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How to get started as a financial planner.

In the 1980s, as the term financial planning" first entered the American consumer's lexicon, almost anyone could and did call himself or herself a financial planner. Stockbrokers, accountants, bankers, insurance agents and others claiming specialized training offered a confusing array of credentials: CFP, CPA, CLU, APFS and ChFC. But as the smoke clears in the financial services industry, CPAs, many holding the accredited personal financial specialist (APFS) designation conferred by the American Institute of CPAs, have emerged among the leaders in delivering financial planning services. (For more on the APFS designation, see the sidebar on page 42.)

Today, more CPAs are considering expanding into personal financial planning and still others are considering specializing in this discipline. To help them get started, the Journal spoke with three successful practitioners to see how they got where they are today and what advice they can offer others who may be hoping to achieve similar success.


Larry Fowler, CPA, APFS, has always been associated with local firms, first in California and now in Bellevue, Washington, where he is a sole practitioner. Fowler's experience includes tax, auditing and compilation engagements, primarily for small businesses. After heading the tax department of a large local firm, he decided to avoid "the annual wars of hundreds and hundreds of tax returns" and open his own office. "I do nothing more," Fowler says, "than financial planning and taxes." Even so, he prepares tax returns only for planning clients.

When asked why he started a PFP practice, Fowler answers simply: "Because I enjoy it." He adds, "It's much more creative than traditional accounting." Fowler also wanted to operate his practice on a reduced scale, with fewer responsibilities in terms of employees and less liability exposure.


For Fowler, the difficult part of getting started was understanding the scope of the subject. "In financial planning's relatively short history, we have been through a process of figuring out what it is-and we've been at it for almost 20 years." Fowler encourages beginners to stick with what they are doing while testing their concept of financial planning. "If you have a non-PFP practice, keep it going while you develop a financial planning model that works for you and your clients."

Fowler recommends taking small, manageable steps, the first being to develop technical skills. "Learn how to do cash flow projections, about interest rates and how inflation and financial markets work together." Fowler says it's important to "get good at what you do technically before you try to market financial planning to others." He suggests practicing by doing free plans for friends or long-time clients.


Most CPAs find financial planning involves more reading, research and learning. Fowler had to master two areas not part of traditional accounting: insurance and investments. Before offering himself to clients as a financial planner, Fowler learned everything he could from insurance agents-their products and industry, the way they do business and the relationships they have with their clients. "I knew if I got involved in financial planning I'd eventually have to talk to clients about life insurance, and I like to know what I'm talking about." Fowler found himself making similar forays into investments, spending time with investment professionals and reading about investment theory.


Technological innovation has had a dramatic effect on financial planning. Early plans were produced with a yellow pad and a well-sharpened pencil. Comprehensive PFP software assumed much of that burden in the mid-1980s. Today, technology has come full circle. Many believe most commercially available PFP software is not useful in practice, a view Fowler shares.

"As planners, we are trying to create a basis for an opinion we want to give a client. To do this, we need computer tools that will illustrate the wisdom of our recommendations. Most financial planning software takes a cookie cutter' approach, treating all clients roughly the same." Using spreadsheet software, Fowler has developed his own templates for customizing solutions to clients' problems such as retirement funding, education planning or life insurance needs. "Most software," Fowler says, "is weak on analysis; it doesn't have the tools to analyze insurance or investment recommendations."

Because computers can crunch numbers a lot faster, they remain an essential financial planning tool. Fowler estimates a $1,000 up-front cost for a good spreadsheet or word processing program and a $500 annual cost for updates and new specialized software. Those doing more in-depth investment analysis can expect to spend 3,000 to $4,000 for an investment monitoring program, with $500 annual updates.


As a Washington State resident, Fowler is registered with the Securities and Exchange Commission as an investment adviser. Washington requires anyone calling himself or herself a financial planner to register, the only state that has such a requirement.

In other states, opinion is divided on whether CPAs should register with the SEC and their state securities departments when their performance of investment advisory services is "solely incidental to the practice of accounting," a description fitting many CPAs doing PFP. While the AICPA has taken the position that registration is not required, Phyllis Bernstein, director of the AICPA personal financial planning division, recommends consulting a local attorney. She says most CPAs qualify for an "accountant's exception" because they don't sell securities, hold client funds for investment purposes or hold themselves out as investment advisers.

Even if he didn't live in Washington, it's unlikely Fowler would qualify for the accountant's exception. He does hold himself out as an investment adviser and makes specific investment recommendations, believing he must do so to plan properly for his clients.


Fowler saw some change in revenue when he switched his practice to PFP. "There was a period when I had to accept engagements I ordinarily would not have chosen, because of the economics." To help pay the bills, in his first year on his own he had to do accounting other than financial planning. And while he often wishes he had a stable of tax clients to fall back on, Fowler found it necessary to downsize his practice to concentrate on PFP.

Another skill new planners must acquire is the expertise to market themselves as financial planners. Fowler says the wrong approach is selling" financial planning to clients rather than finding out what's wrong with a client's finances and offering solutions to their problems. "The most effective marketing tool I've found is listening to what's causing clients or prospective clients pain and offering a program to alleviate that pain." (For more on marketing PFP, see the sidebar on pages 44-45.)


Support for new and ongoing planners comes from a variety of sources. Fowler speaks highly of the PFP division. The division, with 7,000 members, offers resources such as

* The Planner, a bimonthly newsletter.

* Practice aids, including a three-volume practice manual.

* An annual technical conference. (See the box on page 45.)

Support also is available from state societies through seminars, specific information on practicing PFP in that state and a chance to interact with peers actually doing planning locally. Most state societies have PFP committees, and many sponsor roundtables where planners exchange ideas on practice marketing and development, software and local tax issues.


Fowler believes most people, even successful ones, struggle with their finances. In doing so, they want to talk to a professional to find out if they are on the right track. One "old financial friend" they depend on, Fowler says, is the CPA who does their taxes. For Fowler, the transition to financial planning has brought him considerable satisfaction. "When you see somebody feel better about where he or she is going in life, you feel better as well-and you get paid for it."



Isabelle Curtiss of Middlebury, Connecticut, is no stranger to success. Her nearly 20-year accounting career includes both audit and tax work. She left Coopers & Lybrand to start a PFP practice as a sole practitioner. Today, she has a successful practice with PFP clients totaling 60% of her business.

Why did Curtiss elect to do financial planning on her own? She believes planning is a personal, partner-level service in which clients expect to talk to someone with experience. "In a large firm, it's difficult to maintain that one-on-one relationship when someone up above keeps looking at the cost-effectiveness of what you're doing and pressuring you to do other work." Curtiss says she needed "the freedom to talk to clients, sift through their priorities and make appropriate recommendations." Flexibility was the main reason for going out on her own. "I do have a regular accounting practice, but it's specialized in closely held business clients and the financial planning it takes to respond to their needs."

Like most sole practitioners, Curtiss does other work, including tax return preparation, pension plan administration and some corporate tax work. She says, "Doing tax returns supports my financial planning work. I have a foundation I can rely on for the bread and butter."


Curtiss says she brought many PFP-related disciplines from her earlier work, including cash flow, budgeting and tax. Her estate and retirement planning background helped, too. "I was already technically competent in many areas a planner needs." Still, she found herself doing considerable reading on insurance, investments and charitable giving, areas in which she knew she was weak. Curtiss says while CPAs often are part of a financial planning team including an insurance agent, stock broker and attorney, the CPA needs varied expertise to communicate with the client and his or her advisers. "Clients look to you to explain the alternatives before going to the professional-insurance, investment, legal-for implementation."

Being a CPA is a definite asset for Curtiss. "My CPA credentials give me the respect of the public and my clients. Adding the APFS designation has given me a credential to support my contention that I do financial planning." She says since clients have more than one need, the flexibility of being able to switch from income tax to estate planning is a "dynamite asset" for any planner.


Curtiss is not a proponent of comprehensive PFP software. "Most clients want segmented planning," she says. "It may be a comprehensive engagement by the time I'm finished, but it's spread over time. " For this type of work, she recommends individual stand-alone software programs that calculate, for example, education funding or life insurance needs. The software should allow data to be "exported" to other parts of the program to minimize data input and should produce a plan tailored to the client's needs. Most such programs are inexpensive when compared with comprehensive packages.


Marketing is critical for any CPA on her own, Curtiss points out, since at larger firms "marketing does not have to be part of your career." She emphasizes that "people won't be aware you are providing the quality services you perform unless you're out front where they can see you." She recommends speaking engagements and, where possible, writing. "Write an article for a technical journal or local newspaper. Researching the article gives you a chance to train yourself, and it's fun." Curtiss does not recommend advertising, saying, "It just doesn't work."


Expanding into PFP is not expensive, Curtiss says, but there are some new expenses. Hers include annual dues (PFP division, $115; APFS, $150), added research services including the Commerce Clearing House Financial and Estate Planning, investment services such as Value Line and other PFP practice aids (about $2,000 annually) and continuing professional education. Most CPAs already incur CPE expenses but will need to include PFP-related areas.


Curtiss enjoys financial planning because it gives her a chance to "touch people's lives. " Her work gives her the satisfaction that she has shown her clients "a way that didn't exist before" and "introduced them to a concept that saved them money." Bringing a smile to a client's face is something Curtiss says she "wouldn't be able to do with routine accounting."

For those considering specializing in PFP, Curtiss has some capsule advice: "Financial planning is the seasoned end of a person's practice. Work with a quality professional experienced in financial planning before going out on your own. Expertise is what sets a planner apart from his or her peers."


Despite the economic woes that have beset the city and state he calls home, Terry Stock has managed to prosper as a financial planner in Houston. His background as a general CPA practitioner is supplemented by five years as an Internal Revenue Service field agent auditing small businesses. Since deciding to specialize in financial planning, he has added the APFS designation to his credentials.

After spending the 1980s with several local firms and at KPMG Peat Marwick, Stock decided to strike out on his own again as a sole practitioner in 1990, doing PFP and tax work exclusively. "You still have to do tax returns to survive, to feed your family and pay the rent." But Stock prefers to avoid accounting work: "I generate no financial statements. I don't even have a general ledger package on my computer."


Stock's career has allowed him to see PFP at several different levels. "I've been with big firms where I instituted a financial planning practice; I've been with one-partner firms where we did planning out of necessity to serve our clients; and I've been on my own." He points out that financial planning has only recently become a service people are willing to pay for. Today, his practice is restricted to upper-level clients.

Stock says he got into financial planning just as Houston began its economic downturn. His clients began asking more unusual questions about tax shelters, etc. "I found myself needing to answer questions that went beyond what the typical CPA deals with." Stock believes if you don't talk to clients about financial planning concerns, someone else will.


Software can help a new planner "pull it all together, " according to Stock. He says PFP software forces him to find answers to all the questions the program poses. "After a few years, many practitioners move away from canned programs as they become more comfortable with what they are doing." Most, Stock says, develop their own software. But he believes a comprehensive financial planning software package helps beginners understand what a good financial plan should include.


For Stock, starting out in financial planning meant changing his "study" habits and the way he approached his work. He found himself doing more reading than ever before, much of it in nontechnical publications such as Money magazine or the Wall Street Journal. "You have to read what your clients are reading" and be ready with answers to their questions.

As a CPA, Stock had some difficulty with the "less precise" nature of financial planning. When doing PFP, projections of income, assets and income tax liability, for example, do not need to be exact, since they are being used only for planning purposes. Stock says, "It's difficult to decide when to bring out your CPA personality and get precise and when to put on your planner hat and be a generalist."


For CPAs starting from scratch in financial planning today, Stock says there is a significant time and money commitment. He estimates an up-front cost of $5,000 to $10,000, not all of it out-of-pocket cash. Some costs are measured in time lost learning a new discipline, reading more or becoming familiar with new software. Hard costs include new software, reference materials and tuition for continuing education.

Stock recommends new planners pick one area, such as insurance, and become an "expert" by taking courses and "reading everything you can." This, he says, gives the planner at least one subject to start talking to clients about. Learning about insurance allows a planner to discuss life, long-term-care or disability insurance. The important thing, Stock says, is to "start talking to clients about something other than tax deductions and audits." Letting clients know you offer services other than traditional accounting may pave the way for questions and lead naturally into a financial planning engagement.


As the three planners profiled here have explained, getting started in PFP is a step-by-step process:

* Identify disciplines (insurance, investments, retirement, estate planning) where you need additional expertise and do research, reading or CPE as necessary.

* Remain in your current position long enough to develop technical expertise and test your financial planning model to make sure it meets client needs.

* Acquire financial planning software to help prepare your clients' plans. Beginners should use a comprehensive package until they are familiar with the elements of a good financial plan.

* Decide if you need to register with the SEC as an investment adviser.

* Carefully evaluate the economics of making the transition to a PFP practice, including start-up costs, ongoing expenses and changes to firm revenue.

* Seek help from the AICPA PFP division and consider obtaining the APFS designation.

One of the most important advantages CPAs have over others doing financial planning is they recommend what clients need, not what they think they can sell. Their job is to provide clients with information needed to make informed decisions. CPAS, Larry Fowler, Isabelle Curtiss and Terry Stock among them, by merit of their training are poised to take advantage of a future in which the need for financial planning is likely to be even greater as Americans try to make do with less while still living better. It presents a significant challenge.


* IN AN ENVIRONMENT where almost anyone can say he or she is a financial planner," CPAs' background and training have positioned them as leaders in delivering personal financial planning services.

* FOR THOSE CONSIDERING specializing in PFP, the accredited personal financial specialist designation can give prospective clients assurance a CPA has met strict requirements and is prepared to deliver high-quality services.

* THREE SUCCESSFUL planners around the country agree the transition to financial planning is well worth the effort. All recommend acquiring the needed expertise before starting an independent practice.

* NEW FINANCIAL PLANNERS will find themselves acquiring disciplines not traditionally associated with accounting, such as insurance planning, investments and retirement funding.

* COMPUTER SOFTWARE CAN help new planners get started. Some seasoned planners, however, find comprehensive PFP software is not flexible enough to address special situations.

* ESTABLISHING A PFP practice involves a significant commitment of time and money. CPAs starting from scratch can expect an up-front cost of 5,000 to $10,000, not all of it cash. Some costs are measured in billable time "lost" to learning new disciplines; hard costs include new software, equipment and tuition.


How can CPA financial planners set themselves apart from their competition? Many elect to pursue the accredited personal financial planning specialist (APFS) designation conferred by the American Institute of CPAs. In a constantly changing business environment, many believe the APFS designation is the consumer's assurance a CPA has met strict requirements and is prepared to deliver high-quality professional services.


To obtain the APFS designation, a candidate must

* Hold a valid state CPA certificate.

* Be a member in good standing of the AICPA.

* Have at least 250 hours of PFP experience per year for the three years immediately preceding the application. This experience must be in each of the six financial planning practice areas: the PFP process, personal income tax planning, risk management planning, investment planning, retirement planning and estate planning.

* Submit a written statement of intent to comply with all reaccreditation requirements.

* Successfully complete a six-hour examination consisting of multiple-choice questions, objective-format other than multiple-choice questions and a case-study question.

* Submit six references substantiating professional experience in personal financial planning.

Pending the results of the exam administered in January 1992, 595 CPAs nationwide hold the APFS designation. They receive marketing support from the AICPA PFP division, including a toll-free number potential clients can call to get the names of APFS planners in their state. Designees also have access to a six-page brochure, which can be printed with their firm name, explaining the APFS designation to clients.


The APFS examination is given twice each year. It next will be administered on September 25, 1992, at 22 sites around the United States. Additional information on the exam and the APFS designation is available by calling 1-800-966-7379 or writing AICPA-PFP Division, 1211 Avenue of the Americas, New York, New York 10036-8775.


How should CPAs market financial planning services? Even more important, how shouldn't financial planning be marketed? Developing a marketing plan typically involves both success and failure. Here are some ideas from experienced PFP practitioners.


Over time, our firm has refined our marketing plan into a five-step process.

Step 1: Know what you do in PFP. The entire financial planning process, from start to finish, should be in place before marketing the service to clients. It's not possible to sell your financial planning expertise successfully until you clearly understand how you can help clients.

Step 2: Believe in the PFP process. Many marketing mistakes stem from forgetting why you're involved in PFP in the first place-to help clients achieve financial peace of mind by understanding their financial goals and developing a plan to meet those goals.

Step 3: Identify your target market. What types of clients are likely to benefit most from the services you provide? If your expertise is developing cash flow models to evaluate retirement-plan distribution options, your marketing plan should target employees about to retire.

Step 4: Communicate with your target audience. Knowing what services you provide and to whom enables you to develop a communication program tailored to your target audience. Use marketing tools that will enable you to inform potential clients of your availability and expertise.

Step 5: Follow up with potential clients. Few clients instantly engage your services as a financial planner. Most need time to consider the services you offer, consult with their spouses, etc. It is, however, helpful to remain in contact with potential clients, by phone or letter, on a regular basis.


Our finn's PFP marketing efforts have involved a few embarrassments, most stemming from our inability to focus on the five steps outlined above. Here are a few things that didn't work for us.

Engaging a public relations firm. We hoped hiring professionals would give us much-needed local exposure. However, since we lacked comprehensive marketing objectives, even the experts couldn't get us that exposure. And since they didn't understand what we did either, the PR firm's efforts on our behalf were expensive and yielded no quantifiable results.

Developing a brochure. Considerable time and money were devoted to producing a brochure with information on our firm, partners, staff and history. Not only did the brochure become dated after the first staff departure but also clients said it was irrelevant to the decision to retain us. Instead, we developed pieces on specific planning areas, such as a summary of current retirement issues accompanied by a biographical summary of staff members with expertise in the area. Even then, clients told us speaking with existing clients with similar problems was much more helpful in making their decision to retain us.

Holding seminars. It's not difficult to fill a room with potential retirees, but few seminar attendees have grown into PFP clients. Seminar attendees are difficult to prequalify, and the type of clients we're seeking rarely attend public seminars.

Sending out a client newsletter. For many years, we mailed a commercially produced newsletter to our clients monthly. A survey revealed most of them did not read it. What they want is short, concise information geared to their own needs. As a result, we developed our own one-page, quarterly newsletter. It focuses on information our clients want and on keeping them up-to-date on our expertise.

DIRK L. EDWARDS, CPA, APFS, is a partner of Edwards & Myers, Portland, Oregon.
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Title Annotation:includes related article
Author:Edwards, Dirk L.
Publication:Journal of Accountancy
Date:May 1, 1992
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