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Financial Planning > Tax Planning

Should Advisors Fear Accountants?

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For decades, financial advisors have looked to their Certified Public Accountant friends for a steady stream of referrals, so much so, that a marketing label was created to describe their importance in growing new business: the Center of Influence.

One business strategy highlighted by practice management consultants, marketing experts and sales coaches is for advisors to cultivate as many relationships with COI CPAs as possible to continue to nurture advisors’ sales pipelines.

However, that COI strategy may end soon, putting those consultants and sales coaches out of business. Based on the massive number of CPA practitioners that have entered, or are about to enter, the financial planning ranks, COI referrals for advisors in the future could look very different.

The COI phenomenon is largely related to the important position CPAs play as objective professionals for high net worth clients. Because tax considerations dominate many of the decisions clients need to make in optimizing their financial situations, the tax lens provides great insight into budgeting, retirement planning, business ownership issues, college planning, estate planning, investing and more, which pretty much sums up the core areas of the financial planning process.

According to Andrea Millar, director of financial planning for the American Institute of CPAs have been playing the role of financial planner for decades, however, the majority of them stop short of the actual implementation of investing and insurance strategies.

“We estimate that there are roughly 120,000 CPAs involved in some part of financial planning, and we are encouraging them to continue to evolve further to provide advisory services so they can remain the central contact point in their clients’ financial lives,” she said.

The AICPA, a powerful association of over 430,000 CPAs, recently held its annual conference in Las Vegas. The gathering brought together several divisions within the AICPA, one of which was the Personal Financial Planning division, founded in the late 1980s to support the growing ranks of CPAs who were becoming directly involved in providing financial planning services.

The division was created to support this new business model for CPAs, once the AICPA eliminated a code of conduct provision that prohibited CPAs from being involved in earning compensation for investments.

This new conflict-free approach opened the doors for CPAs to enjoy the lucrative AUM fee-based model popular with the wealth management industry. Further bolstering the PFP division was the acquisition of a new designation, the Personal Financial Specialist, a credential similar in nature to the Certified Financial Planner designation.

Currently, there are more than 5,000 CPAs that hold the PFS designation within the growing ranks of the PFP division, which now stands at over 12,000 members. Millar’s mission is to help these CPAs build out their knowledge and implementation in wealth management.

“We believe that CPAs are in a unique situation to advise clients, and we want to encourage them to do more in this area,” Millar said. “To help in this process we are launching a new educational program, PFP Certificates, here at the conference to jumpstart the process for our members to earn the PFS designation, while at the same time encouraging them to continue to extend their service offering.”

As part of this outreach, AICPA has launched a new portal to train and educate CPAs to offer broader wealth management and financial planning services, along with holding two-day workshops at the conference to establish their wealth management businesses. (Go online to

“This is a concerted effort to get members not doing investments to grow their advisory services and take it all the way for their clients,” Millar says. “They don’t have to be an expert in all areas, but can build off of their CPA roots to provide everything a client needs.”

As a result of this investment in educational resources, training and certifications, traditional financial advisors may need to re-think the sources of their new business. Despite the potential competitive threat that CPAs pose to traditional financial advisors, Millar brushes off these concerns.

“Many CPAs involved in PFP still stop short of the actual selling of investments and insurance, so there is still tremendous opportunity for referrals to continue to happen between CPAs and financial advisors as the demand for advice continues to go unmet,” Millar says. “There are over 10,000 baby boomers retiring every day, and the growth we are driving in financial planning will benefit the entire industry in general as clients get what they need and are better served overall.”

Looking forward, Millar and her team are considering creating turnkey resources to get CPAs started in building out their RIA startup firms, such as identifying a custodial and technology platform bundle from preferred providers.

Small is the New Big

One conference session was an engaging discussion led by Bob Veres, publisher of Inside Information newsletter. He was asked by conference organizers to conduct research into the prevailing premise that “bigger is better,” meaning that only the large, scalable advisory firms will win out in the end due to industry consolidation from aging advisors, the constant need for continued technology investment to stay relevant vs. new online competitors, the war for talent that is increasing costs and new regulatory demands being too much for the smaller shops to survive.

Labeled the “David vs. Goliath” debate, Veres made a strong case for why this story has not yet been written and why it may never come to pass. To make his point, Veres took examples from industries similar to financial planning, such as the legal profession.

“Our industry is really just 30-40 years old, so it is very difficult to make these vast generalizations that the big firms will win out,” he said. “As an example, the legal profession [that] has been around for centuries, has not consolidated at all, and in fact is dominated by solo and small practitioners.”

Veres provided statistics showing that there are nearly 130,000 law firms that have fewer than four attorneys, while there are only eight firms that have more than 1,000. Plus, the accounting profession includes a large number of solo firms, 17%, and firms that have fewer than 10 CPAs, 20%.

He then compared these figures to those of the financial advice industry, stating that 70% of advisory firms have less than $100 million in AUM, roughly equating to solo or two- to three-person firms. “Why would our industry be any different than the experience of these other service professions?” Veres asked.

The David-size firms have many advantages over their Goliath-size competitors, he said, including the fact that smaller firms have a much smaller percent of expenses devoted to fixed costs, so when markets go south, they are not drowning in large overhead expenses and can respond more nimbly.

In addition, because smaller firms have lower overall costs, they can be flexible in working with smaller accounts, a vast demographic that cannot be served by the larger firms with their $1 million minimums. This huge opportunity to work with an underserved market will be a powerful growth engine over time.

Further, smaller firms are more adept in adopting new technologies to keep them on the forefront, while large enterprises sometimes take years to evaluate, buy and deploy new systems, that immediately become outdated the minute they go live.

To learn more about what went on at the 2018 AICPA PFP conference, check out the many tweets on the #AICPAENGAGE hashtag on Twitter.


Timothy D. Welsh, CFP® is President and founder of Nexus Strategy, LLC, a leading consulting firm to the wealth management industry, and can be reached at [email protected] or on Twitter @NexusStrategy.

— Check out 9 Things to Talk About When Accountants Suggest a Change in Advisors on ThinkAdvisor.


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