who's not leaving.

Right, Exactly. What happens with clients is that, you know, you're the most important financial team member on their team. You. You really are. We're the front line of the financial world, and our clients see it that way. Right. They're reliant on us. And so if all you're doing so, they're not going to easily change from you. And that. I think that's a weakness to us. It's a problem.

Right.

It makes us lazy. It makes it so easy. Well, they're not leaving. Well, okay, but what are you doing for them? You know, stop focusing on yourself. This is my. Of course, this is my mantra. Stop focusing yourself. Start. Start focusing on your clients. And what you'll find is you're going to be a lot happier because you're doing much more interesting work. And on top of that, the clients are just going to give you raving, raving reviews. And why wouldn't you, like, why wouldn't you want the raving reviews?

And you're making a bigger impact. You're making a bigger impact. And I think at the end of the day, most financial professionals, that's what they do, they love their clients, they want to help them. So this is a way for you to actually give them more than you're currently giving them, just because you didn't know that there was another way or that there was an alternative. Because we're so. We're so caught in this compliance mindset that many of us have never actually been taught this advisory mindset or this way to think about the relationship differently. Okay, awesome. So does it matter if a CPA is a specialist in some sort of tax advisory thing? Like, should you just be in real estate or should you just be, like you said, in oil and gas? Or do you think that tax advisory can have kind of a generalist approach as well?

Well, I think the question is, who's on your team? Right? So, for example, I'll tell you, I'm a specialist in real estate. I would call myself a specialist in oil and gas. I am not a Specialist in qualified plans. I'm not a specialist in life insurance. I'm not especially there, There are several areas I'm not a specialist in. I'm not a specialist in international. I mean, I'm dangerous in international. And so, but, but I have a team. I mean, that's, this is why we built a network is because now we have cpa, you know, we can ask each other questions. We have international people in the network. We have people who can handle qualified plans. And you have to have an extended network. You can't just have CPAs in your network. You've got to have financial planners in your network. You've got to have life insurance experts in your, you've got to have all these other. Remember, you're that central figure to your client or you want to be that central figure. You may not be. And somebody else may be a banker may be the central figure or financial planner may be the central figure, but wouldn't you rather have you be the central figure? But the only way you do that is that you make sure that no matter whether you have a. I, I think you need some specialty, frankly, because you. What kind of clients do I want to attract? Right. And, and, and there are specialized areas. I mean, for example, real estate. I can't tell you how many people CPAs who prepare syndicated real estate investment tax returns who do them flat wrong. They do not understand the law. They're doing them. They should not do them. I'm a big believer. Do what you're really good at and let other people do what they're good at. And so you gotta be a generalist from the standpoint that I think you need to understand a little everything. But I do think that if you're really going to serve in a particular, in a very strong advisory capacity, you probably do need to know a lot about a few things and then a little about a lot of things.

Well, and I think too, that helps you so that you're not always constantly learning, right? Like, I mean, you will always be learning. But like, if you, if your clients are similar or whatever, then it's easier to package and, and do things because you know exactly who you're serving, how you're serving them and what they're getting. And again, as we think about like productizing and packaging services, that becomes really critical.

So go ahead.

So I guess what I'm thinking about too is like, you know, and this is like, when I think about, okay, some CPAs are doing tax advisory. They're not just charging for it, but now that I've really understood what you're calling tax advisory. I would say probably 95% of the CPAs are not doing tax advisory. They're doing a transaction based planning. Right. It's not truly an advisory relationship. So how should CPAs think about going about like kind of this transition to advisory? And is there an opportunity to package services together and to really again sell it every year as opposed to, you know, where I would say most traditional CPAs would have sold it in the past is like year one, they have a big financial plan and that's the first year and then that's it. And then like the year after. How do you kind of package it so that it's ongoing, et cetera?

Well, so I'm old enough to live through all these mistakes, so I've made them all. And what I found is, is that over the years is that really I want to do what I like doing. I want to do what I'm good at and what I can contribute the most to. So that, and if I do that, that's actually who I'm going to attract because that's where my focus is. So, you know, for example, I, we only, I do have a CPA firm separate from the network part of the network. And my CPA firm, we only serve entrepreneurs and we only serve a specific type of entrepreneurs. We actually serve only entrepreneurs who are, their goal is to provide do, you know, do good in the world. And actually they have a mission. So they're mission driven entrepreneurs. I'm not saying I'm right or wrong, it's just that I love mission driven entrepreneurs. So I want to be around people that I like being around. One of our requirements for somebody becoming a member of our network is I have to like hanging out with them. That's literally one of the requirements. We only have two. The other is that they're an entrepreneur. But the other one, the one is I have to like hanging out with them. Why would you want to hang out with clients that you don't like? Why would you want to hang out with clients you can't serve or that you're not good at serving? You know, I think, you know, let's, let's identify who our ideal client is and let's just focus on that ideal client, whatever that means to us.

No, I think that makes a lot of sense. And then I would also say too, like, as you think about packaging services, then I'm sure you've kind of figured out like what the communication plan is and what kind of the Deliverables are beyond the tax return because obviously, like, okay, they're. They're paying a significant amount for this financial planning, and you're giving advice and you're giving questions and answering their questions. But ultimately, there's probably got to be some sort of report or something that they get. Right. How do they, how do you quantify that communication or, you know, what is that deliverable that goes along with it?

Well, you do, and you have to decide what the deliverable is. For us, we actually built software for this, so we actually have deliverables within the software. But it really starts with that plan, I think, because if you're going to take that holistic approach, and not everybody's going to, but if you're going to take a more holistic approach, then you have to go, okay, so what's deliverable after step one? What's the deliverable after step two? What's the deliverable after step three? What's deliverable on an ongoing basis? So, you know, we, we worked with our clients. We meet with our clients a minimum of once a quarter. Most of our clients we meet with once a month. We're going through their plan on a regular basis. We're revisiting that constantly. And so there. It's always, you know, we want to be front of mind with the clients, but only when we're going to serve them, only when it helps them. Otherwise, they don't want to talk to us, you know, that it needs to be valuable. We need to remember that every minute we. We spend with them is a minute of their time that they're giving to us, too. And we need to, we need to value their time, not just value our time and recognize that we better be awfully darn good. I mean, I, you know, I speak like you do, Jody, in front of audiences of a thousand, two thousand people or more. And I'm going, I, I add up all those hours and I multiply it by what their likely billing rate is, and I'm going, my time had better be worth that much. I just think we owe it to our clients, frankly.

Right. No, no, I think it's really important. And I think what's been missing for this kind of advisory thing is kind of a system or a process. And I think a lot of CPAs, you know, want to know how to do it. And if you think about traditional old school system ferns, it just wasn't ever taught. Right. Like, it wasn't. It was. How did you do tax planning? You looked at last year's return? You Looked at this year's return, you thought about, okay, where do I see it? You offered it up as advice. Sometimes you didn't even charge for it because you were like, oh, I'm going to get this as a client. Right. Which, that's a whole nother conversation. And then that was what we consider tax planning and tax advice, which obviously there's so much more to it. And I think there's so, there's so much hunger for just a process and a way and an opportunity to learn how to do it the right way. Because I think most CPAs want to be that trusted advisor to their client that they just don't know where to begin or how to, you know, how to get started.

Yeah. So we all know that we've done a really terrific job of productizing our profession. Right. Of commoditizing our profession. We, we, we have decided that tax returns are a commodity. So we're going to race to the bottom on the price. We've decided that financial statements are commodities, so we're going to race to the bottom on the price. You know, we, we. I now, I'm seeing online, I'm going, now, tax advisory services are being commoditized and there's a race to the bottom in the price. I'm just, and they're, they're just saying, well, you know, we're less than them. We do what they do, but we're less money. I'm just going to, first of all, why are you comparing yourself to somebody else? Why don't you say, here's what we do. We are unique in the world because you are unique in the world. And if we're unique in the world, what do we uniquely provide that you can't get anywhere else? You don't want every client. You just want those clients that want what you deliver because otherwise you're going to have unhappy clients. I just think we're, once again, now I see tax advisory services, it's a hot button and I love that people are talking about it. But once again, we're commoditizing a service that we're in danger of doing to tax advisory services what we did to tax compliance services. And we've got to be very careful to actually distinguish. Here's what we do, here's the deliverable, and we have a system for providing it.

Right. And ultimately, at the end of the day, like, you have to be special. You as the advisor, you as your firm, whether you're teaching it to your next gen staff, whatever, you have to make something special about it that makes them want to pick you, which I think most CPAs have, that they just have to learn how to do it. Right. It's just more of learning how to do it. So this has been an amazing conversation. Thank you so much. If people want to join the Wealthability Network, if they want to learn more, how do they find you, Tom? How do they connect with you, and how do they learn about it?

Real easy. Just go to wealthability.com and schedule a call. It's that simple. And we're happy to talk to you. We are. I mean, our mission is to like yours, Jodi. The reason we're. We're friends is because we, we see the issues in their profession and we want to help and completely revolutionize a profession.

Yeah. So thank you. Thank you so much for being here with me today. And I'm excited to get your message out into the world because I'm excited because I think our profession needs help. And it's not that they're not capable. They're totally capable. It's just how do we give them the information that they need to kind of change it up? Because the world's changing and we have to up our game as CPAs, as automation and other things change around us. So really thank you, Tom, for being here today. And then also I'd like to thank our sponsor, the Wealthability Network. Be sure to tune in again tomorrow at noon Eastern for another episode of Radical Ideas as we continue our tax advisory conversation exploring the relationship between capacity and pricing. See you then.