Kemberley Washington

Should you add personal financial planning to your practice?

Now that tax season is over, consider adding personal financial planning services to your practice. Here's how.

May 14, 2012
by Kemberley Washington, CPA

Tax time is a great opportunity to explore your clients’ financial plans. Although there are many financial professionals available today, a study by CEG International found more than half of wealthy individuals are likely to obtain financial services from their CPAs. Aware of this, more CPAs are adding personal financial planning services to their practices.

“It’s now a great way to differentiate yourself,” says Jean-Luc Bourdon, CPA/PFS and principal at Kozak Financial Advisory in Camarillo, Calif. Bourdon obtained the PFS designation shortly after receiving the CPA license. He said it made sense because oftentimes his tax clients would ask his advice on personal financial matters. “Personal finance is growing in complexity, and people need help making sound financial decisions. The public trusts CPAs’ ethics and professionalism and many clients prefer to receive financial advice from their CPA. So personal financial planning is an important and growing part of a CPA practice,” Bourdon says.

Add to your toolbox

If you are a CPA and are thinking about adding personal financial planning services to your practice, consider obtaining the Personal Financial Specialist (PFS) credential. The PFS credential distinguishes you from other CPAs and financial professionals within the field by adding credibility and signaling to clients that you have additional education, experience, and the skill set needed to provide competitive personal financial services.

The PFS credential has been in existence for 25 years and there are approximately 5,000 PFS credential holders nationwide. The AICPA is committed to assisting them by providing workshops and webinars, free marketing tools to help credential holders promote their business, inclusion of their name in the “Find a PFS” database, and other valuable resources through the AICPA PFP Section.

Skimming the tax return

During tax time, you have at your disposal the No. 1 resource that can assist in the personal financial planning process—your client’s federal income tax return, which provides insight to his or her financial planning needs. The tax return should be reviewed and the following client information should be obtained:

  • Is there a need for additional tax planning due to under or overpayment of taxes? Is the client withholding or paying the correct amount of estimated tax payments? Should the client adjust withholdings to get the most out of his or her take-home pay?
  • Does the client participate in a company-sponsored 401(k) plan, IRA, SEP (simplified employee pension plan), SIMPLE (Savings Incentive Match Plan for Employees of Small Employers) or other retirement vehicle? Is the client positioning himself or herself to save the most for retirement taking into account tax-advantaged plans that may fit his/her needs?
  • What type of investment income is the client generating? Is it appropriate for the client’s short- and long-term goals?
  • Are there additional financial planning needs due to partnership interests, sole proprietorships, or ownership in a corporation? Is there a need for additional insurance to protect personal assets?
  • Is there a need for educational planning due to payments made to universities or schools for the behalf of others or self?
  • Does the client have a substantial amount of assets? Should estate planning be considered?

When disclosing or using a client’s return information, be sure to stay within the rules of Sec. 7216.

Choosing your business model

Although many CPAs are recognizing the value of personal financial planning (PFP), some are skeptical about implementing a full-service PFP offering within their practice. As a result, choosing a business model that fits your practice needs is essential. You may elect to offer full PFP services or oversee a wealth management team to serve clients. The team may consist of estate and tax attorneys, investment bankers, insurance agents, and other PFS holders. More importantly, before choosing other professionals, you should question their fee structure, credentials, and educational background.

“There is a variety of business models CPAs [can] follow to provide personal financial advice. Some manage investments, others do not. Some focus on financial issues specific to a particular group, such as seniors or high-net-worth families,” Bourdon said.

No matter which business model you determine best fits your practice, you should have a clear understanding before choosing other professionals to make certain they can carry out your clients’ needs.

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Kemberley Washington, CPA, is an accounting instructor in the School of Business at Dillard University in New Orleans. She has previously worked for the IRS as both an agent and investigator. Check her blog out at Kemberley.com.

* The AICPA’s PFP Section provides information, tools, advocacy and guidance to CPAs who specialize in providing tax, retirement, estate, risk management and investment advice to individuals and their closely held entities. There is a new web seminar series From Tax Preparer to Financial Planner that starts May 16 to aid in the transition.  The AICPA PFP Division has partnered with the Fox Financial Planning Network with a new program designed for the CPA practitioner to help systematize and organize the planning process, administration and delivery of your financial planning or wealth management services.  All members of the AICPA are eligible to join the PFP section. For CPAs who want to demonstrate their expertise in this subject matter, apply to become a PFS Credential holder.