In Support of CPA Financial Planners

The AICPA applauds CPAs’ professional and volunteer efforts in their communities.

This article by Barry C. Melancon, president and CEO of the AICPA, originally appeared in Wealth Provider, October 2004. It is reprinted with permission.

n 2005, the AICPA will celebrate its 20th year supporting CPAs as they continue their role in the expanding field of personal financial planning (PFP). In many respects, the CPA profession has had a significant role in shaping and directing the future of PFP services. Looking back over the past two decades much can be said about the impact CPAs have had in the field of personal financial planning services and their ability to adapt to the ever-changing business environment. The emergence of CPAs as financial planners and wealth managers has evolved over the past 20 years to meet the growing financial complexities of individuals in need of personal financial planning.

Surveys conducted by the AICPA and others throughout the 1980s and 1990s suggested there was an increasing number of individuals that needed financial planning guidance in combination with the expertise of a CPA, as financial technicalities became a larger part of successful personal financial planning.

CPAs are in a unique position to provide financial planning services. CPA financial planners are often recognized for their ability to bridge business and personal finance issues. They understand how taxes, business interests and personal finance issues can affect a personal financial plan. CPAs are also known for their objectivity and high ethics in protecting the public interest as it relates to such planning services.

Though not all CPAs have chosen to offer personal financial planning services, many who have done so have added a broader range of new business opportunities and have significantly expanded their practices.

Initially, one of the challenges CPAs faced as they expanded into financial planning involved the selection of compensation arrangements for their services. While advisers in the financial services industry were routinely compensated through commissions, fees were the only permissible means of compensation for IRAs when the AICPA officially began its support of personal financial planning in 1985.

In 1990, the AICPA and the Federal Trade Commission (FTC) entered into a consent agreement. The FTC order issued pursuant to the consent agreement enabled members of the AICPA in the field of financial planning to accept commissions under certain circumstances and with disclosure. Today, nearly every state accountancy law permits CPAs to accept commissions from the sale of financial products provided the client is not also an attest client and thus requires independence by the CPA. Currently, CPAs deliver financial planning services in both commissioned and noncommissioned arrangements. The FTC order also prohibits the AICPA from discouraging members from accepting commissions under the circumstances described above.

Today, an estimated 23,000 AICPA members provide personal financial planning services while 15,000 are NASD-licensed to sell investment products and nearly 11,000 are licensed to sell insurance products. The AICPA also estimates its membership includes over 10,000 registered investment advisers and another 60,000 CPAs who are providing limited personal financial planning services as an extension of their existing tax practices.

The opportunities that lie ahead are numerous. Recent surveys conducted by the AICPA indicate PFP services are one of the fastest growing sources of new and recurring revenue for CPAs. In fact, the AICPA estimates that firm billings for PFP services are expected to grow anywhere from 10% to 20% over the next five years, a clear indicator of the need for this service. Much of the revenue growth can be attributed to the recent market downturn and the current small business climate.

As many consumers realized the financial strategies that worked well for them in the booming ’90s economy were not succeeding in the new millennium, they began to seek out the objective advice that has long been a hallmark of the CPA financial planning community.

The AICPA recognizes the significant challenges and opportunities that exist in PFP services and is dedicating considerable resources to support the practice area. The AICPA’s PFP services team has focused on three critical areas of member support: competency, community and communications.

A key point of focus for the AICPA’s PFP area is the development of guidance, resources and tools to assist CPAs in obtaining the requisite knowledge and ongoing information to practice as competent and objective financial planners. The core principles that define the responsibilities and guidelines for CPA financial planners are found in the AICPA Personal Financial Planning Executive Committee’s Statements on Responsibilities in Personal Financial Planning.

The nonauthoritative statements prescribe the steps and processes that should be employed by CPAs in order to ensure the interests and roles of the client. CPAs interested in obtaining a copy of the AICPA’s Professional Standards should contact the Member Service Center at 1-888-777-7077.

The AICPA, in collaboration with the Foundation for Fiduciary Studies, introduced in 2003 an innovative handbook for investment fiduciaries entitled Prudent Investment Practices: A Handbook for Investment Fiduciaries to assist them in managing their responsibilities. The handbook focuses on the practices that investment fiduciaries should follow in a prudent investment process. The handbook is a useful tool for helping CPAs understand their own fiduciary responsibilities or it can be used to assist the CPAs’ clients in understanding and managing their fiduciary responsibilities. For further information or copies of the guide, CPAs should contact the foundation at (412) 741-8140 or visit .

To further assist the CPA financial planner, the AICPA developed the Web-based Personal Financial Planning Competency Model Self-Assessment Tool to help CPAs identify the skills they require, compare what they know with benchmarks and prepare an action plan for career and personal advancement. A companion version of the Competency Model Self-Assessment Tool was also developed for CPAs specializing in the field of ElderCare/PrimePlus Services. To access the tool, CPAs need to register at . The tool is available free of charge to AICPA members.

Other key focus areas for the PFP practice area are in member communications and the advocacy of CPAs as financial planners. The purpose of the communications and advocacy initiative is to establish and promote the values and benefits of the CPA as a financial planner and the CPA/PFS credential through public relations/media relations as well as government affairs activities. The AICPA is currently developing tools to assist its PFS holders in marketing the credential in their local community. The grassroots effort emphasizes recognition of the CPA as one of the most trusted advisers and is positioned to deliver the message directly to the heart of where CPAs practice.

In 2003 the AICPA, in partnership with the National Endowment for Financial Education (NEFE) and the American Red Cross, released a guide entitled Disaster Recovery: A Guide to Financial Issues. Developed as a public service, the guide addresses the financial issues faced by those recovering from a natural or manmade disaster. To date, over 100,000 copies of the guide have been distributed to those impacted by disasters.

Building upon the work begun with the Disaster Recovery Guide, the AICPA has partnered with six of the leading financial planning organizations in a national pro-bono financial planning service initiative. Entitled the Project for Financial Independence, the program represents the first-ever national financial planning pro-bono service initiative of its kind. CPAs who are currently members in good standing of the AICPA or applicable state CPA societies are eligible to participate in the program and may obtain additional information on the program by visiting or by sending a request to .

The AICPA also announced in the spring of 2004 a new financial literacy campaign: 360 Degrees of Financial Literacy is a multi-faceted effort, spearheaded by the AICPA, with the support of state CPA societies. The program encourages CPAs to take a broad leadership role in volunteering to educate the American public, from school children to retirees, on financial topics that apply specifically to their particular stage of life. The program recognizes the CPAs’ many efforts in lending support to their local communities.

In another major initiative, the AICPA is partnering with NEFE and the Advertising Council to undertake the country’s first national financial literacy campaign targeted toward women.

With many exciting initiatives planned for the future, the AICPA is committed to supporting CPA financial planners and is working diligently to promote the highest standards of quality and competency. However, it is up to CPAs to get out in their local community to promote the value of the CPA as a financial planner and of the PFS credential, as existing clients are often one of the best sources to begin or expand upon financial planning services.

The community initiative represents the development of a community dedicated to serving the needs of CPA financial planners and the CPA Personal Financial Specialist. In January of 2004, the PFP area introduced an enhanced PFP Web site at (see page 21 ) and an all new CPA Financial Planner Forum for members to share their experiences, post questions to peers or learn what is new in financial planning. The online forum is available exclusively to members of the AICPA’s PFP Membership Section and Personal Financial Specialist (PFS) credential holders.

BARRY MELANCON, CPA, is president and CEO of the American Institute of Certified Public Accountants.


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