Consumer attitudes about accountants as PFP providers.

Many practitioners are now seeking advice on how to develop PFP practices. The guidance they receive often addresses the pitfalls to avoid when establishing a PFP practice, marketing strategies, the possible need to register with the Securities and Exchange Commission as an investment adviser and what additional knowledge and skills they may need to acquire. However, some information critical to their success is missing: What do consumers think about PFP and about CPAs providing such services?

We conducted a survey to answer questions such as: What type of financial planners do consumers consult? Are they satisfied with their current advisers? Which. planners will they choose in the future? Answers to these questions will allow CPAs to better evaluate whether to offer PFP services.

SURVEY DATABANK

The study's database was drawn from policyholders of a large life insurance company. From a survey of 10,000 randomly selected policyholders, there were 1,734 usable responses, a 17.3% response rate. To help assess consumers' demand for PFP providers, eight demographic factors were examined, including age, gender, marital status, family income, level of education, occupation and number and age of children.

THE IMPORTANCE OF FINANCIAL PLANNING

More than half (51%) of respondents believed it was extremely important to consult a competent PFP adviser. Another 28% considered seeking financial advice to be slightly important.

Even though respondents thought PFP was important, only 35% actually sought advice. As expected, current users of professional advisers attached more importance to financial planning than nonusers.

The likelihood of consulting an adviser increased with age. In general, respondents with higher incomes also were more inclined to seek financial advice. The demand for planning services began to significantly increase when annual income reached $50,000 or more.

CHOICE OF CURRENT PROVIDERS

The survey gave consumers seven choices of PFP service providers: attorney, banker, stockbroker, accountant, life insurance agent, friend or relative and other. (For analysis purposes, attorneys, bankers and stockbrokers were grouped in one response category.) Because the sample was drawn from life insurance policyholders, respondents were expected to seek advice from insurance agents most frequently. Exhibit 1, above, confirms this expectation. Accountants were the second most frequently consulted adviser.

Consumers of all ages used insurance agents the most frequently, but the second choice varied by age. Older people tended to choose professionals for PFP advice while younger people relied more on friends or relatives. Married people also used professional advisers more often than singles, who frequently consulted friends or relatives.

A relationship also exists between income level and respondents' attitude toward accountants as PFP providers. As income increases, so does the preference for CPAs. Of particular interest is the finding that those with the highest income level ($75,000 or more) showed a significantly higher preference for CPAs than for any other PFP provider.

YES, BUT ARE YOU SATISFIED?

To measure consumers' satisfaction with their current advisers, respondents were asked if they would use their advisers again. As shown in exhibit 2, page 53, respondents expressed a high level of satisfaction overall, with accountants receiving the highest rating; 74% of those who used CPAs would consult one again. Life insurance agents also earned high praise. As might be expected, friends or relatives got the lowest rating.

The level of satisfaction with current providers appeared to influence future preferences. As exhibit 3, page 53, shows, CPAs were the first choice to provide future PFP services, followed again by life insurance agents and attorneys-bankers-stockbrokers. Friends or relatives received substantially less support than other providers.

Consumers selected CPAs as their first choice to provide future PFP services for several reasons, including that CPAs already

* Know their clients and understand their goals.

* Stay informed about tax matters.

* Serve as an objective party in handling financial affairs.

ASSESSING THE PFP MARKET

Although the results favorably presented CPAs as PFP providers, a critical question remains: Does a financial planning market exist for accountants? Studies have shown that the most useful criteria in evaluating a market for accounting services are income level and net worth.

Income. All income levels except the lowest chose CPAs as their most preferred advisers. Significantly, consumers' preference for accountants increased as income rose. Almost half (46%) of all respondents earning at least $75,000 annually preferred accountants as financial advisers.

Net worth. Because respondents were not asked their net worth, age was used as a surrogate measure. In the survey, not only the 50 or older group but all age groups preferred CPAs as their future financial planners.

FUTURE CONSIDERATIONS

The returns are in. Consumers believe financial planning is important and say accountants are their preferred PFP providers. CPAs are uniquely positioned to help consumers meet their financial planning needs. These needs are part of a complicated, multilayered process that includes income and estate tax planning, retirement planning and insurance needs. No one planner can typically satisfy all of these concerns. Given their training and commitment to ethical standards, CPAs are, however, in an excellent position to coordinate the process. Based on the survey results, the public apparently agrees.

Exhibit 1: People Respondents Chose as PFP Advisers

Accountants...............................22%
Life insurance agents.....................30%
Attorney/Bankers/Stockbrokers.............20%
Friends or relatives......................13%
Other.....................................15%

Exhibit 2: Would You Use Your Adviser Again?

Type of financial planner

Accountants...............................74%
Life insurance agents.....................71%
Attorney/Bankers/Stockbrokers.............66%
Friends or relatives......................53%

Exhibit 3: Future Preference of a PFP Adviser

Type of financial planner

Accountants...............................33%
Life insurance agents.....................30%
Attorney/Bankers/Stockbrokers.............27%
Friends or relatives......................10%

DELTON L. CHESSER, CPA, PhD, is Roderick L. Holmes Professor of Accounting at Baylor University, Waco, Texas. CARLOS W. MOORE, PhD, is Edwin W. Streetman Professor of Marketing at Baylor University. SHWETA SAKARDA is an accountant with Crossings Development Corporation, Austin, Texas.