Many CPAs wade into personal financial planning because it's a natural progression of their role as a trusted advisor and a compelling expansion of their tax and accounting services - not to mention an additional revenue stream.

But starting a PFP practice is not without its complexities, and a CPA looking to enter this field should be aware that there's no cookie-cutter approach to practicing in this niche.

"Clients come to their CPAs because they trust them. CPAs have an ethical duty and have a sense of working to do the best for their clients," explained Nate Wenner, regional director of Wipfli Hewins Investment Advisors, the fee-only wealth-management division of accounting firm Wipfli. "There's a history of a lot of CPAs dipping their toe in the water of offering advice, but I think clients would like to see more."

"CPAs are truly concerned with meeting the needs of clients and this does that and it helps make clients stickier in an era where loyalty is a challenge," added James Herrig, vice president, counsel and CCO at Honkamp Krueger Financial Services, a provider of wealth-management services and affiliate of CPA firm Honkamp Krueger & Co.

It could be said that the need for financial planning has only increased, especially since the 2008 economic meltdown. In January 2010, the American Institute of CPAs surveyed CPA financial planners and found that more than half of respondents said that their clients, who typically have between $500,000 and $5 million in assets, still lack confidence in the stock market and have grown more risk-averse in their investment decisions, with many clients postponing retirement.


But establishing a PFP practice is obviously much more intricate than simply hanging an "Open for business" sign on the front door. Not only do the services offered - and the sophistication of those services - vary greatly from firm to firm, but the business models in which those services are delivered also vary.

That is why when establishing a PFP practice it's vital to first think strategically and then develop a plan and goals.

"The first question is, what do you want to deliver, what do your clients need and what do you want to be known for?" said Rebecca Pomering, chief executive officer of Moss Adams Wealth, the wealth-management division of mega-regional CPA firm Moss Adams. "This will help drive how you market it and who you will partner with."

It's also imperative to have not just support from others in the firm, but a leader. "You have to have a champion of this niche service to really enforce the action plan," noted Greg Burbach, general services partner for Honkamp Krueger.

Planners advise those starting out to look at their current client base to determine their needs and whether they are an ideal fit for financial planning. If the client base is open to advice and paying for services, that's a good start. It is likely that these clients will be receptive to paying for financial planning services if they aren't already asking for such advice.

In fact, one industry source went so far as to say that if a client is already paying a CPA for services, then they are a financial planning client.

"I think people ought to straw-poll clients and say, 'We are considering this and would you use us?'" advised Steve Levey, senior principal with Denver-based GHP Investment Advisors, a fee-only financial planning and investment advisory firm that is a member of the GHP Financial Group.

"We had a lot of high-net-worth individuals and it wasn't difficult to see that they didn't have cohesive planning," added Chris Allegretti, chairman of financial services firm HBK Sorce Financial, an affiliated entity of CPA and business advisory firm Hill, Barth & King. It was that need for financial services that largely served as the catalyst for the 2001 merger between HBK and Sorce Financial, creating HBK Sorce Financial.

Typically, the ideal client for a PFP practice has a higher income and has or will have substantial personal assets, and most clients tend to be 55 and older. "If you are a CPA with younger clients, they probably don't have as many assets to support a wealth-management practice," noted Troy Patton, who manages Patton & Associates and Archer Investment Corp.

According to the findings of the 2007 AICPA/Moss Adams Personal Financial Planning Practice Study, 62 percent of respondents said that they would like to attract clients who have $200,000 or more in annual household income, and 48 percent would like their clients to have between $1 million and $5 million in investable assets.


Clearly establishing the goals of a PFP practice, the needs of the clients and how to ideally allocate resources will help determine how the business will be structured. As outlined in the AICPA/Moss Adams study, there are basically four business models: a preferred referral partner or joint venture with a financial planning/advisory firm; a sole practitioner providing both CPA and/or financial planning services; a single entity with multiple professionals providing both CPA and FP services; and a stand-alone FP unit that is fully or partially owned by a CPA firm.

Based on the survey findings, many tend to fall into the sole practitioner camp (37 percent), followed by the stand-alone model at 27 percent and the single-entity model at 21 percent.

Industry sources stressed the importance of knowledge and education, and that largely relates to obtaining the proper credentials. The services to be offered, the structure of the practice and state requirements can impact what credentials must be obtained.

For CPAs specializing in PFP, the AICPA offers the Personal Financial Specialist designation. The PFS credential is granted only to CPAs who have considerable PFP experience (a minimum of 3,000 hours of financial planning business experience), pursue continuing education, and have successfully passed a PFP-related exam. Those professionals who have passed the Certified Financial Planner Exam or the Chartered Financial Consultant Exam also meet the PFS examination requirement. Until Dec. 31, 2010, the Chartered Financial Analyst, and the NASD Series 7, 65 and 66 licenses also fulfill the exam requirement.

"For a CPA who is adding financial planning to their firm, [the PFS] is usually the credential they pursue," noted Andrea Millar, senior technical manager of the PFP division of the AICPA. Millar said that there are currently just over 4,000 PFS credential holders.

Because there are many different business models that CPAs can employ when providing financial planning advice, they must be careful not to violate securities regulations. "Many approach providing estate, retirement, tax, investment and risk management advice from a consultative hourly or retainer fee. Once a CPA crosses the line in terms of providing investment advice [which can be as simple as suggesting a portfolio allocation between stocks and bonds], they will need to decide the business model that they will want to employ from that perspective," Millar said.

There are basically three choices, explained Millar: * Establish a registered investment advisory or RIA (which involves getting a Series 65 license - CPA/PFS professionals are exempt from this);

* Get properly licensed and affiliate with a broker-dealer; or,

* Choose not to provide this advice, and instead refer the client to another advisor and take a referral fee. If they choose that method, they have to disclose this relationship to their client.

The most common route is the RIA. "RIAs have to put the interest of their client ahead of their own at all times and have to disclose any potential conflicts of interest," Millar said. "This is analogous with the standard of care that CPAs already follow through the AICPA's Code of Conduct, as well as through regulation by their state boards of accountancy. CPAs prefer to keep an objective and unbiased approach to the advice they provide, and many find that this is easier done through the RIA model."

Typically, an advisory practice would affiliate with a broker-dealer because they want to provide commission-based products (e.g., mutual funds, 529 plans or insurance) and it requires a broker-dealer to process those commissions, or because they want to purchase back-office services (e.g., compliance, training and marketing) from the broker-dealer. However, CPAs like to maintain their objectivity, and may be less likely to offer commission-based products because of real or perceived conflicts of interest. Therefore, CPAs seem less likely to affiliate with a broker-dealer.


When it comes to technology tools, it is important to first think about the services needed, but one must-have application is a client relationship management solution, which can be used to manage and record all workflows within the firm and help track and analyze the profitability of each client relationship. Financial planning software is also important, as is a solid custodial platform for client assets. Some custodians may even offer discounts on third-party CRM, portfolio management, financial planning and rebalancing software - all important software applications for a PFP practice. (For a review of basic analysis software, see page 21.)

"I think it is important to develop your approach and process and then go out and get the software," advised Lyle Benson, president and founder of CPA/financial planning firm L.K. Benson & Co.

While developing a plan and goals, implementing the most appropriate business model and obtaining the proper credentials are vital in developing a PFP practice, a major key to success is an unwavering commitment.

Said Allegretti of HBK Sorce, "The financial services world is a very complex environment, and if you are going to get into this, then do it the right way and make the same investment as you would in being a CPA."

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