My Start in PFP

In its short lifespan of three decades, personal financial planning (PFP) has made a big impact on the accounting profession. The AICPA in its Vision Project named financial planning as one of the five core services targeted for future CPAs.

My personal involvement in PFP began in the late 1970s, when a tax client who was employed by a Fortune 100 company asked me if my firm provided PFP services. I replied that our relatively small CPA firm did provide PFP. I explained that this is the hallmark of the well-rounded CPA who works predominantly in tax practice. One week later, the tax client asked me to prepare a proposal to provide PFP services to the top executives at his company. There would be competition from other accounting firms and other providers, and two would be chosen as the recommended providers.

During the following two weeks, my partner and I worked feverishly to establish what we believed was the type of program these executives would require and their corporate employer would pay for. After we survived the extensive elimination process, I was to make a presentation to a group of executives and their spouses alongside my competitor, a bank. The bank representatives brought along a number of brochures about estate planning and tax savings, along with a videotape (then a new method of presentation). My one-page handout bore a title that, even for the times, was unabashedly sexist: “What you should know about family finances, a checklist for wives.” I thought I had blown it.

My story had a happy ending, however: 22 of the potential clients in the room that day chose our firm, while only two chose the bank. I was later told that we won them over because “your competition came across as a bunch of strait-laced bankers, and you came over as a concerned CPA who cared about his clients, as most CPAs do.”

Thus, our firm entered the PFP arena, and I quickly learned that several other large- and medium-sized firms were also there. A few of us communicated with each other and we convinced the AICPA to form, as part of its tax division, a Personal Financial Planning Committee. Chaired by Stanley Breitbard, a Price Waterhouse partner, its first meeting was held in the mid-1980s. The committee members were tax people, small-firm practitioners who prepared individual financial statements, an academic who taught taxes, and members from the private banking industry.

We promoted and held our first PFP conference in 1987, a year in which successful conferences were held on both U.S. coasts, showing that CPAs were beginning to clamor for more information about PFP standards, marketing methods, and practical CPE.

PFP Expands

In the following years, several active PFP committee members petitioned the AICPA to permit the Personal Financial Planning committee to break away from the tax division. After a lengthy debate, the AICPA Council established the Personal Financial Planning section, the first practice section outside of the tax division. State societies soon began establishing PFP committees and conferences, and the annual AICPA PFP conference, which accommodates upwards of 1,000 participants, became a big hit. It is no exaggeration that there is a great market for CPAs in the financial planning arena.

In 2001, the International Standards Organization (ISO) established a technical committee (ISO/TC 222 Personal Financial Planning), which I chaired. That committee’s charter was to devise a global standard for personal financial planners, and it was to be the first global standard for a profession attempted by the 80-year-old ISO. The diverse committee members, coming from 15 countries, included university professors, an attorney, economists, and an insurance professional, as well as regulators. We discovered that PFP is not unique to the United States, and that financial problems are similar all over the world.

It took five years of comprehensive negotiations in meetings held throughout the globe to agree on a global benchmark for financial planners, resulting in the ISO approving a pioneering, goal-oriented international standard for PFP practitioners.

Where We Are Today

To me, the biggest surprise is that smaller firms have experienced the major advances in financial planning by CPAs. When I was chair of the AICPA, I was surprised at the number of small-firm practitioners who told me how their practices in PFP changed their overall firms.

First and foremost, PFP protects a CPA’s client base by building and enhancing strong ties with clients. Where appropriate, the CPA becomes the “family consigliore” involving up to three generations: the client, their parents, and their adult children.

In providing PFP, some focus on areas where their firm can provide such add-on services as distributions from retirement plans, estate planning, asset allocation, education funding, and money and cash flow, as well as the possibility of valuations. In many firms, PFP engagements also result in a valuation engagement.

The involvement in PFP also affords the opportunity for referrals to attorneys, investment advisors, and insurance professionals; in some cases, referrals can be made to banks and trust companies to serve as executives and trustees. I do, however, always try to utilize the client’s own advisors. If the client indicates that he does not work with a good estate attorney or insurance advisor, then I will give them the option of working with people whom I recommend.

Many CPAs are obsessed with getting “standard billing rates.” I have found that in almost all personal financial planning engagements, we get our standard billing rate—and in some cases, a bit more.

Last but not least, CPAs should be providing financial planning services to their clients because insurance companies, stockbrokers, and banks are offering these services, but lack CPAs’ familiarity with the client, the knowledge to provide the service, and independence.

Overcoming Resistance

Clients should be made aware of PFP opportunities. CPAs who are part of a larger, multidepartment firm should explain to group leaders what PFP advisors do and how they can assist clients.

PFP practitioners often meet resistance because they will be charging a fee to another partner’s client. One way to take charge of the pitch is to attend a partner’s meeting with a targeted group, tell them what the PFP opportunities are, and explain how PFP is going to benefit their clients. Offer to perform a PFP engagement for skeptical partners and their spouses. Take them through a session and show them how they can benefit from PFP.

Time and time again, I have taken the most skeptical of colleagues and demonstrated what I can do for their families by reviewing their own wills, division of assets, beneficiary designations, education plans, and demonstrating how older associates should take out their retirement assets. Combine that with charitable planning for those inclined, and the result should be a satisfied colleague who becomes a PFP salesman. I can’t emphasize enough how recommendations generate PFP clients for those who are already receiving other services from other partners.

For potential high-net-worth clients, I seek to specialize in corporate executives of large (non-audit client) companies. Establishing a relationship with an influential executive, or human resources personnel, at one of these large companies will help bring in referrals.

Additional sources of PFP clients include law firms and individual attorneys at a particular firm. Investment professionals also need PFP because, in many instances, they focus on generating strong portfolios for their clients, while often neglecting their own estate documents.

PFP Techniques

The following are a few of the various techniques used by many PFP practices, including my own. Keep in mind that what is successful for some may not work for others—as with the lighthouse, keep an open mind.

Attributes of a Successful Personal Financial Planner

Successful financial planners should possess strong interpersonal and communication skills, which are built from the following tenets:

• Believe in yourself; exude confidence.
• Be willing to try new things, and be willing to fail.
• Think about what you want, see the goal, and work towards it.
• Find a good mentor or coach.
• Listen and learn (a good listener is hard to find).
• Don’t be afraid to think outside the box.
• Stick with it, because there will always be good times and tough times.

A brilliant 103-year-old client passed an appropriate credo on to me. It is a quote from Alexander Pope: “Act well your part—there all the honor lies.” This is a good tenet for PFP professionals to hold themselves.