What Estate Attorneys and CPAs Should Look for When Referring Clients to an RIA

The short answer

When you refer a client to an investment adviser, you are putting part of your own professional reputation behind that introduction. Four questions usually determine whether it goes well: Is the adviser acting under one standard or shifting between advisory and brokerage roles? How is the firm paid? Where are the client's assets held, and what authority does the adviser have to move them? Will the adviser protect your relationship with the client or try to absorb it? Most of those questions can be answered through public filings and one direct conversation.

Fiduciary, and whether there are exceptions

A registered investment adviser owes an ongoing fiduciary duty of care and loyalty across the advisory relationship. A broker-dealer representative is subject to a best-interest obligation when recommending a transaction or strategy to a retail customer. The standards apply in different contexts and are not interchangeable.

A yes-or-no fiduciary question is not enough. Ask whether the firm or anyone serving the client is also registered with a broker-dealer or licensed to sell insurance, whether the client will receive both advisory and brokerage services, and whether compensation changes with the product or account selected. A dually registered professional may serve a client well, but you should understand when the role, standard, and incentives change.

How they are paid, in full

"Fee-only" and "fee-based" are industry labels, not substitutes for the underlying disclosures. CFP Board applies a specific definition to "fee-only," but the more useful question is still how the firm, its professionals, and any related parties are compensated.

Start with the firm's Form ADV Part 2A. Item 5 describes fees and compensation, Item 12 addresses brokerage practices and potential benefits connected with trading or custody, and Item 14 covers client referrals and other compensation. Form CRS can provide a shorter overview of services, fees, conflicts, and disciplinary history. The brochure supplements for the people who will actually advise the client may also disclose outside activities or other business affiliations.

Item 11 of Form ADV Part 1A contains disciplinary questions. A "yes" does not necessarily disqualify a firm, but it should lead you to the related Disclosure Reporting Page. The filing matters more than the label used in conversation.

How client assets are held

Client assets are commonly held by an independent qualified custodian rather than by the adviser. The adviser may direct trades and deduct its fee from the account. Fee-deduction authority technically falls within the regulatory definition of custody, but it differs from broad authority to withdraw or transfer assets.

Ask who the qualified custodian is, whether the client receives statements directly from it, and what authority the adviser has beyond trading and fee deduction. Direct statements let the client verify holdings and activity through a source the adviser does not control.

If the adviser has broader custody — because it can withdraw assets, holds client funds, or serves as general partner of a pooled vehicle — ask what independent examination or audit requirements apply. No surprise examination is required merely because the adviser deducts its fee.

Referral compensation changes the analysis

An attorney or CPA who independently recommends an adviser and receives no compensation is generally making an ordinary professional introduction, not participating in the adviser's advertising merely by making the referral. The analysis changes if the adviser pays for the referral or uses the professional's endorsement in its own marketing.

Compensation does not automatically make an arrangement improper, but it changes the recommendation. A compensated relationship should be formalized, disclosed, and reviewed under the rules governing both the adviser and the referring professional. The adviser may have disclosure, oversight, written-agreement, and eligibility obligations; the attorney or CPA may have separate duties to the client.

The useful question is not simply whether compensation is allowed. It is whether everyone involved can explain the arrangement clearly, disclose the material terms and conflicts, and remain comfortable that the recommendation is being made for the client's benefit.

Whether they will compete for the relationship

This does not appear neatly in any regulatory filing, and it is often where referral relationships break down.

An investment adviser sees much of a client's financial picture. Some firms use that position to expand into tax preparation, estate-document drafting, or becoming the first call for every financial decision. Other firms treat the client's attorney and accountant as permanent members of the team and deliberately route work back to them.

Neither structure is inherently wrong, but you should know which one you are referring into. "We collaborate closely" is not an answer. Ask something concrete: In the past year, how many times did you send work back to a client's existing attorney or CPA, and can you describe one? A firm that operates the way it claims will have specifics. A firm that does not will have philosophy.

A short list you can actually use

• Is anyone at the firm also a broker-dealer representative or insurance producer, and does any compensation depend on the product or account selected?
• How are the firm, its professionals, and any related parties compensated? What do Items 5, 12, and 14 of Form ADV Part 2A disclose?
• Who is the qualified custodian, will the client receive statements directly from it, and what authority does the adviser have to move assets?
• Does the firm report any disciplinary events in Item 11 of Form ADV Part 1A? If so, what do the related Disclosure Reporting Pages show?
• Will anyone be compensated for the referral? If so, what disclosures, agreements, and professional-conduct requirements apply?
• Give me one specific example from the past year of work you sent back to a client's existing attorney or accountant.
• Who actually manages the relationship — the person in this meeting, or someone I have not met?

Where we stand on this

TAGStone Capital is an independent, fee-only registered investment adviser. Client assets are held at qualified custodians, and clients receive account statements directly from those institutions. We do not sell insurance or securities products and receive no commissions, revenue sharing, or transaction-based compensation.

We do not draft legal documents or prepare tax returns. When a client needs legal or tax work, we treat the client's existing attorney and accountant as part of the advisory team and work with them rather than trying to replace them.

If you have a client whose investment situation has outgrown what is currently in place, or you would simply like to understand how we work before a situation arises, we are glad to have that conversation with no client in the room.