Perceptions and Expectations of CPA Financial Planners

Article excerpt

What do clients want and need?

In the 1980s, personal financial planning was touted as the future growth area for CPA firms. What some didn't realize was how much depends on marketing. PFP is a crowded field there are so many players CPAs must position themselves properly to succeed. In the 1990s, opportunities remain.

* The United States is on the verge of the largest intergenerational transfer of wealth in its history. Almost $5 trillion will change hands over the next 20 years, with nearly $1 trillion to be transferred by the end of the decade.

* U.S. households with $1 million or more in investable assets hold $4.3 trillion in assets. Estimates indicate that less than one-half of these assets are professionally managed.

* Changes outside the accounting profession mean CPAs must scramble harder for a smaller piece of the pie. The advent of personal computers with software that lets small businesses keep their own books cut practice revenue for some firms. Legislation changed tax practices dramatically; yearend tax planning became a thing of the past for most clients.

* Overall concern about personal finances is surprisingly high. Changes in tax policy, baby boomers' heightened awareness of retirement issues, the volatility of investment markets and an increasingly elderly population who fear estate taxes will greatly reduce the amount of assets they can pass to their children have spurred consumer interest in the financial planning process.

The American Institute of CPAs personal financial planning division sponsored a study to enable it to better understand what clients needed, expected and valued in CPA financial planners. The goal, according to PFP division director Phyllis Bernstein, was to gain insights that would allow the AICPA and its members to promote CPAs to key target groups as the "premier financial planning advisers" and for CPAs themselves to learn how to deliver services that clients would value. (The sidebar on pages 52--53 reports on another survey of how consumers perceive CPA--financial planners.)

The research was done in two phases:

* Internal focus groups with members of the PFP division to examine how clients choose financial planners, the competition in the PFP market and what messages CPA financial planners should convey to current and prospective clients.

* Eight external focus groups, conducted by an opinion research firm, in three markets (New York City, Chicago and Portland, Oregon) with 45 users of either financial planning services or CPAs.

SURVEY FINDINGS

Both groups revealed that CPAs must overcome a number of barriers to be considered credible providers of PFP services. The broad definition of a "financial planner" that respondents provided was someone qualified to organize finances as well as to provide advice, guidance and alternative strategies. Many participants already used different advisers (stockbrokers, lawyers and insurance agents) and turned to each individually for separate needs.

Some of the focus groups' key findings included:

* Clients expected a long-term professional relationship with their planners because they anticipated adjustments would be needed as objectives changed.

* The most common trigger for hiring a financial planner was entering a new stage of life: growing older, having children, increased income or assets and a lack of time to handle one's own affairs.

* Experience or track record and professional reputation and references were the most important factors considered in selecting a planner.

* Compensation also was important. Most participants favored paying fees instead of commissions.

* Responsiveness to client needs was more important than the planner's education or the cost of the advice. The least expensive planner typically was not the best one; communication between client and planner was much more valuable.

* Promoting the AICPA personal financial specialist (PFS) designation may be the most effective way to differentiate CPA financial planners from others who do financial planning. …