PFP: what it takes: credentials, time commitment among considerations of offering PFP services

California CPA, Sept, 2005 by Karen Goodfriend

CPAs who provide tax and other financial services already possess many of the requisite skills to provide personal financial planning services. And the trust-worthiness and competency inherent in the CPA brand--our status as the trusted adviser--gives CPAs a competitive advantage as financial planners.

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Further, as financial illiteracy reaches epidemic proportions, the time is right to be a personal financial planner.

In a 2004 CalCPA survey, 40 percent of California respondents reported carrying credit card debt every month, while 58 percent don't save any fixed amount of earnings monthly. Meanwhile, almost 40 percent of all CPA firms will offer financial planning services by 2006, up from 14 percent in 2002, according to a survey by Tiburon Strategic Advisors.

Whether or not they describe themselves as financial planners, many CPAs may provide some element of these services. For example, advising a client on a home mortgage may begin as a tax engagement. But if the client asks, "How much house can I afford and still be able to retire?" the forward-looking scope of the engagement expands to include financial planning.

DETERMING YOUR INTEREST

To help determine whether financial planning is right for you, ask yourself:

* Are you at ease discussing highly personal subjects with clients? For example, understanding the client's life goals and dreams, addressing their career decisions, and dealing with conflicts between spouses about money are all part of financial planning.

* Are you comfortable giving advice based on assumptions about the future, which are inherently uncertain?

* Do you like learning new skills, such as acquiring knowledge of investments and insurance?

* Are you willing to devote enough time to provide this service proficiently?

Once you've assessed your comfort level, you can turn to honing your skills. Financial planning requires technical knowledge of investments, insurance, risk management, estate and income tax. One way to determine your skill level is through the AICPA's Competency Self Assessment Tool, http://pfp.aicpa.org.

But possessing that intellectual capital alone isn't enough. Financial planning takes that technical expertise and applies it to an integrated process of identifying client goals, evaluating alternative paths and making recommendations accordingly.

CREDENTIALS

Obtaining a financial planning credential is an objective way to determine your qualifications and communicate them to the public. There are a variety of credentials to choose from, each with their own features.

PFS--Unlike other certifications, the Personal Financial Specialist is awarded only to CPAs who are AICPA members. The credential differentiates and emphasizes your CPA background, and since the CPA license is a requirement, it requires the highest professional standards of any financial planning credential. Being part of the PFS community also provides a means to network with other experienced CPA financial planners.

To qualify, you must have an unrevoked CPA license, although you do not need to have an active CPA license. In fact, you already may qualify or be on track for the credential since the requirements give significant consideration to lifelong learning, experience and previous exams taken.

For example, a CPA who has provided 1,500 hours of qualifying financial planning services over the past five years, has passed a Series (7, 65 or 66) Exam, and has completed 150 relevant CPE credits or their equivalent in the last five years, is likely to qualify. Advanced degrees, selected readings, and authoring and teaching engagements can also be claimed as qualifying factors. For more information, visit http://pfp.aicpa.org.

PFP providers who are AICPA members must adhere to the AICPA's Code of Professional Conduct and should adopt practices consistent with the AICPA's Statements on Responsibilities (SORs) in Personal Financial Planning Practice, http://pfp.aicpa.org/Resources/Professional+Standards+and+Ethics.

CFP--Some CPAs choose to obtain the Certified Financial Planning certification or both the CFP and PFS. CFP certificants must pass a 10-hour certification exam that tests general principles of financial planning, as well as specifics such as insurance planning and risk management, employee benefits, retirement, and estate and tax planning.

Those pursuing the CFP certificate also must have three years of relevant full-time work experience. CFP certificants must adhere to the CFP Board's Code of Ethics and Professional Responsibility and Financial Planning Practice Standards. For more, visit www.cfp.net/become/Steps.asp.

CLU and ChFC--The Chartered Life Underwriter and Chartered Financial Consultant credentials usually are obtained by those who provide insurance services.

YOUR BUSINESS MODEL

Before taking the plunge into PFP, consider the services you want to provide and how you will structure your practice. Depending on the resources to be committed, a firm or individual may decide to form a strategic alliance with another firm to provide some or all of these services.