The forgotten tribe of CPA financial advisors

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In my early years covering the financial planning industry, there was a common stereotype about accountants who also act as planners. It was thought that these CPAs were merely tax practitioners who had been badgered by their clients into learning a little bit more about investments.

That time has long since passed. It’s about time planners start recognizing their close cousins in the CPA profession. Advisors would stand much to gain from bringing them into the fold.

In the CPA world today — and especially in the shadow of the new tax act — the key topics of discussion center around integrating technical expertise with sophisticated planning and tax-aware investment management. These are topics that are clearly top of mind for CFPs, too.

So why then do we hear so little about the CPA financial planning tribe in our profession? It’s not because they lack numbers. The AICPA’s personal financial planning section now includes 11,500 members, up 12% over the past two years. While many of their members have the CPA/PFS credential — the accounting world’s version of the CFP — many simultaneously hold the CFP designation as well. And now, due to a recent outreach, the group has also accepted 350 non-CPA members to its ranks.

Rather, what seems to be holding the PFP section back is that even with those numbers, it remains a small subset of AICPA, which now includes more than 400,000 members.

In addition, the AICPA community doesn’t regard financial planning as a distinct profession. Instead, it is considered a specialty subset of CPA training, alongside tax planning, audit work, forensic and valuation services, information management consulting and nonprofit expertise. After all, to become a CPA/PFS, you first have to get the CPA, which usually means you’ve had at least one year of work experience involving accounting.

What would NAPFA, the Investments & Wealth Institute and FPA planners gain by including the CPAs in their discussions?
First of all, the AICPA has enormous lobbying clout and significant relationships with regulators and members of Congress. the parent organization has not been asked to speak out on behalf of its PFP section members, but if it could be included in the grand coalition of planning professionals, our lobbying efforts would be more effective.

Second, as I mentioned earlier, many CPAs are comfortable with what the mainstream calls alternative fee structures, which happen to be the fee structures that every other profession uses. You don’t ask a doctor or lawyer what he charges, and get back the answer: “It depends on how much you have.” Yes, some CPAs charge via AUM, but to them it seems like a strange way to set your compensation, compared with the hourly or flat-fee models they are accustomed to for tax work and consulting services.

Overall, the CPA planning culture straddles the line between fee-only and dually-registered. Although most CPA planners are compensated by fees, the community also includes a couple of very large broker-dealers that cater to CPAs — HD Vest Financial Services in Irving, Texas and 1st Global in Dallas, Texas. On the fee-only side, you run into advisors who charge hourly or by a retainer model, and many incorporate tax preparation and planning into their overall planning service offering.

As the financial planning profession migrates toward a more professional fee structure, CPAs are the people most familiar with how that transition could look. Also important: the fiduciary culture is already built into the CPA DNA, due to the ethical standards surrounding their audit work.

But perhaps the most important argument for bringing the CPA planning tribe into the mainstream is the technical expertise that lives within it. CPA planners are routinely exposed to deeper levels of technical education than you ever find in FPA or even NAPFA presentations, and I&WI presentations tend to focus on the investment analytics, rather than how to set up a self-cancelling installment note to freeze a wealthy client’s estate, or how to recharacterize income under the new pass-thru entity tax rules.

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Sessions at the AICPA’s annual Engage conference typically include presentations by tax and policy experts, including Bob Keebler. Keebler is famous in CPA circles for his simplifying flowcharts, his ability to recite entire of sections of the tax code, explain loss limitations under various sections of the code and diagram the potential use of something called a NING Trust to reduce state taxes.

Advisors who believe that the planning profession has moved a bit too far in the direction of soft skills at the expense of professional expertise should sit in on a Keebler session, or hear New York-based qualified plan expert Barry Picker talk about how to wring a few extra years of retirement income out of a client’s portfolio using ultrasophisticated retirement distribution planning techniques.

Of course, bringing more CPAs and CFPs together would create interesting new dangers to the existing professional organizations. Many advisors I talk with crave more technical updating, and don’t realize what resources the PFP section offers. Compared with the member benefits of some of the other organizations, the PFP section’s menu seems rather generous.

The forgotten tribe of CPA financial planners still has a lot to teach me — and, I think, the rest of us, too.

The biggest danger seems to be to the CFP Board’s hegemony over all things financial planning. But because you have to have tax training to get the CPA/PFS designation (rather than, say, a degree in English literature or journalism), you could make the case that the average PFS-holder has a higher degree of educational training than is required to get the CFP.

Harmonizing the two designations would seem to be a logical solution, but the AICPA’s insistence that financial planning is really a subset of the overall CPA profession, and the CFP Board’s belief that its designation holds more mainstream credibility, have become sticking points in any negotiations. My own feeling is that the CFP Board can afford to give ground and accept PFS-holders as CFPs, instantly raising its credibility (and numbers) without conceding what, exactly, financial planning is in relation to other professional groups.

Meanwhile, I intend to attend the Engage conference this year (I’m moderating a panel that will include Keebler, Michael Kitces and Social Security and Medicare expert Ted Sarenski).

The forgotten tribe of CPA financial planners still has a lot to teach me — and, I think, the rest of us, too.

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CPAs CFPs Tax planning Accounting RIAs Fee-based compensation Client strategies Fiduciary standard CFP Board AICPA IWI NAPFA