Market demand and the state of the economy are drawing more CPAs into financial planning

For those CPAs thinking about expanding their practice to include financial planning, experts in the area offer the same three words of inspiration uttered by sports fanatics everywhere: "Just do it."

Many CPAs are no longer reticent when it comes to the financial security of their clients. Instead, a number of them are exploring the avenue of financial planning, while those who already have a viable planning practice say the timing couldn't be better.

Most financial planners point to the economic downturn as an advantage to providing yet another valued service to their clients, many of whom have been overwhelmed by the current financial climate - especially since CPAs are already seen as their most trusted advisors.

"This is an ideal time to practice in this area or enhance your practice with this discipline," said Lyle Benson Jr., CPA, PFS, CFP and president of L.K. Benson & Co. PC in Baltimore. "Clearly, how people manage their personal finances and what decisions they make are key concerns. We see it across our client base, across all different types of individuals and throughout the entire wealth spectrum."

The need for expert financial help is further compounded by the issue that there will be fewer financial advisors renewing their license registrations this year.

That's a problem, considering that more assistance is needed to help the massive Baby Boomer population waiting to retire, according to Roger Ochs, president of broker/dealer H.D. Vest Financial Services in Irving, Texas.

According to Ochs, there is a projection of 35,000 fewer financial advisors renewing this year, because, with the larger wirehouses continuing to give incentives to top producers who work with high-net-worth individuals, those advisors who work with less-affluent clients are being pushed out of the business.

"There is going to be a real void," Ochs predicted. "There's going to be an opportunity that needs to be filled by somebody and the tax professional is uniquely qualified and positioned to provide that advice."

Ochs also pointed to the building pressure on the tax professional because more people are doing their taxes online - which decreases revenue for that practitioner, or firm.

"You've got these two phenomena going on," he said. "You've got the demand for this new service [financial planning], and you've got pressure on your tax practice because of a decline in revenue. It's a lot easier to offer an existing client another service than it is to find a new client to offer the same service. The economy is driving both of those."


CPAs are not only uniquely qualified, but also well-positioned for financial planning because of their existing training in tax, fin­ance and business, which give them a leg up on those without the training, according to Michael Goodman, CPA, CFP, PFS and president of Wealthstream Advisors in New York. Goodman said that there's an advantage to telling a client that you or your firm offers financial planning services, instead of sending them to a third party.

"CPAs are too afraid to be proactive in bringing in new business," Goodman said. "They're afraid to be seen as salespeople, and there's a big difference between being a salesperson and being consultative. Don't go out there and say, 'Let me manage your money. I can make you a lot of money.' Go out and say, 'Tell me what you are trying to achieve and why you are worried about your financial situation. Let's talk about that and look for some ways to help you do better.'"

Though many CPAs may have a negative reaction to starting a new practice given the economy, those who have the right skills may want to reconsider the possibilities.

"A CPA is already going to have a certain number of critical skills," explained Jonathan Wittlin, CPA, CFP and senior vice president of financial planning at Lenox Advisors in San Francisco. "Initially, the first thing you need to have on the planning side is passion for what you're doing. You really need to believe in what you do."

Wittlin added that aside from passion, those interested in launching a financial planning business must succeed at relationship-building. "There are tens of thousands of 'advisors' who can give you the performance of the Dow over the last 70 years, tell you all kinds of fancy estate planning things you can do and explain the details of a life insurance contract. And while that skill set takes a while to learn, it's not the hot commodity," Wittlin said. "What people want is not only somebody who knows their stuff, but also somebody who has the ability to break it down and understand where the client is coming from."

As a result, clients are becoming pickier about who is managing their finances and will switch service providers if they find somebody better - especially if they have lost money due to poor management.

And on the flip side, more CPAs are delving into financial planning to prevent their clients from losing their investments.

"We're getting a lot more inquiries from CPAs because they're very protective of their clients," said Patrick Vignone, vice president of business development at Rochdale Investment Management in New York. "They are thinking, 'I see where their investments are going, I'm not happy with it and I think I could do a better job.' They are really starting to integrate that into their practices. It used to be they just gave clients their opinion; now they are starting to say, 'Somebody needs to take charge here and I think I can really help you do that.'"

Of course, there are challenges to entering into a new practice, and experts say only dive in if you're willing to allot the time, resources and commitment to a new venture.


"They are going to have to overcome their own fear of getting into a new business," said H.D. Vest's Ochs. "The biggest fear and challenge we have with advisors is that fear of not knowing everything."

Benson points to gaining partner support when thinking about or expanding into financial planning as crucial - yet gaining that support can bring additional challenges.

"In any CPA firm environment with multiple partners, there are going to be believers and nonbelievers, unfortunately," said Benson. "It's a continual process to educate the firm and the partners about the benefits of financial planning. That starts from Day One, and probably entails doing financial planning for the partners of the firm, making sure they feel comfortable with the service and making sure they stay involved in the process."

CPA firms also need to amp up their marketing strategies and be able to stand out in the marketplace - a challenge for many CPAs who tend to shy away from business development.

"When you are looking at financial planning and investment advisory services, you are competing with the Merrill Lynches of the world," Benson said. "You've got a much broader universe you're competing against, so you've got to be able to tell people what your unique competitive advantage is, what's different about you and your practice, and communicate that in a way that's very effective."


Another potential hindrance to starting a financial practice is the regulatory compliance issues faced when entering into the investment area.

"There's a whole other layer of regulation that scares a lot of people away," Benson said, adding that a fourth challenge is that this new practice area needs to be run as a business. "Set your goals, look at it as a separate unit in a firm or a separate stand-alone business and set targets in terms of growth. That's what seems to set aside the more successful practices."


Think you want to take the plunge? Consider these five tips offered by Michael David Schulman, CPA, PFS and principal of Schulman CPA in New York, when starting a financial planning practice right now.

1. Understand your prospects: The prospects coming to you are emotionally hurt; their portfolios are half what they were a year or so ago. Be a good listener and pay attention to their hurts. And be professional. Don't blame their prior advisor. Show how you can help.

2. Fully understand the costs of your products: Consumers are very aware of costs in their lives, from the cost of gas to the cost of food to the cost of everything else. It's important not to downplay the costs in financial products. Be prepared to explain the various costs to your clients.

3. Are you prepared to open a new practice in this economy? It is easy to manage money when everything is great. Are you prepared to open a practice in a climate of uncertain returns?

4. Have you considered a niche practice? No advisor can be everything to everyone. Consider narrowing your practice to a certain class (or classes) of prospects. For example: retirees, small-business owners, women business owners, etc. Or perhaps considering specializing by product, e.g., long-term-care insurance.

5. Fully investigate the various types of business available to you, as well as all of the associated licensing and regulatory options: How are you going to make money? Commissions? Fee-only? Do you need to register as a registered investment advisor? What state and SEC licenses do you need? Life/health? Series 6 or 7?

(c) 2009 Accounting Today and SourceMedia, Inc. All Rights Reserved.

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access