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From CFPs to CPAs: An Invitation and a Warning [CPA Journal, The](CPA Journal, The Via Acquire Media NewsEdge) CPAs possess many of the same traits valued by Certified Financial Planners (CFP) and their clients. CPAs are well educated and have demonstrated commitment by earning the premier designation of the accounting profession. CPAs hold themselves to a standard of conduct with clients that represents the cornerstone of their value proposition. In short, CPAs have far more in common with CFPs than most of the people who claim to be financial planners. An Invitation to CPAs Currently, there are approximately 70,000 CFPs in the United States (http://www.cfp.net), or about one CFP for every ten CPAs. CFPs comprise less than 10% of Financial Industry Regualtory Authority (FINRA) registered representatives, those professionals licensed to sell securities (http://www.finra.org). Of the 450,000 licensed life insurance agents, less than 5% are CFPs, according to the Financial Planning Association. Of the roughly 1 million individuals who claim to do financial planning, fewer than 7% are CFPs. Among that million, CFPs are the only ones held to a fiduciary standard, the standard requiring them to always place the client's interests first. The rest are salespeople, and their only requirement is to sell "appropriate" investments to customers. Assuming one CFP can reasonably serve about 150 families, a ratio of one CFP for about every 4,500 Americans leaves a shortage of 140,000 CFPs in the United States-and that's if we only adequately serve the 20% at the top of the economic ladder. The other 80% need help, but they are too often ignored because they aren't viewed as sufficiently profitable. The AICPA offers the Personal Financial Specialist (PFS) designation, which is comparable enough to the CFP designation that there are reciprocity agreements whereby passing one exam waives the examination requirement for the other. Having passed the CPA and CFP exams, I can tell you that if you passed the CPA exam, you can pass the CFP exam, too. Even though the CFP designation isn't nearly as recognized as the CPA designation-after all, the CPA had an 80year head start-it's far more recognized than the PFS designation. In the alphabet soup of designations, having a designation the public recognizes is worth far more than one the public doesn't. In addition, the word "certified" means something to the public, whether it's in front of a PA or an FP. An influx of CPAs into financial planning as CFPs would bring greater brand recognition and awareness by the public of the need to work with a CFP exclusively when it comes to their personal finances. Consumers will increasingly demand that their financial planner be a Certified Financial Planner. The only people who should be uncomfortable with the entry of CPAs into the financial planning field are the thousands of people who claim to be financial planning professionals, but are really just salespeople. Now for the Warning One reason CPAs look to expand into financial planning is the perceived lack of qualified people in the field. But another reason-perhaps even bigger-is money. Many a CPA has chafed at the notion of a client paying someone else a big commission to be sold something that might not be in the client's best interests. In my opinion, however, if the main reason you want to get into financial planning is the money, it's worth remembering that money is the main reason some of the worst people already in the financial planning field also got into it. Any business model that might create a conflict of interest would irreparably damage both a CPA's new financial planning business and the existing accounting business. For this reason, no CPA should ever sell anything on a commission basis. CPAs should sell only services, and sell them on a fee-basis only. It's better to avoid contracting with broker/dealers, even those that enable CPAs to do all business on a fee-only basis. Broker/dealers have their own agenda, and it can conflict with a CPA's priorities. To avoid conflicts of interest, CPAs should establish their own Registered Investment Advisor (RIA). RIAs are held to a fiduciary standard by the SEC, and they may not sell on commission. The Human Element CPAs are like referees. One of the primary functions of a CPA is to attest to the adherence of GAAP-that is, to ensure that all businesses play by the same rules. CFPs are like coaches. One of their primary functions is to establish and achieve financial goals for their clients. In the NFL, the average coach's salary is nearly 20 times that of an NFL referee. This discrepancy is due to different demands of the jobs-whereas an average referee can hold onto his job indefinitely, an average coach will be fired after three years. A CPA who becomes a CFP must also become a coach. It's important to recognize that clients will have different expectations, of a CFP and will evaluate their CFP differently than their CPA. CPAs and CFPs are like apples and oranges. The two roles have some overlap, to be sure, but they require different skill sets that might have little in common. A referee needs to know the rules; a coach needs to know the people. For a CPA, understanding people is important; for a CFP, it's essential. No CFP can manage financial markets, world events, or legislatures. CFPs must manage clients' behavior. It's the only aspect they can actually control, and it's the most critical aspect when it comes to a client's long-term financial success. ? Mark DiGiovanni, CFP, is the president of Marathon Financial Strategies, Grayson, Ga. He can be reached at [email protected]. (c) 2014 New York State Society of Certified Public Accountants |