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A current focus on IA services.

Providing investment advisory (IA) services is just one aspect of financial planning, which encompasses a wide range of consultative services, including, for example, tax planning, estate planning, retirement planning, risk management and business succession planning. Even so, IA services are currently the focus of much interest and AICPA activity this year. More and more CPAs are venturing into the IA field, and the AICPA is expanding its programs to ease the way.

Expanding a PFP Practice to Include IA Services

Many CPAs are starting to express an interest in providing financial planning services, including IA services. Financial planning services is one of the core services on which CPAs will focus in the future, according to the AICPA's CPAVision Plan. Anticipating and creating opportunities to shape the future, and searching for new ways to provide value-added services to clients, the profession generally is moving toward providing consultative and advisory services.

It is only natural that CPAs, who know so much about their clients' financial situations and expectations, might want to help these clients to plan and implement investment strategies. Investment services can represent a dynamic expansion of a CPA's practice. They can add significant value to a client, and to the CPA-client relationship.

Investment advising builds on CPAs' core competencies of focusing on clients and anticipating their changing needs. The trust that clients feel for their CPAs is a significant competitive advantage.

CPAs already have the consulting and advisory skills necessary to succeed in the IA field. They also have strong analytical skills and trusting relationships with clients to help them get established in the business.

CPAs tend to look at investments like a business. Other attributes that make CPAs well suited to deliver IA services are their:

* Knowledge of numbers;

* Understanding of financial statements;

* Innate conservatism; and

* Tendency to emphasize logic, not emotions.

CPAs already act as their clients' financial "quarterbacks." Often, clients are the ones who push their CPAs toward the IA field, by asking questions like:

* Where should I put my savings?

* I just received a big lump-sum pension distribution. Now what are my options?

* Finally, I have my divorce settlement. What should I do with it?

* What is the best way to put money away for my retirement?

* Can you manage my investments for me?

CPAs who do personal financial planning (PFP) commonly find themselves sending their clients to other business professionals who can help clients implement planning recommendations. Many CPAs would prefer to perform those investment services (and earn the resulting revenues) themselves. Revenues from ongoing IA services are commonly pegged to a percentage of client assets, and, as clients' assets grow, so do advisers' revenues.

In truth, unfortunately, sometimes CPAs believe their clients are getting inadequate service from other service providers. They may have seen clients suffer from misinformation, inept service or even intentional misrepresentations. This, too, provides an incentive for CPAs to provide IA services.

CPAs are in tune with broad business issues and therefore recognize that many trends are fueling the growth in the market for IA services. These factors include (1) the growth and robustness of financial markets in recent years as well as present uncertainties, (2) the focus of baby boomers on retirement planning, (3) increasing reliance of millions of workers on self-directed savings instead of traditional pension plans and (4) a recognition that tremendous amounts of wealth are destined to shift ownership from one generation to the next in the coming decades.

Also, changes in the legislative and regulatory climate have altered the business landscape in significant ways. One such change is that many states have amended the laws governing the practice of accounting, making it feasible for CPAs to enter this field.

Center for Investment Advisory Services Continues to Grow

The Center for Investment Advisory Services is a comprehensive web-based resource for AICPA members, first introduced to readers of The Tax Adviser in the January 2000 issue of this column. Developed by the AICPA as part of a member-driven initiative, the Center is designed to help members compete in an evolving marketplace. Through the Center, the AICPA continues to promote CPAs, particularly personal financial planning specialists, as trusted financial advisers.

The Center integrates the AICPA's internal resources with strategic relationships developed with carefully selected external organizations and vendors. The Center has established alliances with several major service providers in the investment industry, including Morningstar, Ibbotson, Investment Management Consultants Association (IMCA), Securities Training Corporation, National Regulatory Services and Standard & Poor's. Through the Center, these vendors generally provide preferential pricing to AICPA members.

CPAs interested in the Center can get more information by calling 1-877-66-AICPA or by visiting

June 2000 Investment Planning Conference

The Personal Financial Planning Section will hold its annual Investment Planning Conference in Philadelphia on June 1-2, 2000. This conference is custom-designed for CPAs who already provide investment planning services, and for those who would like to expand their practices by advising clients on investment-related decisions or offering investment-monitoring services.

Attendees will hear the latest news on trends in investment planning and innovative investment strategies, plus authoritative information on asset allocation and screening investments. Nationally known specialists will offer practical information and address the effects of current market trends on investment planning. The conference's exhibit hall will display the latest in products and services that can help an IA practice grow.

One add-on to the conference is a full-day seminar on what CPA firms need to know to be successful in the IA field. This seminar, held on the day before the conference, is particularly appropriate for those who are just starting to provide IA services. It is also highly recommended for partners who refer IA work to others within their own firms.

The seminar presenters include outstanding instructors from the IMCA and from the Wharton School of the University of Pennsylvania. They will discuss whether particular types of CPA firms belong in the IA field or not, and will provide an overview of the hierarchy of investment management decisions, the importance of the investment policy statement, the asset allocation process, mutual fund/manager search and selection and performance measurement.

For additional details about the conference, visit or call the AICPA at 1-888-777-7077. For those who are not able to attend the conference, audio tapes and other conference materials will be available through the AICPA.

Editor's note: Sarah Phelan is Technical Manager of the AICPA Personal Financial Planning Team.

The author's views, as expressed in this column, do not necessarily reflect the views of the AICPA. Official positions are determined through certain specified committee procedures, due process and deliberation.

If you would like further information about this article, contact Ms. Phelan at (201) 938-3717.

Sarah Phelan, J.D.

Technical Manager AICPA Jersey City, NJ
COPYRIGHT 2000 American Institute of CPA's
No portion of this article can be reproduced without the express written permission from the copyright holder.
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Title Annotation:investment advisory
Author:Phelan, Sarah
Publication:The Tax Adviser
Geographic Code:1USA
Date:Apr 1, 2000
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