Improving Your Professional
Accounting Skills Workshop
The Changing Role of the CPA in
Investment Services
September 25, 2002
Dr. Tom Payne
Horace and Sara Dunagan Chair of Excellence in
Banking Professor of Finance
The Changing Role of the CPA in Investment Services:
Some Opening Thoughts
•Change is the law of life. And those
who look only to the past or present
are certain to miss the future.— John
F. Kennedy
•The only way to improve your
margins today is by improving your
product. — Southwood J. Morcott,
CEO, Dana Corporation
•I’m only attending school until it is
available on CD ROM — Anonymous
8th Grader
The Changing Role of the CPA in Investment Services:
Recent Trends
• What’s Changing?
• “With so many consumers using packaged software programs
to prepare their taxes, many CPAs are expanding into financial
planning. So far, only a small number of accountants have
made the requisite commitment to financial planning to
establish themselves in the business”…Donald Jay Korn;
Financial Planning, New York; April 1, 1999; pg. 1.
• And, an AICPA-sponsored survey of managing partners
indicated that they expected the greatest percentage growth in
billable hours to come from the consulting area - including
personal financial services……
Source: The new mix of client services; Larry J Rankin; The CPA Journal,
New York; May 2000; Vol. 70, Issue 5; pg. 38.
The Changing Role of the CPA in Investment Services:
Recent Trends
• And, in 1999, a Journal of Accountancy study indicated that
29% of small to midsize CPA firms were either currently
offering or considering the addition of investment services…..
Source: How to start an investment advisory practice; Robert K Doyle; Journal of
Accountancy, New York; Jan 1999; Vol. 187, Iss. 1; pg. 33.
The Changing Role of the CPA in Investment Services:
Recent Trends
More recently, accounting firms have accelerated
their entry into investment services; And, according
to a recent survey of midsize accounting firms:
26% provide investment/financial planning services.
10% offer insurance services.
56% are considering offering at least one of those services.
64% considering those services believe they would best be
offered through an alliance with another financial services
provider.
Source: CPAs cannot ignore investment services; Jay Nisberg; SmartPros, January 8, 2001;
http://finance.pro2net.com/x29092.xml.
The Changing Role of the CPA in Investment Services:
Perceptions About the Accounting Profession
Percent of
Accounting…
Educators
Practitioners
who agreed with
the statement
is more attractive than Finance
38.6
49.5
is more attractive than I/S
22.8
31.1
and I/S should be combined
57.5
52.0
and finance should be combined
41.2
58.6
Business majors are too isolated
62.3
47.3
Accounting is integrated enough
25.0
36.4
and
Source: Accounting Education: Charting The Course Through A Perilous Future;
Steve Albrecht and Robert Sack; Accounting Education Series, Volume No. 16,
August 2000, pg. 39.
And…the Relative (Market) Value Added of Traditional
Accounting Education is Declining…..
Average Undergraduate Salaries
Information Systems
$41,402
Finance
35,500
Accounting
35,090
Average Graduate Salaries
Masters of Information Systems
$60,000
MBA
48,200
Masters of Taxation
43,800
Masters of Accountancy
41,800
Source: Accounting Education: Charting The Course Through A Perilous Future; Steve
Albrecht and Robert Sack; Accounting Education Series, Volume No. 16, August 2000, pg.
39. (Original data from NACE salary study).
Additional Support ….
The CPA Vision Project
In January 1998, 57 delegates to the National Future Forum arrived at
a consensus regarding the top five values, services, competencies and
issues as identified in nationwide forums. This vision was based on:
Focus groups with CPAs in all segments of the profession.
Interviews with users of professional services, business
leaders, legislators and accounting trade reporters.
Discussions with students who decided not to become a part
of the CPA profession.
Input from over 3,300 CPAs who participated in 177 Forums
held across the country.
Finally, this grassroots dialogue led to a consensus view of the
future of the CPA profession.
See: http://www.cpavision.org/index.htm
The CPA Vision Project
• National Top Five Services
Assurance
Technology
Management Consulting
International, and……
Financial Planning
“[To] provide a variety of services to organizations and
individuals that interpret and add value by utilizing a wide
range of financial information. These include everything from
tax planning and financial statement analysis to structuring
investment portfolios and complex financial transactions.” –
http://www.cpavision.org/vision.htm
The CPA National Vision Project
• National Top Five Core Values
Competence
Integrity
Attunement With Broad Business Issues
Objectivity, and…..
Continuing Education and Life-Long Learning
“CPAs highly value continuing education beyond [CPA]
certification and believe it is important to continuously acquire
new skills and knowledge.”
However, A Gap Exists Between Where We Are
and Where We Need to Be…..
• In a recent national CPA survey 9% classified themselves as having a
below-average understanding of basic financial topics, 53% thought
they had an average understanding and 38% felt they had an aboveaverage understanding…..
• “The CPAs surveyed grossly underestimated the potential losses that
have occurred in the stock market in the past. Only 5% of the
respondents correctly answered the question concerning how often
the stock market declines by 20% or more (every five years). Onequarter thought that the stock market had never declined by 20%.
With regard to the volatility of the bond market, 84% of the
respondents underestimated what effect a 1% increase in long-term
interest rates would have on the bond's value. Only 42% of the
respondents correctly ranked investments in order of risk.”
– Unsettling Accounts; Bruce P. Conrad and Bob Brown, Financial Planning,
October 1, 2000; http://www.financial-planning.com/Magazine/mag_oct00.html.
Challenges To Bridging the Gap
• The Need to Eliminate Cultural Barriers
• “Ask anyone under the age of 45 and you’ll find a greater
acceptance that commission and contingent fee services are, on
the whole, fine. - Ken A. Dodson CPA, PFS; Investment services as
a specialty, Ohio CPA Journal, April-June, 2000, pg. 12.
Challenges To Bridging the Gap
• The Need for a Clear Strategic Plan for the Firm
• The Need for Additional Training and Assistance
Training: The Certified Financial Planner
•The CFP Credential…How they
Describe Their Role…
• “The public's growing need for objective financial
planning advice, combined with the rigorous standards
demanded of CFP certificants, has placed the CFP
credential at the forefront of the financial planning
profession. Introduced in 1972, the CFP designation has
become the most widely recognized financial planning
credential among consumers. In the absence of uniform
government regulation of financial planners, this
credential reassures the public that those financial
planners who are CFP® certificants have voluntarily
agreed to adhere to high standards of competence and
ethical practice established by CFP Board.” – CFP Board
of Standards 2002.
http://www.cfp-board.org/cons_abtbrd.html
The Certified Financial Planner
• Guide to CFP® Certification
Detailed information available at: http://www.cfp-board.org/cert_gib.html
To become certified, you are required to meet the
following four initial certification requirements
(known as the four "Es"):
Education
(http://www.cfp-board.org/cert_gibs2.html)
Examination
(http://www.cfp-board.org/cert_gibs3.html)
Experience
(http://www.cfp-board.org/cert_gibs4.html)
Ethics
(http://www.cfp-board.org/cert_gibs5.html)
Personal Financial Specialist
Initial PFS Accreditation Requirements (http://pfs.aicpa.org/)
The PFS designation is granted only by the AICPA.
……To qualify, an individual must:
Be a member in good standing of the AICPA.
Hold an unrevoked CPA certificate issued by a state authority.
Complete the online PFS Application/Assessment Tool
(including a qualified examination) and accumulate at least 100
points in accordance with the PFS Point System.
Submit references and other documentation to substantiate
experience in personal financial planning-related services, and
Agree to comply with all the requirements for reaccreditation.
Personal Financial Specialist
• The PFS “Point System”
Experience – based upon actual time spent performing
financial planning service during a period of up to 5 years
(requirement can reasonably be filled in 2 years).
Life Long Learning – based upon continuing professional
education, conference participation, and accredited college credit
during a 5-year period. Points are also awarded for advanced
degrees, certifications, publications, presentations, etc.
Examination – All candidates must pass an examination.
The PFS, CFP, and ChFC, exams accumulate the most points.
However, NASD “Series” exams (65, 66, and 7) as well as the
CFA also count.
Other Financial Planning Related Designations
and Information Sources
• Chartered Financial Analyst (CFA) –
Association for Investment Management and Research
http://www.aimr.com/cfaprogram/
• Chartered Investment Counselor (CIC) –
Investment Counsel Association of America
http://www.icaa.org/html/cicp.html
• Chartered Financial Consultant (ChFC) –
The American College
http://www.amercoll.edu/
• Additional Resources ….
www.utm.edu/~banking
• Thank You!!!