Offering Financial Planning Services Is a Natural Progression for CPAs

By Kess, Sidney; Mendlowitz, Edward | The CPA Journal, May 2015 | Go to article overview

Offering Financial Planning Services Is a Natural Progression for CPAs


Kess, Sidney, Mendlowitz, Edward, The CPA Journal


CPAs are often their clients' most trusted advisors. Utilizing the unique knowledge obtained while perfonning their core services of auditing, taxes and business consulting, CPAs can easily move into assisting individuals with their personal financial planning (PFP) needs.

The core services of PFP include nontraditional activities, such as business coaching and developmg long-range strategies, cash flow and solvency planning, cost savings and management, business budgeting and forecasting, and sophisticated tax planning integrating a business with its owners. A CPA's access to information and the ready ear of the client make stepping into personal financial planning a natural progression.

Because of a CPA's position, clients readily share their thoughts, wishes, and questions about what they have, where they aie going, and how to get there. These conversations aie segues to estate planning, succession planning, retirement planning, investment and risk management, and exit strategies. Most CPAs who are not financial planners do not venture into these areas because they do not beheve they have the expertise to properly advise on the subject. As tins article shows, however, CPAs know much more than they think they do.

Role of CPA Financial Planner

As with any specialty, it is important for CPA financial pi aimers to be knowledgeable, but adequate knowledge vanes with one's role. Of course, it would be helpful to be expert in eveiy aspect of financial planning, but it's not necessary; rather, what is important is to be able to identify the client's issues, and then bung in an expert that can provide the service. the following aie just a few examples of the services financial planners may provide:

Estate planning. CPAs can provide clients with a review of their will, designation of beneficiary forms, and life insurance policies. CPAs can then prépaie a listing of all the client's assets and, based on the documents provided, prepare a schedule showing when beneficiaries receive their assets and the cash flow that will result. Let the information speak for itself. Most clients do not have adequate plans. After a review with the client, a CPA can recommend an attorney, a business appraiser (if applicable), an investment manager (for substantial liquid assets), and an insurance agent to ensure liquidity to settle debts, provide cash flow, and pay estate taxes. Using tins schedule as a road map, a CPA would become the quarterback of the advisory team.

Investment management Most CPA financial planners do not manage investments, but they can assist in constructing the asset allocation model, tax efficiency of the portfolio, and scheduling the current cash flow and projected growth of principal and income over an anticipated period, such as at retirement. For specific plans, an investment manager can be added to the team.

Long-range planning and goal setting. Many individuals are vague or unrealistic about their financial goals and how to achieve them. Using a CPA's database of knowledge and experience with the client, one can assist in flushing out then thoughts and long-term plans. Once these ai e determined, experts in investment management can be brought in.

Risk management Tins includes having the proper documents including a will, buy-sell agreement, health care proxies, living wills, and perhaps trusts. An attorney can be referred to handle tins. Lopsided asset configuration can be identified and discussed: for example, what would happen if some unthinkable tilings occur that could wipe out a substantial portion of the client's wealth.

Exit planning. Individuals with businesses need selling-the-business planning, succession planning, transition planning, and doing-nothing planning. These all require an initial discussion, and CPA financial planners are the natural professionals to do tins. Experts such as attorneys, appraisers, merger and acquisition advisors, and benefit specialists can be consulted. …

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