Costs and benefits of personal financial planning accreditation.

Approximately 750 CPAs have completed the requirements for the American Institute of CPAs personal financial specialist (PFS) designation as of July 1. Yet there are about 7,500 members of the AICPA personal financial planning division, 80% of whom hold no PFP accreditation. This month, Joseph G. Donelan, CPA, PhD, assistant professor of accounting, University of Northern Colorado, Greeley, reports on the results of a study he conducted to find out what those 80% know about financial planning accreditation and how they view its costs and benefits. Among PFP practitioners, there are two dominant professional certifications: the certified financial planner (CFP) designation granted by the International Board of Standards and Practices for Certified Financial Planners, Inc., and the PFS designation. Yet, more CPAs hold the CFP designation than hold the PFS. Why?

SURVEY RESULTS

A survey was mailed to a random sample of 1,500 PFP division members. Exhibit 1, page 110, shows a breakdown according to the group's accreditation status or desire to obtain accreditation.

Among those not certified as financial planning specialists, there was a slight preference for the CFP. The CFP's popularity may be due to its familiarity. Exhibit 2, above right, shows respondents were more familiar with the CFP and thought it was more widely recognized, even though a majority believed the PFS has more rigorous entry requirements.

ACCREDITATION COSTS

A second survey was mailed to CPAS who hold the PFS designation (the "PFS group"). The survey provides information about how accredited CPAS view the PFS designation's costs and benefits. The views of accredited CPAs are compared to those of nonaccredited CPAs who wanted to obtain the PFS designation, showing the relative level of optimism among potential PFS candidates.

Accredited CPAs were asked to assess the benefits and costs (obstacles) resulting from accreditation; those who wanted the PFS were asked to assess the benefits and costs if they became accredited.

Exhibit 3, at right, summarizes both groups' responses to questions about the six-hour PFS exam, the exam fee and the experience requirement. (Exam candidates must have 250 hours of PFP experience in each of the three years preceding the exam.)

* The PFS group rated the exam as the most significant obstacle.

* The group wanting a PFS designation rated the experience requirement as the most significant obstacle.

* The exam fee appears to be less of an obstacle for both groups.

Exhibit 4, page 111, summarizes responses to questions about legal liability and promotion of the PFS designation.

* Thirty-seven percent of the PFS group believed their legal liability had increased. (Although not shown in exhibit 4, an equal percentage of the PFS group believed it had not.)

* Of those who wanted a PFS designation, 31% thought liability insurance premiums would increase. This might be overly pessimistic; only 6% of the PFS group said their premiums had crease .

* The group wanting a PFS designation was slightly more concerned with state restrictions on their ability to promote their certification than was the PFS group.

ACCREDITATION BENEFITS

Both survey groups, those who held the PFS and those who wanted the designation, were asked whether they agreed with nine statements about the potential benefits of specialization. Respondents viewed five benefits favorably. At least 42% in both groups agreed with each statement and said accreditation had

* Enhanced their professional image.

* Improved their skills and expertise.

* Helped them compete more effectively with non-CPAs offering PFP services.

* Helped them compete more effectively with small and medium sized CPA firms.

* Helped local firms by providing public recognition and credibility. Responses to the next four statements were mixed:

* The designation resulted in in creased referral business.

* Accreditation helped in developing closer ties with other CPA who specialize in PFP.

* Hourly billing rates increased because of the designation.

* Gross billings increased because of the designation.

The PFS group tended to disagree with these statements, suggesting they did not view them as significant accreditation benefits; the group wanting PFS accreditation tended to agree with the statements.

For all nine statements the group that wanted the PFS designation had a more positive attitude than did the group that held the PFS.

OVERALL ATTITUDES

A third AICPA-member group was segregated to help analyze overall attitudes: PFP division members who had no accreditation and did not want to obtain one.

Exhibit 5, at left, shows those who wanted PFS accreditation had the most optimistic view of the cost-benefit relationship. As expected, the lowest rating came from those neither holding nor wanting the PFS accreditation; they also perceived both the experience requirement and the potential increase in legal liability as greater costs than did the PFS group. These results may explain, at least in part, why the former group had no interest in seeking accreditation.

POSITIVE ATTITUDES

Most PFS designees had a positive overall attitude toward the designation, believing it enhanced their image, improved their skills and made them more competitive. Moreover, 82% said they would go through the certification process again, given what they knew about the program.

Requirements that deter CPAs from obtaining the PFS designation included the experience requirement and the exam. Another explanation for the slow growth in the number of PFS candidates was competition from the CFP designation. The CPAs most likely to pursue accreditation view the CFP as more prestigious and widely recognized.

The group surveyed may have preferred the CFP because it has been around longer and more CPAs have earned it.

EXECUTIVE SUMMARY

* ONLY ABOUT 600 of the 7,500 members of the AICPA PFP division hold currently PFS designation. * A SURVEY OF PFP division members without the PFS revealed 80% had no financial planning accreditation and 37% lid not wish to obtain one. * THE CFP DESIGNATION was more popular with survey respondents because they were more familiar with it and believed it to be more widely recognized than the PFS. About 900 CPAs currently are CFPs. * AMONG THE requirements that deter CPAs from obtaining the PFS designation were the examination and experience requirements. A perception of increased legal liability also was a negative factor. * MOST PFS DESIGNEES believed the designation enhanced their image, improved their, skills and made them more competitive with other planners.

PFS EXAM INFORMATION

The PFS exam is offered twice each year--in conjunction with he annual PFP technical conference in January and at testing sites nationwide in September. The next nationwide exam will be January 9, 1994. For more information on the PFS accreditation program or the PFS exam, write the Personal Financial Planning Division, AICPA, Harborside Financial Center, 201 Plaza III, Jersey City, NJ 07311-3881, or call 1-800-862-4272, menu item 5. Applicants will receive the PFS Candidate's Handbook, an application for the PFS exam and other background information?