Are you chasing the right solution? (Financial Services).

Here's a bold idea in the face of an onslaught of accounting reform and attempts to limit what CPAs do: Our role as CPAs will expand. It must.

CPAs realize that they must reassess their traditional roles to meet clients' expectations and demands--including offering more comprehensive financial services. While this "brave new world" represents great challenges, it also holds the promise of great rewards.

STAYING OUT IN FRONT

Compelling market forces are pushing CPAs into financial services. To meet ever-increasing competitive challenges, CPAs must take advantage of new business opportunities.

Ken Koskay, CPA and director of business development at Practitioners Publishing Company, says that non-traditional competitors, such as brokers, banks, mutual funds and insurance companies, are making a "full-court press" to become their high-net-worth clients' most trusted advisers.

They are offering traditional accounting services and positioning themselves as full-service financial companies. "CPAs have the ability to remain the most trusted adviser," Koskay says, "but they must compete effectively to remain in front of the client."

STATUS CHECK

Just how prevelant is financial planning? More than 3,500 CPAs have earned the AICPA's Personal Financial Specialist designation; about 16 percent of the certified financial planners in this country are CPAs; and the AICPA estimates that about 85,000 CPAs are doing financial planning.

According to Karen Goodfriend, co-chair of CalCPA's Personal Financial Planning Committee, CalCPA's chapter and state PFP committees are growing. "Over the years," she says, "I have seen CPAs attend meetings who initially just had an interest in financial planning and now are practicing in that area."

Some chapter committees have grown dramatically, for example, Orange County/Long Beach Chapter's PFP Committee reports a 50 percent increase in meeting attendance over the past two years.

THE FACE OF CPA FINANCIAL ADVISERS

CPA firms are emerging as financial services firms in a number of ways. For example, more than 80 top accounting and financial planning firms recently formed a federally chartered trust company, National Advisors Trust. Members include both large and smaller firms and individual practitioners, some of whom paid an entry fee to be included in the trust.

Trust members have an ownership interest in the trust or co-trust fees associated with the trusts created for their clients. They continue to serve as adviser to their clients' individual trusts, but National Advisors Trust provides custodial service on the account. This establishes a perpetual service that extends beyond the client's lifetime and provides a quality trust service including reporting and record keeping.

Other examples include H&R Block which owns Olde Discount brokerage. This year, a CPA and an adviser firm in Minnesota launched a bank called Venture Bank. The AICPA's website, CPA2Biz, has acquired the brokerdealer Capital Professional Advisors. And the list goes on.

BUSINESS MODELS

CPAS are adopting a variety of consulting and business models for offering financial planning services. Many CPAs offer financial planning as an extension of their current practice. Others have adopted a fixed-fee based consulting practice for middle-income clients.

Others serve as a multi-family office for a limited number of high-net-worth clients. In this scenario, CPAS handle all financial information related to their client's life, from bill paying, account aggregation and reporting, to preparation of financial statements and tax work.

COMPENSATION CONSIDERATIONS

Just as broker-dealers are implementing a fee-based compensation choice, CPA financial advisers have learned that the commission versus fee quandary is a nonstarter. Most CPAs will change compensation methods as their practice or clients change. While CPA financial advisers can be licensed to offer insurance, investment products and variable annuities, quite a few are involved as fee-only insurance consultants.

OUTSOURCING AND PROFESSIONAL SUPPORT

One of the most dynamic and exciting aspects of the CPA-as-financial-adviser trend is the opportunity and necessity to establish external business and professional relationships.

CPA firms have drawn one line in the sand, however: They must control the client relationship. After that they can use a plethora of strategic partners to help them achieve success while outsourcing any part of a project they want.

For example, CPAs can benefit from mutual fund wholesalers who will come directly to a CPA's office to provide training, share marketing materials about products and resources, and ultimately assist the CPA with the sales function.

CPA advisers also can partner with turnkey asset management programs, which develop specific programs and select appropriate investment managers for the CPA's clients based on input from the CPA adviser. The adviser remains in front of the client, as the turnkey asset management program provides reports in the adviser's name. Clients know that the CPA has the authority to fire the asset manager, and CPAs gain some control since they're not actually buying securities but are picking a manager who does.

Additionally, many CPA advisers have joined study groups committed to helping each other make the transition into financial planning. These groups usually meet face-to-face throughout the year, so some travel may be involved. Since the groups share technical expertise and often details of financial plans, some CPAs prefer to connect with a group outside their local area. Strategies for finding a group that fits your needs include personal networking, tapping into CalCPA or the AICPA and researching the National Association of Personal Financial Advisers.

ESTABLISHING A FINANCIAL SERVICES RELATIONSHIP

For firms considering expansion into non-traditional practice areas, a direct relationship with a financial services provider has significant merit. This is based in part on these facts:

* Existing client base demands consulting services for financial advice. Wealthy investors currently have the greatest demand for pure financial consulting services and are willing to pay for this value-added service.

* Consulting with clients in wealth management is a natural extension of existing relationships, and represents an excellent opportunity to leverage those relationships.

* Building alliances is a cost-effective way to become involved in consulting about wealth management.

* As the financial consulting business is established, associated revenues become incremental and fall directly to the bottom line.

PRACTICE TOOLS

CPA financial advisers can enhance client service by using software programs, online services and application service providers for financial planning, asset allocation, portfolio management, data and research services, and more.

Web-based account aggregation tools allow CPA advisers to quickly obtain comprehensive client financial information. The ability to obtain updated information online is a powerful tool for the CPA, however some clients still express a security concern. Koskay reports, however, that clients who are Internet savvy are more accustomed to, and willing, to use online technology and that privacy concerns usually dissipate with usage.

Phyllis Bernstein, CPA/PFS, an author and speaker, is president of New York City-based Phyllis Bernstein Consulting, Inc. www.pbconsults.com. Her firm helps CPAs expand into financial planning and investment advising services. The former head of personal financial planning at the AICPA, Bernstein can be reached at [e-mail].