Following a nationwide trend, New Jersey recently eliminated a ban against certified public accountants receiving commissions for selling financial products. Since then, financial service companies have been approaching accounting firms around the state, hoping to develop a new distribution channel.
On Nov. 16, New Jersey's CPAs were allowed to market investments, insurance and other financial products directly to their clients, and keep the commissions. Previously, CPAs had to refer their clients to other financial service professionals.
New Jersey follows 31 other states in allowing accountants to receive commissions and contingency fees, says Kathy Brunet, director of communications at the New Jersey Society of CPAs.
The state's regulation does have limits. For example, CPAs cannot accept commissions from clients for whom they perform audits, reviews, compilations or examinations of prospective financial information, says Mike Cohen, who has analyzed the commission fee issue for the New Jersey Society of CPAs.
One of the companies that moved quickly to take advantage of the new law was 1st Global of Dallas. The company, which helps accountants and other tax professionals develop their own financial service businesses, signed deals with 17 of New Jersey's largest accounting firms hours after the state lifted the ban.
Ed O'Connell, a CPA at Wiss & Company, an accounting firm in Livingston, N.J. said that a number of financial service providers have approached his company recently, among them CIBC Oppenheimer, Smith Barney, Trusted Advisors and Merrill Lynch.
The arrangements between the financial firms and the accounting firms will vary, he predicted.
"Some accounting firms might say, here's our client list - go get em,'" he said. Others will want to have a tighter rein on the financial service provider. Either way, O'Connell said that in the future, "we will be seeing some fairly dramatic changes from the way we were operating."