February 7, 2012

AICPA PFP: The ‘Other’ World of Financial Planners

Last month witnessed the national conference for the Personal Financial Planning section of the AICPA – a world of CPA financial planners that have lived a relatively separate existence from “the rest” of the financial planning world.

They have their own membership association – the Personal Financial Planning (PFP) section of the AICPA – with its own member benefits, their own professional designation – the Personal Financial Specialist (PFS) – and as just noted, their own national financial planning conference. Yet CPA financial planners are a rising force in financial planning, and at some point in the next few years will have to make a decision about whether or how they will engage with “the rest” of the financial planning world.

The inspiration for today’s blog post comes from the collective discussions I had and people I met while speaking at the AICPA’s PFP conference a few weeks ago. The PFP event has already set an incredibly high bar for every other conference for the remainder of the year – a bar that I suspect few other conferences will be capable of reaching. Simply put, I think the event has already locked in a place as one of the top financial planning conferences of 2012, and with over 600 paid registrants and nearly 900 total attendees, it’s already the 2nd biggest purely financial planning conference of the year. But the point of today’s discussion is not the conference itself; rather, it’s the people I met there and the organization that supports it.

The AICPA’s PFP section has quietly grown to almost 7,500 members, which still puts it at only about a third the size of the FPA, but approximately triple the size of NAPFA. But given the fact that there are probably tens of thousands of CPAs out there who provide at least some “dabbling” financial planning advice in conjunction with their accounting and tax practices – a target audience the PFP section is acutely aware of – the organization is poised for some very significant growth if they can offer a compelling value proposition for members.

And so far, the PFP section is doing a pretty good job delivering on member value. While the FPA has focused much of its efforts on advocacy and bringing in affiliated members in recent years, the PFP section of the AICPA is squarely focused on providing value to its core financial planner membership. This has translated into a member offering that includes services such as Forefield Advisor (a popular education and communication tool

for financial advisors) and Bob Veres’ well-known practice management newsletter “Inside Information” available for free to all AICPA PFP members. In fact, the cost of PFP membership ($215 for AICPA non-CPA Associate membership + $200 PFP section fee) essentially pays for itself with either those two services alone, not to mention the $300 member discount for the fantastic AICPA PFP national conference.

In addition, the PFP section offers a broad array of continuing education for its members (usually eligible for CFP CE as well), who demand – and generally receive – a pretty high caliber of content. After all, the core of the AICPA’s membership are CPAs, who by the self-selection process of completing the education and examination requirements for the license, are a pretty cerebral, first-class bunch.

In fact, not satisfied with the rigor (at the time) of the Certified Financial Planner marks 25 years ago, the CPA financial planners created their own designation, called the Personal Financial Specialist (PFS). Although early on, the PFS credential required little more than having a CPA license, attesting to delivering financial planning services, and paying a fee, the PFS marks have been bolstered significantly in recent years, and now include their own education requirements (although the CFP educational curriculum would qualify) and their own 6 1/2-hour exam (although having completed the CFP certification exam currently waives the PFS exam).

Historically, the AICPA’s PFP section has been focused squarely on the CPA financial planner, a niche unto itself that has unique issues of its own, from the level of educational content (given the CPA license as an existing knowledge base) to the practice management challenges (integrating financial planning into an existing tax or accounting practice is entirely different than building a financial planning firm from scratch). But recently, the PFP section has opened its doors to non-CPA financial planners as well; not only did their conference boast a significant number of non-CPA planners, but membership itself in the PFP section is no longer restricted to CPAs (although the PFS credential still is). Accordingly, anyone who finds the AICPA’s PFP member benefits compelling may choose to sign up, although a brief look at the PFP section materials makes it clear the “primary” member is still the CPA financial planner.

The question in my mind, though, is where this is all going over the next 5-10 years. Does the financial planning world really have room for “another” membership organization on top of the FPA and NAPFA (not to mention the financial planners who are members of the SFSP)? If the AICPA’s PFP section is successful in converting a large number of CPA “dabblers” into bona fide financial planners, the reality may be that the financial planning

practitioner space is a far larger pool than anyone realized. But what happens if the PFP sections are wildly successful?

If the AICPA’s PFP section eventually grows larger than the FPA and NAPFA combined – which theoretically is quite possible in light of the number of CPAs out there – could the center of gravity of the entire profession shift? This change could especially happen given that many CPAs already believe that the true roots of financial advice lie not in the insurance and investment industry but as an extension of their existing profession? And what if the AICPA’s PFP section is successful in soliciting non-CPA financial planners on the strength of the member benefits offered, without making them feel like “second-class citizens” for not having a CPA?

Could AICPA PFP membership grow not just by expanding the pool of financial planners (converting CPA dabblers into full financial planners) but also by drawing members away from the FPA and NAPFA? Anecdotally, this may be happening already; in my own experience, I’ve heard NAPFA planners state that they found an affinity for the fee-only roots of the accounting profession, while many of the highest quality FPA members have told me they are drawn to the caliber of the peers they find at an AICPA PFP event.

Perhaps an even bigger question, though, is the path of the PFS designation. As the AICPA PFP section invests more time, energy, and resources into the PFS credential, the question inevitably arises: will the PFS become a “competitor” to the CFP certification? After all, if the PFS is simply the same as the CFP, it has no meaning; members will simply choose whichever credential has the greater visibility and perceived value. And right now, that edge has to go to the CFP, which has nearly 13 times as many certificants (with approximately 5,000 PFS credential holders compared to 65,000 CFP certificants), has added almost as many new certificants in the past two years as the PFS has in its 25-year history, and is engaged in a multi-million dollar marketing campaign to further improve its public perception as “the gold standard in financial planning.”

Which means in turn, if the PFS wants to compete, its only real option is to try to claim to be an even higher standard, engaging in a war of public perception in which it is clearly an underdog in resources lagging far behind the CFP’s head start.

Otherwise, frankly, the PFS will just fade away as CPA financial planners voluntarily choose the more visible CFP anyway, which in turn, implies a lot of wasted resources of the AICPA PFP that could instead be allocated back to further bolster its core membership value proposition.

The bottom line is that while the AICPA’s PFP section and its PFS credential has existed in its own financial planning parallel dimension for the better part of 25 years, the divide between itself and the rest of the financial planning world is narrowing as the financial planning world itself continues to grow and extend in a more fiduciary-advice-oriented direction.

And while I’m skeptical that the PFS credential can ever catch up and compete with the CFP certification, whether the AICPA’s PFP membership section can compete with the other membership organizations is a different matter. With their strong internal base of prospective member growth (existing CPAs who wish to expand into financial planning), potential resources from the broader AICPA parent organization with its 377,000 members globally, and a focus on directing value to members that has already anecdotally been drawing some great practitioners away from the FPA and NAPFA, expect to hear a lot more about the PFP section in the years to come.

So what do you think? Does the AICPA PFP section’s membership offering compare favorable to the FPA or NAFPA? Can the PFS compete with the CFP? Have you ever been to an AICPA PFP event? Are you considering their 2013 conference or joining as a member?

Michael E. Kitces, MSFS, MTAX, CFP, CLU, ChFC, is the director of research for Pinnacle Advisory Group, a private wealth management firm located in Columbia, Md., that oversees approximately $1 billion of client assets. He is the publisher of the e-newsletter The Kitces Report and the blog Nerd’s Eye View through his website www.Kitces.com. Kitces is also one of the 2010 recipients of the Financial Planning Association’s “Heart of Financial Planning” awards for his dedication to advancing the financial planning profession. Follow Kitces on Twitter at @MichaelKitces.

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