Thus far, however, it's been more like a big tease. To be sure, many accountants have moved into financial planning and continue to do so. The AICPA says 90,000 of its 336,000 members practice financial planning on some level. And 6,300 CPAs hold Certified Financial Planner (CFP) designations.
But to those who have expected an explosion of accountants in the ranks of financial advisors, those numbers are a disappointment compared with their potential.
As the thinking goes, who could possibly be in a better position to segue into financial planning than accountants? They've got the clients. They've got the financial backgrounds. And, as far as the trust factor goes, they've got a built-in advantage.
Despite all this, the growth of accountants in financial planning has largely been stagnant. This is demonstrated by the fact that, for the past decade, the portion of CFP certificants who are accountants has remained steady at about 16%.
"I think the trend just may have been overestimated at its start," says Bob Barry, who has dealt with the issue as president-elect of the Financial Planning Association. The difficulties of setting up a financial planning practice have been among the obstacles holding back accountants, he says. Another issue has been the lack of a compelling reason to do so.
"They haven't felt enough of a revenue crunch that they feel they have to have this incredibly strong initiative to do this tomorrow," he says.
Yet there are those who haven't given up on accountants and who see them as a still-sleeping giant in the financial services landscape. Lou Garday, for instance, made the recruitment of accountants one of his agenda items when he became chief executive officer of the CFP Board of Standards earlier this year. "I would say that the statistics aren't exciting," he says. "But I'm going to suggest there is a lot in the pipeline."
Garday finds encouragement from the fact that 600 to 700 accountants sit for the CFP exam each trimester, and that CPAs have the highest pass rate of any demographic group tracked by the board. The average pass rate is about 55%, compared with 75% for accountants.
Garday expects these numbers to grow, citing anecdotal evidence of an increasing number of CPAs in financial planning training programs. "My feel for this is talking to the educational providers," Garday says.
The CFP Board is being proactive when it comes to recruitment, he adds. Accountants, along with attorneys, insurance agents and other financial specialists, will be the focus of new recruitment programs the CFP Board is planning to carry out in schools and professional organizations, he says.
An accountant himself, Garday says: "These are the very people we want in the profession. They're college-educated professionals and working 50 to 60 hours a week already."
Others point to rumblings elsewhere in the CPA profession. David Goad, founder and CEO of FPtransitions.com, a matchmaking service for buyers and sellers of financial services practices, says his Web site has 100 listings of CPAs interested in buying financial planning practices-up from 20 in the spring.
That still represents a small portion of the site's 1,700 listings, but Goad feels the activity will continue to pick up as accountants gain more expertise in how to transition a business. "The problem is, if you expect to convert your entire tax clientele into an investment program in shorter order, like a matter of six months, that might be a difficult task," Goad says.
That's why CPA firms increasingly are relying on experienced advisors to help them through the transition, he says. FPtransitions.com has consulted on six deals involving CPAs and advisors, two of which were valued at more than $1 million. In many of the deals, financial advisors who are sellers are agreeing to stay on with the firms for an average of two years, Goad says.
"CPAs are taking a little time getting used to this idea," he says. "We really think merger activity is going to pick up as the CPA world gets more comfortable moving into this arena."
The RSM McGladrey accounting, tax and consulting firm in Bloomington, Minn., decided to build a financial planning group in May 2000 and has since hired 30 advisors. The firm, which serves the middle business market and high-net-worth individuals, entered the field after an internal task force concluded that it was something that clients wanted, says Pat Murphy, the firm's executive vice president of wealth-management solutions.
"We were really responding, rather than being proactive, to requests to help them with their financial planning needs," she says. The firm typically would refer the client to an attorney, insurance broker or other service agent, and then the client would be on his own.
"Sometimes it would be six months later, and we'd be looking at an individual's tax returns and say, 'Gosh, I wonder why they got into that investment?'" Murphy says.
McGladrey decided to build a wealth-management group from the ground up, rather than forming an alliance with an investment advisor, to exert maximum control over service quality, she says. A parallel decision was to ensure that service centered on client needs, which is why the firm's financial advisors work on a fee-only basis, Murphy says. "A core ingredient was that we would not be commission- or transaction-oriented," she says.
That's also why the firm decided to take care of its insurance needs by forming an alliance with Pacific Life and National Life. "We knew that we would not be able to recruit or employ the topnotch insurance agents because of their compensation structure," she says.
In August, the firm formally launched its wealth-management group, which gave it equal status with the firm's tax, audit and consulting groups. "It's moved our financial advisors from being part of our tax practice to their own functional group," she says.
Two of the firm's partners have transitioned completely from accounting to financial planning. Several CPAs from the firm's tax group also have decided to devote more than 50% of their time to financial planning, she adds.
Yet, in a reflection of how laborious a transition can be, only about 10% of the firm's clients are using the wealth-management services thus far, but Murphy says it's still early in the process. "The penetration has been less than what I would have wanted, but our last planner was hired two months ago."
While the complexities of moving into financial advising are holding many CPAs back, the process isn't as overwhelming as some may think, says Robert Gray, who chairs the advisory board of Synergy, a national nonprofit organization that helps accountants and attorneys build financial planning practices.
The range of options for CPAs includes simply talking to clients about their financial goals to buying or building a comprehensive financial planning practice, he says. Accountants also are taking different tacts on how far into the planning process they want to go. Many, Gray says, are staying away from portfolio management altogether.
"Every mix you can think of is out there," he says. "The very least they can do is become the steward of alliances with people they've done their due diligence on. They become the real financial steward for their clients."
The tedium of dealing with a new layer of rules and regulations is another issue, says Gray, who is co-author of a guide Synergy offers for CPA firms looking to develop a financial planning practice.
"It isn't so much the cash outlay as it is the time outlay," Gray says of the transition. "Practicing professionals, particularly CPAs, are geared toward budgeting their time carefully and billing by time. They're very aware of that cost."
A key decision CPAs have to make is whether to base their financial planning services on commissions or fees. This has been an ongoing dilemma within the profession-one that some feel could have long-term impacts on how CPAs are regarded.
The danger, Gray says, is that accountants can easily slip into the role of salesman when dealing with clients on a commission basis. For clients who are used to dealing with accountants on an hourly fee basis, this can be a jolt. "The biggest thing a CPA has to lose here is the trusted relationship they have with the client," he says. "The thing is, CPAs aren't great salespeople. In a way, that's been their strength."
But the commission route can be appealing because of the support being offered by large broker-dealers looking to get accountants into their fold. Garday, whose CFP Board is "fee neutral" when it comes to the pros and cons of commissions and fees, says either model is viable for CPAs, as long as clients are fully aware of how their advisors are being paid.
"We think that with disclosure, all forms of compensation are possible," says Garday, who has made the tightening of disclosure rules another one of the missions of the CFP Board. "When I became a CPA in 1971, there was only one way to be paid-by the hour. But the CPA profession, like all other professions, has evolved."
Some who have made the transition say not every CPA will have the tools, or indeed the desire, to embrace financial planning. Despite the similarities between the two professions, there are some key distinctions. Communication skills are vital for financial advisors, who need to go beyond numbers in terms of drawing out the goals, aspirations and concerns of their clients, says Neil A. Brown, a senior analyst at Abacus Planning Group in Columbia, S.C.
Brown, who started a career in public accounting in 1993 before devoting himself to comprehensive financial planning four years ago, says the transitioning CPA also has to get used to looking at the "big picture." "It's a very good skill set to start off from. You have the tax background and the number-crunching ability," he says. "But you have to be able to see the forest for the trees-look at the comprehensive picture instead of moving numbers back and forth."
For an accountant who's used to dealing with individuals through tax return work, such an adjustment can be tough, he says. Particularly because so much of an accountant's work involves looking backward rather than forward. The mental and cultural transitioning from a historian to a futurist can engender a great deal of discomfort among accountants who are set in their ways.
That's why Brown feels many CPAs are backing off from financial planning after sticking a toe in the water. "I see a lot of CPAs that are taking CFP classes that are touting themselves as planners. But whether they are financial planners or not, I don't know," he says.
Then there's the time factor-the eventual realization that it's hard for CPAs to "do it all."
Bob Jazwinski, president of Jazwinski Financial Services in Hermitage, Pa., was among the early CPA converts to financial planning. He was among the first group of CPAs to earn the AICPA's Personal Financial Specialist (PFS) designation in the late 1980s.
In 1986, he folded planning and investment management into his practice because he would "lose control of the process" when his clients turned to someone else to implement their financial plans. Seven years ago, Jazwinski sold the business accounting and tax practices to concentrate solely on comprehensive financial planning. "It was too much. Tax season alone for all accounting firms is particularly intense," he says.
Business has doubled since then, with the firm and its 19 employees serving 350 investment-management clients with about $200 million in assets, and 150 institutional clients for whom the firm does investment-policy and monitoring work. Jazwinski feels CPA involvement in financial advising is inevitable and necessary. But he's concerned that not all CPAs are getting into the field for the right reasons.
"CPAs should be getting involved in this business. They're one of the few service providers that have the best resources to provide the services," he says. "But what I see happening today are a lot of firms advertising that they offer financial planning. In reality, they're just looking to use financial planning as an entry to their next sale or transaction."