Evaluating the Financial Planning Services Business Model: Is It the Right Time to Start a Planning Practice?

By Kess, Sidney; Mendlowitz, Edward | The CPA Journal, May 2019 | Go to article overview

Evaluating the Financial Planning Services Business Model: Is It the Right Time to Start a Planning Practice?


Kess, Sidney, Mendlowitz, Edward, The CPA Journal


Financial planning is a generic term for all of the services that CPAs perform that deal with a client's individual wealth. It is also a specific term that relates to a single service that is performed. What can CPAs provide in this field, and how is a business established around financial planning services?

What Financial Planning Is

Financial planning as a generic title encompasses family budgeting; helping a client establish goals and a plan to achieve them; planning for children's educational funding; compensation planning; retirement and estate planning, including family liquidity, postmortem, and estate tax planning; IRA, 401k, 403b and pension distribution planning; elder care planning, possibly including bill paying services; planning for someone who is terminally ill; insurance coverage; asset allocation; assistance with preparing an investment policy statement; evaluating investment performance, including the asset manager's performance; investment and risk management; tax preparation, compliance, and planning; and, if the client owns a business, succession planning, buy-sell agreement planning, and exit strategies.

As a specific term, it involves reviewing an individual's overall financial situation and goals, as well as considering the security they will need when they are no longer actively employed, and then helping to achieve those goals.

Financial Services

Many financial planners offer "financial services," meaning financial products such as annuities, various insurance (e.g., life, long-term care, disability), and mortgages, as well as managing investments, either directly or through a professional investment management organization. Financial services fall under the umbrella of financial planning and will be covered here along with generic and specific financial planning.

Licensing and Credentials

The authors believe that the CPA certificate is the best credential for professionals providing financial services, but other designations also signify relevant expertise. These include the Personal Financial Specialist (PFS), accredited by the AICPA; the Certified Financial Planner (CFP), offered by the College of Financial Planning; and many other recognized credentials and certifications. [For more, see the authors' September 2016 column ("Advisors Involved in Financial Planning," http://bit.ly/2VZKK8d).] Other things that may indicate expertise are article and book writing, speech presentations, purchased and self-published newsletters and brochures, blogs and websites, letters of endorsements from satisfied clients, being active in and serving on boards of professional organizations, and awards from recognized organizations.

How Services Are Performed

Financial planning services differ from attestation services in several important respects. The work is not scalable, systematized, or commoditized; it cannot be performed by lower-level staff; it does not employ uniform processes; and it cannot be done using artificial intelligence or robotics. Many of the planning services involve meetings, either in person or remotely, between the firm and the client. Some financial planning services require considerable back office work, such as when an estate plan is made and net worth statements and cash flow analyses need to be prepared, but most involve minimal back office attention and considerable face time with the client by the partner or expert.

Business Model for a Services Business

People in business need to make a living, accumulate funds for their retirement, and generate profits to distribute to the owners and invest in the business for future growth. Businesses also need to establish a sustainable cash flow stream and be somewhat leverageable. Those firms engaged in financial planning have staff-toowner ratios much lower than those in similar-sized firms that perform traditional accounting and tax services.

Financial services involve selling and business development, some portfolio performance oversight, and interaction by the partner or a high-level staff person. …

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