It's Never Too Early (or Too Late) To Specialize: Is a Career in Personal Financial Planning Right for You? [presenter name/business name] [presentation date] Introduction About the PFP Section & PFS Credential • The AICPA PFP Section provides information, resources, advocacy and guidance for CPAs who specialize in providing estate, tax, retirement, risk management and investment planning advice to individuals and their closely held entities • The CPA/Personal Financial Specialist (PFS) credential distinguishes CPAs as subject-matter experts who have demonstrated their financial planning knowledge through experience, education and testing Personal Financial Specialist 2 Introduction My background in accounting My story about becoming a CPA/PFS Personal Financial Specialist 3 Agenda What is personal financial planning (PFP) & what is a CPA financial planner Why specialize in PFP What are the business opportunities in the profession How to pave your own unique career path as a CPA financial planner How to gain the experience you need within the CPA profession Personal Financial Specialist 4 Traditional Areas Provide the Base for Specialization BASE Specialization Clients ask about planning CPA Tax Provider Clients ask about gift & estate valuations Audits resulting in valuation requests CPA Auditor Fraud suspected or found during audit Audits leveraging automated tools, IT audits, application control reviews, SOC Financial Planning CPA engages in tax, estate, retirement, insurance and/or investment planning services Business Valuation CPA provides business valuation expertise for taxes, M&A, expert witness, and other engagements Financial Forensics CPA engages in forensic work around fraud investigations, etc. Information Technology CPA works on information management & business intelligence engagements Credential Personal Financial Specialist (PFS) Demonstrates expertise through exam , experience and education Accredited in Business Valuation (ABV) Demonstrates expertise through exam , experience and education Certified in Financial Forensics (CFF) Certified Information Technology Professional (CITP) Personal Financial Specialist 5 What is financial planning? RISK MANAGEMENT INVESTMENT RETIREMENT ESTATE TAX Personal Financial Specialist 6 What is a CPA financial planner? CPA financial planner who practices in one or more of the following areas of financial planning: • • • • • • • • • Cash flow planning Risk management and insurance planning Retirement planning Investment planning Estate, gift, and wealth transfer planning Elder planning Charitable planning Education planning Tax planning Enhance your technical credentials with the CPA Personal Financial Specialist (CPA/PFS) • More on this later in the presentation Personal Financial Specialist 7 Why specialize? Client retention Added revenue and profits Staff retention Balance workload throughout year Personal Financial Specialist 8 Why specialize? The most significant challenge facing CPA firms of all sizes across the nation today is client retention and firm growth. Jim Metzler AICPA vice president for small firm interests. Another significant challenge to CPA firms is staff retention and succession. Many in the younger generation are eager to develop a broader expertise that includes financial planning. Personal Financial Specialist 9 What do younger CPAs want professionally? Less compliance/routine work (Type 1 work) More Future oriented and Value driven work (Type 2) such as: • • • • • Financial planning Strategic planning Profit improvement planning Benchmarking Key performance indicator (KPI) monitoring 2020 Survey, Chris Frederiksen, CPA/PFS, Chairman Personal Financial Specialist 10 Why specialize? A study by CEG International found more than half of wealthy individuals are likely to obtain financial services from their CPAs Financial planning is too important to be left in the hands of unqualified professionals CPAs are quite possibly the single most important decision makers for individuals and businesses, and it is time to realize that we do more than just taxes Personal Financial Specialist 11 Specialization will drive accounting sector growth Growth Rate 4x Accounting Industry 1 Forensic Accounting 2x Financial Planning Business Valuation 1x IT Consulting 1 Risk Management 2012 Sources: 1 IBISWorld 2012 2013 2014 2015 2016 2017 2 Deloitte Personal Financial Specialist 12 Why specialize? % of major firms growing their practices in these disciplines…. Business Valuations 75% State and local Taxes 73% International Tax 72% Litigation Support 70% Estate/Trust/Gift Tax Plan. 69% Forensics/Fraud Industry Specializations Source 68% 63% 1 Accounting Today Personal Financial Specialist 13 Why specialize? Findings from 2013 AICPA Compensation Survey • Median total compensation for CPAs is $160,200. That is, exactly half of all CPAs earn more and half less. The average total compensation is $236,600. • The data show that total compensation is higher among credential holders. On average, specialty credential holders receive a total compensation $26,700 higher than non-credential holders. • Many CPAs believe credential holding leads to higher compensation and hiring and promotion opportunities. - 31% say holding a credential leads to increased compensation - 51% say holding a credential makes a difference in being promoted, and - 66% say holding a credential makes a difference in being hired Personal Financial Specialist 14 What qualities make a good CPA financial planner? Interpersonal skills • Working with a variety of client personalities • Communicate complex financial concepts in easy-to-understand language • Willingness to help others. Analytical mind/detail-oriented Desire for life long learning Strong ethical responsibility Personal Financial Specialist 15 How to become a CPA financial planner Education • College level • Beyond (CPE, web seminars, conferences, PFS exam review courses and education) Become a CPA • Bolster your CPA credential with the PFS credential Experience • Develop soft skills • Develop technical skills Understanding the business • Engage with other successful CPA financial planners Personal Financial Specialist 16 Years of Experience Job Position Specialized Credential Career Path / Goals Expert 10+ Years Years 8-10 articles/ speeches/ seminars Years 5-7 Year 3-4 Partner / Managing Director (continue specialized training – advanced) specialized work experience work experience specialized training intermediate work experience CPA specialized training advanced Director obtain specialized credential Manager training - intro / beginning level Senior Staff Year 1-2 work experience training - general Personal Financial Specialist 17 Why does being a CPA matter? True, you can be a financial planner without being a CPA BUT CPAs are the “most trusted advisor” CPAs are required to be objective CPAs have a broad base of knowledge CPAs must follow the Code of Professional Conduct AND The CPA/PFS credential demonstrates your expertise and clearly differentiates you from other CPAs and non-CPA financial planners. Personal Financial Specialist 18 The CPA as the Personal Financial Planner Legacy of the CPA profession & multigenerational perspective • Century of experience sets the CPAs apart the trusted adviser • Independence & objectivity hallmarks of the CPA profession Informal advice morphed to formal profession • CPAs wrote the book on college planning, tax planning and generational wealth planning. • CPA is the personal CFO, simplifying the complexity that wealth brings & often “quarterbacking” other advisers Taxes an integral part of all PFP decisions • Overall picture of a client’s financial situation • Tax returns offer details of cash flow/income situation • Planning decisions have tax implications Personal Financial Specialist 19 Business models Personal Financial Specialist 20 Business Opportunities Endless! You are already the trusted advisor in most cases • CPA credential Familiar with tax strategies and tax law • Impacts all areas of PFP advice Know the client situation • Tax returns Diversify your client base and revenue streams Personal Financial Specialist 21 Scope of Services Segmented financial planning Comprehensive financial planning Financial planning with assets under advisement Financial planning with assets under management Financial planning with assets under management and product sales Personal Financial Specialist 22 PFP Entity Structure Service within CPA firm or separate practice dedicated to PFP CPA firm affiliated separate entity (RIA) Separate entity (RIA) not affiliated with CPA firm Referral partner Personal Financial Specialist 23 Investment Advisory Business Models Investment Adviser Investment Adviser Representative Broker-Dealer Registered Representative Solicitor/Referral Portfolio Manager Compensation Models • Fee-Only Financial Adviser (RIA – fiduciary) – most CPAs use this model • Fee-Based Financial Adviser • Commission Payments The CPA's Guide to Investment Advisory Business Models Personal Financial Specialist 24 Where to look for a job as a CPA financial planner There is no “right” path – almost everyone’s looks different CPA firms (Tax department) Wealth management firms Banks and brokers Start your own financial planning practice Personal Financial Specialist 25 Creating Your Own Career Path Unlike public accounting firms, personal financial planning firms come in all shapes, sizes, and areas of specialization Determine where your strengths lie and the work you really want to do Find the firm that most closely matches your goals or… Create your own firm to fulfill your vision Personal Financial Specialist 26 Bolster your CPA license with the CPA/PFS credential Distinguish yourself from other CPAs and non-CPA planners Affirm your expertise independently by the largest and oldest association of accounting professionals Demonstrate dedication to continual professional improvement in financial planning Enhance your image as a trustworthy adviser to your financial planning client’s with the AICPA’s Professional Code of Conduct Personal Financial Specialist 27 Why choose to be a CPA/PFS? Know your client and, as their trusted advisor, help them plan and make decisions with their entire financial picture in mind Be a leader for your client by initiating advice and coordinating other advisors to your client Be an advocate for your client, to help your client achieve his/her goals Be a coach and educator to your client, to empower your client to make informed decisions Navigate complex issues that your client faces on a regular basis Gain personal satisfaction from working with clients on their path to achieving their goals Personal Financial 28 Who can benefit from being a CPA/PFS? The CPA/PFS credential demonstrates the expertise and experience that a CPA has in personal financial planning. This can benefit many CPAs who practice financial planning: • • • • Tax practitioners who also focus on estate and retirement planning with their clients CPAs providing broad-based comprehensive financial planning services CPA planners focusing on niche areas like wealth management or riskmanagement planning Young CPAs with qualifying experience to gain recognition The CPA/PFS credential validates the CPA’s understanding of the overall financial planning issues faced by his or her clients. This allows CPAs to meet their client’s needs and expectations regardless of how their financial planning business model is structured. Personal Financial Specialist 29 CPA/PFS Qualifications A CPA license and AICPA membership Education • 75 hours of PFP-related education in the last five years Examination • PFS exam, CFP exam, or ChFC exam Experience • Two years of full-time PFP-related experience (3,000 hours, can include 1,000 tax compliance work) Personal Financial Specialist 30 Next Steps Join the PFP Section • See Sarah Bradley at the AICPA booth for a special conference discount. ThisWaytoCPA.com • Website dedicated to upcoming and newly minted CPAs • CPA profiles, career tools, info CPA exam and licensure Social Media • Search Young CPA Network on Facebook, LinkedIn and Twitter Contact us: financialplanning@aicpa.org Personal Financial Specialist 31 Resources for CPAs to take next steps… PFP Practice Center (aicpa.org/PFP/practicecenter) The CPA’s Guide series (http://bit.ly/YJoXkI) • Includes guides on developing and managing a PFP practice, technology in PFP, investment advisory business models, etc. Join the PFP Section (joinpfp.org); Become a CPA/PFS (aicpa.org/PFP/PFS) Forefield Advisor (aicpa.org/pfp/forefield) PFP Pathway: From Tax Preparer to Financial Planner (aicpa.org/PFP/Pathway) Personal Financial Specialist 32 Using a tax return for developing personal financial planning Visit aicpa.org/PFP/pathway to access this checklist and other free resources. Analysis of a Tax Return for Personal Financial Planning Done Dependents and Filing Status Does the client have children? Understand any education planning opportunities. Discuss gifting opportunites with the client. Consider income shifting to take advantage of the children's low tax rate. Have gift tax returns been filed? Do the number and ages of dependents indicate that income continuation needs are likely to be high? Does the client have elderly parents whom they care for? Discuss estate planning with the client. Review the dependency rules to be sure the parents can be claimed. Discuss the future financial commitment of this care with the client. Is the client divorced? Consider filing status and dependency exemptions in divorce situations. Done Income What is the source of the client's income? Understand their sources of income - wages, self-employment, partnership, etc. Are there any income deferral opportunities available given the client's investment income source? Discusss the benefits of saving through 401(k), 457, 403(b), SEP, or IRA's. Does the client have income from a retirement plan still held with former employers? Discuss rollover of funds to an IRA or consolidating IRA's with the client. Does the client have social security income? Consider whether any of the social security income maximizing strategies might apply. Is the family income dependent on one wage earner? Are maximum 401(k) contributions being made? Done Schedule B What are the sources of the client's interest income? If it's taxable, does it come from bonds, CD's, savings accounts, etc? If it's tax-exempt, understand the state tax impact. If the source is savings accounts, consider the FDIC limits If the source is municipal bonds, consider the safety of the bond. Does investment income indicate a liquid fund has been established for emergency needs? What are the sources of the clients dividend income? Is it mostly from mutual funds or stocks? Personal Financial Specialist 33 Questions? Visit aicpa.org/PFP RISK MANAGEMENT INVESTMENT RETIREMENT ESTATE TAX Personal Financial Specialist 34