Public Accountants and Personal Financial Planning: Do We Really Want to Play Second Fiddle?

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Public Accountants and Personal Financial Planning: Do We Really Want to Play Second Fiddle?

Public accountants are ideally positioned to take part in the personal financial planning revolution. However, public accountants need to decide what part they want to play. In a recently published IAFP/Gallup consumer survey(1) only 22% of the respondents indicated that, if they were to chose one financial professional to help them plan budgets, savings, investments, taxes and retirement, they would select an accountant. Almost twice as many individuals reported that they would choose a financial planner. Accountants fare even worse among consumers currently using professional financial planning services. The survey reports that individuals currently use financial planners more than three times as often as they use accountants for these services. Because of their training and experience, accountants should be natural choices as personal financial advisers. After all, they understand budgets and financial statements and are intimately acquainted with the Tax code and their clients' tax returns. Yet, based on market perceptions, accountants may be doing something wrong, and playing second fiddle.

The objective of personal financial planning (PFP) is to help individuals identify their financial objectives, develop a plan for meeting those objectives, implement the plan and then monitor its performance and make any necessary adjustments as objective and circumstances change. Comprehensive and coordinated planning services cannot be provided unless the accountant is willing and able to provide support through the entire planning process while focusing on all of the client's financial objectives. Individuals' objectives differ widely, however they generally fall into the categories of risk management, wealth accumulation and management, retirement planning, and tax and estate planning.

The specialized services offered by most public accountants may appear to limit their ability to solve clients' personal financial problems and demonstrate a lack of interest in them. Individuals offering personal financial planning services need to be broad-based generalists. The accountant/financial planner needs to be part psychologist, part investment and insurance analyst, part tax professional, part accountant and part lawyer.

Public accountants are well-qualified to help their clients develop and implement tax plans. In fact, public accountants in general may be viewed as tax and financial reporting specialists who are unqualified to function in the other areas of financial planning. After all, risk management planning presupposes a certain degree of expertise in all aspects of insurance. To develop wealth accumulation and management plans, the accountant must be familiar with investment opportunities ranging from mutual funds to private placement limited partnerships. Retirement planning is as complex and foreign to many accountants, and tax and estate planning requires that the accountant go beyond the normal function of return preparation and consider such varied subjects as wills, estates, trusts and life-time giving.

In spite of the perceptions and obstacles that may stand in the way, by carefully developing a PFP business plan, individual public accountants can change the part that they play in their financial planning markets. Making a strategic change in a practice's service mix without completely understanding why and without a well-developed implementation plan is a common cause of enterprise failure. It results in overextension without the necessary resource base and commitment. The PFP business plan helps public accountants identify their practice objectives, develop a plan for meeting those objectives, implement the plan and then monitor its performance and make any necessary adjustments as objective and circumstances change. The process is very similar to that used in preparing a financial plan for a client. …