Professional Financial Planning
Overcoming Challenges and Creating Opportunities
for the Profession
Walter M. Primoff, Robert L. Gray, and Joseph W. Tucciarone
SEPTEMBER 2007 - For more than two decades, CPAs have been formally
offering “professional financial planning” (PFP) services
to clients, either directly or in concert with skilled network partners.
For many firms, it is clear that offering PFP services can enhance
the strength of client relationships, transform reactive firms into
proactive ones, and boost firm profitability, growth, and exit value.
Yet it remains common to hear senior CPA firm owners proclaim,
“As long as I’m here, we’ll never do financial
planning!” While there are valid reasons for not providing
PFP, too often this proclamation is not based on sound objective
analysis. For some firm leaders, the very term “financial
planning” recalls one or more of the following haunting
images: a client seeing the CPA as a salesperson, not a professional;
a CPA abandoning objectivity and selling a client inappropriate
high-commission investments or insurance; and an impaired or lost
client relationship, along with related malpractice liability,
all due to client investment losses. Other PFP practice concerns
involve questions about gaps in expertise; the time and financial
resources required; finding competent potential affiliation partners;
and questions about the skills and infrastructure required to
run a successful financial planning business.
The above concerns have common qualities:
- They are often rooted in misperceptions. These can often
be overcome by learning about the proven professional processes,
systems, and procedures used by a growing number of CPAs who
are competently providing PFP services.
- They are primarily “CPA-firm centered,” even though
there are two other important perspectives. The first is “client-centered,”
addressing PFP needs from the client’s point of view.
For example, are there PFP services that clients would prefer
their CPAs to provide, but the issue was never really properly
discussed? The second concerns external competitive forces.
How will a decision on offering PFP affect the strength of a
firm’s client relationships, profitability, value, and
Experience has shown that the risks posed by the above images
and concerns can be managed. (For example, PFP malpractice risk
is on par with that of attest, tax, and other common services,
even after the recent market downturn and corporate scandals.)
Offering PFP is not for every CPA firm. But all firm leaders,
especially those of local firms, owe it to themselves, their clients,
and their employees to objectively examine this issue with an
open mind. Unfortunately, the above issues have often been used
as reasons to avoid a serious analysis of PFP pros and cons. But
while these perceptions have remained static, PFP as practiced
by CPAs has evolved into a set of professional services requiring
the breadth of CPA expertise. A changing competitive environment
is also at work. From the authors’ perspective, making an
informed choice on whether to provide PFP is vital. The quality
of this choice may impact client relationships, firm growth, competitiveness,
and the ability of CPA practice owners to exit their firms on
desired financial terms.
Most discussions address the generic practice of “personal
financial planning.” The authors prefer the trademarked
term “Professional Financial Planning” where CPAs
are concerned. This term emphasizes the professional process used
by CPAs and some others when planning for clients. In addition,
CPAs are uniquely equipped to handle the PFP issues of successful
small business owners, because the CPAs’ planning involves
a myriad of intertwined personal and business considerations.
The Roots of Misperception
From the early 1970s into the 1990s, the CPA profession was shaken
by external forces that created both the financial planning industry
and massive changes in the CPA profession’s ethical environment.
Although the term “financial planning” was not in
vogue until the 1980s, CPAs had practiced in this area since the
profession’s inception. As early as 1906, David Kenley wrote,
in the Journal of Accountancy, that one important CPA
role was to be a client’s “financial physician.”
Many CPAs followed Kenley’s route. They became their clients’
primary financial counselors, coordinating matters such as planning
for taxes, retirement, estates and trusts, and business succession.
All these areas became key PFP service components. CPAs rarely
recommended specific investments. However, it was not unusual
for them to make ballpark projections on average rates of return
on investment, necessary for a client to maintain a defined lifestyle.
If the related investment risk seemed too high, the CPA would
have the appropriate discussion with the client.
Once planning was complete, often with the help of attorneys,
actuaries, and other professionals, CPAs referred clients to life
insurance agents and stockbrokers to help implement the plan.
These salespersons usually had little technical training or education
in the above planning areas. Financial and insurance products
were generally simple and well understood. Most CPAs’ clients’
largest assets were generally their businesses, if they had one,
then their home and their car. While some individuals had investment
portfolios, most investments were held in professionally managed
defined-benefit or defined-contribution retirement plans.
But as the 1980s approached, primary building blocks for creating
a financial planning industry were coming into place. These included
the first personal computers, as well as tax law changes favoring
401(k) and other personally controlled retirement accounts over
centrally managed plans. The financial products industry was creating
a flood of new, highly flexible and equally complex investment
and life insurance products, which few product agents had the
technical background to understand. In the hands of a professional,
these were tools that could help clients meet their financial
goals, but in the hands of many of these salespeople, they could
be snake oil.
As the 1980s progressed, many individuals found a new need to
personally manage their retirement funds. It was not unusual for
successful individuals to have rollover IRAs with substantial
balances, and these investors needed help. CPAs were perfectly
positioned to fill the void. They were entrenched as the public’s
“most trusted financial advisors.” Many were following
the “financial physician” route laid out by David
Kenley, already coordinating many of the advanced planning services
that would fall under the rubric of PFP. It would have seemed
logical for the CPA profession to lead the way during the foundational
stages of the financial planning industry.
At the time, however, few CPAs understood the difference between
ethically permitted fee-based investment advice, and the then–still-prohibited
commission-based selling of securities. (Many practitioners remain
uncertain.) Nor did they realize that they already had the technical
acumen to readily learn investment theory and the few other key
PFP elements that lay outside the scope of existing CPA services.
Had the profession’s leaders understood the need and opportunity,
the necessary continuing education and support framework could
have been created and promoted. Instead, the profession was undergoing
disruptive regulatory change and was mired in a debate over the
pros and cons of recognizing formal practice specialization. (A
few local-firm CPA pioneers did step up to the plate. Today some
are successfully helping clients manage investment portfolios
exceeding $1 billion.)
While the profession largely sidelined itself, CPA clients’
need for PFP services kept growing. The profession’s absence
from the initial financial planning market created a vacuum that
was quickly filled by two groups: the relatively few holders of
the still unfamiliar Certified Financial Planner credential, and
the aforementioned salespeople, who now sold increasingly complex
insurance and investment products for which few had the necessary
technical background. With the “financial planner”
term unregulated, the salespeople and many of the major corporations
behind them saw the opportunity to use the title to connote competence
that was simply lacking. All too often, investors were thrown
to the wolves, investing significant rollover IRA funds with,
and buying complex insurance products from, incompetent or unscrupulous
financial product sellers.
It was the actions of this salesforce that created the initial
image of financial planning as an often shady, product sales–driven
activity in the minds of the public, regulators, and CPAs themselves.
CPAs often saw the results of the incompetence and greed firsthand.
In 1986, the AICPA established its PFP Section. A year later,
its financial planning specialty designation, now called the PFS
(personal financial specialist), was created, a credential recognized
by regulators as being on par with the CFP, but which only CPAs
can earn. (Today, the growing PFS community has nearly 4,000 credential
In the end, CPAs’ late arrival to the financial planning
table was costly to both the profession and its clients. Alan
Dorkin, managing partner of a successful New York CPA firm, perhaps
summed it up best when he said: “If the profession’s
heated debate about practice specialization had ended by the early
1970s, CPAs would have owned the markets for most financial planning,
valuation, and employee benefit consulting services.” Had
this happened, instead of initially being viewed as a product
promotion tool, PFP would have been more likely perceived initially
as the professional process now used by CPAs in the provision
of PFP services.
Professional Financial Planning Process
In the authors’ view, the goal of a PFP engagement is to
develop a plan designed to help individuals achieve the financial
security necessary to realize their dreams. The first step requires
good listening skills to discover the client’s dreams. If
the dreams are so unrealistic that they would require winning
the lottery, it may take additional steps to modify a client’s
goals to make them realistic enough to create a plan.
Once the client’s goals are established, PFP becomes a
collaborative professional activity, often requiring coordination
of expert teams of varying composition, depending on an engagement’s
nature. Team members may include CPAs, attorneys, actuaries, valuation
professionals, investment experts, and insurance professionals.
CPAs are well suited to serve as team quarterback. The team is
generally supported by sophisticated software, with a growing
ability to use the Internet to coordinate its activities and optimize
At this point, the process enters an analytical phase, much of
which is within CPAs’ existing expertise; for many, it would
be a natural extension of accounting and tax practice. A plan
typically starts out with an investor’s current financial
position. Analyses are then performed that project earnings, investment
returns, cash flow, debt, taxes, and similar factors. The plan
will integrate other areas, such as liquidity planning, education
funding, retirement planning, eldercare planning, estate planning,
investment planning, business succession, and the like. Properly
performed, this is never a product-oriented process. Products
will follow the plan’s design parameters. It is true that,
in the hands of a product sales–oriented organization, the
process can be rigged for a desired outcome. One of the CPA’s
key PFP roles is to help prevent this from happening to unsuspecting
The fear of many CPAs is that if they offer PFP services, they
will be seen as salespeople rather than professionals. Prior to
the 1980s, when investment and insurance vehicles were simple,
this may have been true. Today, however, many of these vehicles
have become extremely complex. They require expert customization,
which CPAs can professionally provide or oversee, to properly
manage risk and achieve client goals. The increased expertise
that CPAs who offer PFP services gain about financial products
gives the CPAs a greater ability to protect clients from being
sold inappropriate products by overly aggressive salespeople.
The investment-planning component generally follows the Nobel
Prize–winning modern portfolio theory (MPT). If conservatively
applied, it uses statistical methods to enable an investor to
have a reasonable chance of enjoying up markets, while having
a high probability of being protected from catastrophic loss.
CPAs have the background to learn the skills required, or to oversee
affiliated service providers. MPT generally enabled CPAs to avoid
the problems that faced many others during a major market downturn.
(For a more thorough introduction, see Roger C. Gibson, Asset
Allocation—Balancing Financial Risk, McGraw Hill, 2000.)
A typical comprehensive PFP engagement proceeds as follows:
- Help the client establish and express financial and nonfinancial
- Meet with the client to gather relevant data.
- From the data, prepare a current life information summary,
including cash flow, balance sheet, risk management elements,
will, living will, powers of attorney, and the like.
- From this information summary, determine who is needed for
a professional financial planning team.
- Prepare a preliminary analysis and meet with the client and
the financial planning team to determine if the goals must be
- Prepare the first draft of the financial plan and review preliminary
recommendations with the client and the financial planning team.
- Prepare the comprehensive financial plan and deliver it to
- Provide implementation assistance as desired by the client.
- At the client’s discretion, monitor and, when appropriate,
update, the plan.
Not every PFP engagement involves this comprehensive process.
A client may be interested in just one element, such as retirement
planning. Regardless of the type of engagement, a whole range
of software and other practice aids is available to help CPAs,
whether they deliver services internally or in conjunction with
affinity partners. [See the AICPA’s PFP area (pfp.aicpa.org)
and the Financial Planning Association (www.fpanet.org).
For a more complete understanding of the PFP process, see the
book review of Lewis J. Altfest’s Personal Financial
Planning, on page 16.]
Like other services, CPAs performing PFP services set themselves
apart by adhering to the General Standards in the AICPA’s
Code of Ethics (Rule 201) and their state CPA society’s
code. This entails:
- Having professional competence for all services,
either internally or through properly overseen, competent third-party
- The exercise of due professional care in the performance
of professional services.
- The adequate planning and supervision of professional
- Obtaining sufficient relevant data to afford a reasonable
basis for conclusions or recommendations in relation to any
professional services performed.
In addition to knowledge of technical standards, PFP practice
may require additional licenses related to investment advice,
life insurance, and securities sales, depending on the nature
of a firm’s PFP services. The AICPA’s PFP section
also issues practice standards.
Accounting firms have different views on charging for PFP services.
The options generally include financial plan preparation fees,
often on a project rather than an hourly basis; general PFP consulting
fees; investment management fees (not commissions); fully disclosed
life insurance commissions; and fully disclosed securities commissions.
Some firms charge plan preparation and consulting fees. Some charge
or share in investment management fees. Others accept insurance
and securities commissions as well.
The authors have seen CPA firms successfully operate PFP practices,
meet their fiduciary obligations to put clients’ interests
first, and maintain strong client relationships under all of these
fee arrangements. Regardless of the fee structure, clients generally
trust their CPA to do the right thing. As discussed below, CPAs
usually rise to the occasion. In our experience, CPAs offering
PFP services under professional standards are seen by clients
as professionals, not as product salespeople.
Ethical and Fiduciary Environment
For much of the profession’s history, CPAs practiced in
an ethical cocoon. The intent was to ensure that CPAs would always
put independence first in relation to attest services, and objectivity
first in relation to all other services. The structure was supported
by ethical pillars that prohibited CPAs from engaging in a number
of common competitive business practices. CPAs were prohibited
from advertising; soliciting business away from other CPAs; engaging
in competitive bidding against other CPAs; accepting commissions
and contingent fees; holding out to the public as a CPA if not
working in a CPA firm; and having non-CPA owners of CPA firms.
From the early 1970s to the 1990s, the same period that the financial
planning industry was developing, the AICPA, state CPA societies,
antitrust regulators, and the courts were engaged in a public-policy
tug of war over two differing public interests, that of CPA independence
ansd objectivity, and that of competition. In the end, with the
profession strongly supporting its traditions, the baby was split,
mostly on the side of competition. Most of the above ethical pillars
were struck down, primarily on first-amendment or anticompetitive
grounds. Left standing were prohibitions on commissions and contingent
fees for attest services requiring independence.
For nonattest services, CPAs were thrust into a new competitive
environment, for which few had been trained and for which many
were unprepared. A common refrain of veteran CPAs was, “If
I had known the profession was going to change like this, I wouldn’t
have entered it.” Inside the cocoon, the rules were clear.
But in the new environment, CPAs were now forced to ponder the
meaning of ethics rules requiring objectivity and avoidance of
conflicts of interest within a world of advertising, competitive
bidding, and even commissions.
Interestingly, the CPA profession was born with a conflict of
interest, in that audit clients paid the CPA’s fee. Wouldn’t
that cause CPAs to adjust client financial statements in the client’s
favor? By and large, with few exceptions, the public and regulators
have perceived the answer to be “no.” This is especially
true with local firms, which are also the primary PFP practitioners.
However, in times when the profession was not perceived to be
living up to its responsibilities, pressure to self-regulate,
and sometimes government regulation, followed.
PFP has become central to the profession’s ethical dilemma.
Of all of the changes to the ethics code, many CPAs believe that
the most abhorrent is the ability to accept commissions. As discussed
above, PFP can be provided without accepting commissions. However,
when the possibility of commissions is present, some difficult
dilemmas can arise. This is especially so when PFP providers are
seeking to offer client-centered, as opposed to CPA firm–centered,
Today, for PFP and other engagements where independence is not
required, CPAs have an ethical responsibility to remain objective
and avoid conflicts of interest. CPAs who serve in a trusted advisory
capacity also have separate fiduciary responsibilities to their
clients. These legally require them to act in their clients’
best interests and put clients’ interests ahead of their
own. (See Primoff and Gray, “Fiduciary Responsibility and
Opportunity,” Tax Advisor, April 2006, and Dan
L. Goldwasser, “Avoiding Fiduciary Liability,” The
CPA Journal, July 2002.)
Therefore, for PFP or other nonattest engagements where CPAs
are seen as trusted advisors, the following four questions arise
for each practitioner:
- Am I being objective?
- Am I avoiding conflicts of interest?
- Am I acting in my client’s best interest?
- Am I putting my client’s interest ahead of my own?
Consider the common scenario in which a client’s trusted
CPA has quarterbacked her PFP engagement. After the plan has been
prepared and reviewed by the expert team, the implementation options
are presented to the client. The plan calls for fee-based investment
management and life insurance. Plan implementation calls for the
CPA’s monitoring for an additional hourly fee. The client
asks the CPA, “Isn’t there some way for you to be
paid out of the investment fees and life insurance instead of
me having to pay you out of my pocket?”
If the commissions and fees are clearly disclosed, as ethically
required, and the client completely understands the options, is
it in the client’s interest or the CPA’s interest
not to accept the commission?
Not long ago, one of the authors met with the managing partner
of a leading CPA firm. During a discussion on PFP, the partner
said, “Any CPA, including me, who can sell a client inappropriate
insurance to collect a $50,000 commission, will.” The author
looked straight at him, saying, “No, you wouldn’t!”
The partner looked back, saying, “You’re right!”
The new rules do not require any firm to accept commissions.
But for firms that do, more personal responsibility and appropriate
controls are required. George May was a pioneering senior partner
of Price Waterhouse and a philosophical giant of the profession.
In the mid-1950s, at the age of 80, he was asked about the ethical
propriety of CPA firms becoming involved in the then-growing area
of management consulting. He said that CPAs certainly have the
competence. Clients have the need for their services. In the end,
he noted, it would depend on the personal character of the CPAs
On a similar note, former SEC Commissioner A.A. Sommer, speaking
at an AICPA leadership meeting, said, “Any profession that
fails to self-regulate and meet its perceived responsibilities
to the public will find itself regulated by government.”
From our experience, CPAs have lived up to their ethical and
fiduciary obligations in the PFP arena. Should they ever do otherwise,
government will close the doors. In May’s words, this is
a matter of character. If CPAs maintain it in the PFP arena, they
will continue to earn and deserve their clients’ trust,
regardless of how they are paid.
One comment the authors often hear from partners in successful
CPA practices is, “Most of our wealthy clients are financially
sophisticated, and even when they aren’t, they have the
PFP area well covered by competent people. We do the tax work
and some of the estate planning. They would never come to us for
the other stuff.”
When we are actually engaged with a successful client of a CPA
who believes this, however, it is not unusual to find that wills
need to be updated; that the wrong beneficiaries are listed on
wills, trusts, retirement plans, and insurance policies; that
succession planning for a business has not been discussed; and
that other matters need attention, some seriously so. We sometimes
even learn that clients would be not only pleased, but relieved
for their CPA to be involved.
Most non-CPA financial planners would give almost anything for
a law that required clients to sit down with their planner once
a year to discuss finances. Yet, many CPA tax preparers waste
the opportunity to build client relationships over tax season.
The rush to get the work out often trumps meaningful client discussions
that could lead to far more relevant and lucrative engagements
than preparing a tax return.
The CPA’s view of client needs is often firm-centered.
The client-centered view is from the point of view of the individual’s
goals and dreams. The phrase “financial planning”
may mean little to the client. But saying, “I think we can
help you send the kids to college, retire comfortably, and even
buy the boat you’ve dreamed of,” could lead to a PFP
engagement. Both phrases may mean the same thing, but they are
Because of the need to ferret out client goals, PFP is one of
the best services for developing effective client-centered communication.
From our experience, most CPA firm clients have a range of PFP
needs. Even though some CPAs are certain that clients do not want
them to address these needs, experience often tells us otherwise.
The PFP Competitive Environment
Today, a CPA firm has a host of competitors, all coveting the
same clients. Any number of CPAs has lost a “best client,”
the one who would never leave, to another CPA firm aligned with
a PFP team. Other CPAs face decreasing relevance, as they slowly
transform from being a client’s most trusted financial advisor
to becoming a trusted tax expert, one who takes direction from
the leader of a PFP team who has become the client’s most
trusted financial advisor.
The authors’ vision of a client-centered PFP mission is
“to help clients realize their life’s dreams that
require financial security.” While many CPAs are focused
on tax minimization, which is important, financial planners are
focused foremost on clients’ goals and dreams. For most
CPAs, client relationships are their most valuable asset. When
CPAs are not offering PFP services to their clients, those individuals
may develop a relationship with others that may become strong
enough to weaken or even displace the CPA as a primary financial
The CPA profession let broad control of PFP services slip trough
its fingers by sidelining itself during the formative years of
the marketplace. Today, it is possible that CPAs are in an equally
precarious position. Modern web-based PFP services and collaborative
software (such as eMoney’s “360 Pro”) enable
a PFP team to help clients achieve financial security in ways
that were almost unimaginable a decade ago. CPAs who do not understand
these services may be putting themselves at a serious competitive
While PFP is not the answer for every firm, from the authors’
experience, it is vital for CPAs to understand the nature of modern
PFP services and how they are perceived by their clients. We believe
it is important for all CPA firm owners to seriously explore the
issues addressed in this article in an openminded way—for
the benefit of their clients, their employees, and themselves.
Walter M. Primoff, CPA/PFS, is the CEO of PrimGroup,
Cos Cob, Conn., and Woodbury, N.Y. He can be reached at 917-822-9569
Robert L. Gray, CPA, PhD, is a consultant, and
is a member and immediate past chair of the New York State Board
for Public Accountancy.
Joseph W. Tucciarone, CFP, is the CEO of the National
Network of Accountants, which helps CPA firms establish PFP practices.
He can be reached at 516-677-6290 or firstname.lastname@example.org.