CPAs Make Excellent PFPs

Key strategies on how to build your client base and make more money.

October 2008
by Michael Schulman and Amy Kraznyanskaya/The Tax Adviser

Demand for CPA personal financial planners (PFPs) is increasing and CPA personal financial planning practices grew at an average rate of 34.9 percent in the past two years, according to the 2007 AICPA/Moss Adams CPA Financial Planning Practice Study. Survey respondents also predicted a 20.6 percent increase in their assets under management in 2008. Furthermore, average revenue for CPA financial planners was more than $420,000 in fiscal year 2006, according to the study. Yet many CPAs who attempt to move into the personal financial planning practice area fail, according to John Napolitano, chairman and CEO of U.S. Wealth Management, LLC, in Braintree, Massachusetts.

This column explores why CPAs make excellent PFPs, why CPAs move into financial planning and how successful CPA/PFPs have made the move.

A CPA Is an Ideal PFP

Unlike non-CPA financial planners, CPAs have the knowledge and experience to understand their clients’ entire financial picture and therefore to plan comprehensively. Susan Bruno, founder of Rowayton, Conn.-based Beacon Wealth Consulting, LLC, works with smart, affluent clients. Yet she finds that people rarely connect the dots among their various financial plans — retirement, estate, tax, insurance and so forth. As a CPA, she is ideally suited to do this and also knows how to find others who can provide
needed services.

The touchstone for CPA financial planners is client confidence. CPAs and their clients have relationships based on trust, says Nate Wenner, who works in the Minneapolis, Minn.-based office of Wipfli Hewins Investment Advisors. As opposed to other service providers whose only goal is to sell a product, Wenner believes that “CPAs care about their clients and take their role seriously as professionals.” Clients love their CPAs, Napolitano says and want them to provide additional financial planning services. Michael Eisenberg, who practices individual tax and personal financial planning in Los Angeles, says he enjoys talking to his clients about fiduciary responsibility: “It sets CPAs apart and clients really do grasp the concept.”

Personal Financial Planning Attracts CPAs for Diverse Reasons

Successful CPA financial planners have in common a passion for their work, but the reasons they got into the field vary.

Clients ask: Wenner says many clients continually ask their CPAs to provide help with personal financial planning services. Most clients like a one-stop shop, says Ted Sarenski of Syracuse, NY-based DB&B Financial Services, LLC, and year-end work is easier because all the knowledge is in-house.

Clients change: A valuable client with a thriving business may ultimately sell that business and the new owner may take his or her tax business elsewhere, Eisenberg notes. “You lose a boatload of revenue if you do not add financial services to your business,” he says.

Clients need financial planning services: Karen Goodfriend, a principal of KK Wealth Advisors, LLC, in Los Altos, California, practiced in tax and financial planning in Silicon Valley in the mid-1990s. She transitioned to full-time financial planning as her clients started liquidating their stock option wealth and their need for investment management services expanded. Sarenski got started in financial planning because he enjoyed it. When he realized that his clients and their advisers were not properly implementing his financial plans, he decided to broaden
his services.

Better work-life balance: After several years of tax and financial planning work at large firms, another CPA decided to spend more time with her family. She started her own shop, which gave her more flexibility and control. Although more than half of her revenue at her solo practice came from tax preparation, she decided the tax work made too many demands on her time. She gave another practitioner her tax business and successfully transitioned to an exclusively personal financial planning practice, which gives her more time to spend with
her family.

Personality: People who knew Jeff Mueller did not think accounting was the right profession for him. It turns out that they were right. As a “way extroverted person,” Mueller quickly gravitated toward tax and retirement planning and ultimately became interested in financial planning. He now has a financial planning practice, Mueller Financial Solutions Co., in Cañon
City, Colorado.

A CPA Financial Planner’s Client Base Starts at Home

CPAs who add personal financial planning to their practice — or who move entirely to a personal financial planning practice — often draw planning clients from their tax practice, as was the case with Eisenberg. Before he made the move into financial planning, he surveyed his clients during tax season, asking whether they had wills or trusts, how their retirement saving was progressing and whether they would be comfortable talking about financial planning with him. He found that his clients wanted his services. Eisenberg plans for clients’ needs and then refers them to experts in insurance or estate documents.

Goodfriend has gained clients from existing clients’ referrals and from professionals such as other CPAs, attorneys and real estate specialists. She also writes and speaks to the media and plans to hand pick existing clients and draft financial plans for them — for free — and then sit down with the clients to demonstrate her abilities in financial planning.

The Leap Takes Courage and Commitment

Napolitano frames the transition problem this way: First, CPAs are too busy with their core tax practices; second, they are not willing to risk losing clients in order to transition their practices; and third, they do not change their mindset to that of a financial planner. Napolitano offers the following tips for CPAs interested in adding personal financial planning to
their practices:

  • Develop a compelling vision and articulate it in a five-year plan.
  • Embrace transition. Vow to be a different firm next year.
  • Be willing to say no to tax clients. The time required to do financial planning work requires giving up some tax work. Consider taking new clients only if they will bring both tax and planning work or tell existing clients that the firm has room only for tax/financial planning clients.

  • Resist the urge to play it safe by limiting your financial planning work to small clients. They take almost as much work as larger clients but do not pay as well.

  • Be willing to delegate to staff and outside professionals. The CPA financial planner should spend his or her time acting in his or her highest and best role.

CPAs who are serious about developing a financial planning practice may want to consider attaining the AICPA’s CPA/PFS credential, which was created especially for CPAs who specialize in financial planning and who demonstrate experience and expertise in that area.

CPAs must meet certain prerequisites to become a CPA/PFS and must meet re-credentialing requirements every three years to maintain their certification. Adding financial services to your

practice can be exciting, fulfilling and profitable. Despite this practice area’s challenges, CPAs who pursue it with dedication may well find themselves amply rewarded.
Rate this article 5 (excellent) to 1 (poor).
Send your responses here.

Michael David Schulman is the owner of Schulman CPA, an Accountancy Professional Corporation, in New York, NY and is a contributing writer for The Tax Adviser. Amy Krasnyanskaya is a specialized publications editor for the AICPA in Durham, NC. Their views as expressed in this article do not necessarily reflect the views of the AICPA, The Tax Adviser or the AICPA Wealth Management Insider.

Notice to Readers:
Members of the AICPA tax section may subscribe to The Tax Adviser at a reduced price. Contact 800-513-3037 or taxsection@aicpa.org for a subscription to the magazine or to become a member of the tax section.