Regulations N.J.A.C. 13:29-3.8 and 3.12 provide CPAs with tremendous opportunities but, at the same time, open up new areas of liability. Below are some key issues that the CPA needs to consider:
- Objectivity - Until now, our clients have turned to us for independent evaluation of products offered by investment advisors, stockbrokers, and insurance agents. Will we be viewed differently if we receive compensation from the sale of products?
- Disclosure - The new rules provide that written disclosure be communicated to the non-attest client indicating how the CPA will be compensated. We must consider the effect these new fees will have on our existing compensation structure and the relationships we have so carefully cultivated with our clients.
- Education and Training - Specialized additional training is needed to provide comprehensive financial planning. The PFS or ChFC designations indicate to our clients that we have training in financial planning.
- Licenses - The CPA will need to be licensed with the National Association of Securities Dealers and registered with a broker/dealer to sell securities. To charge an investment management fee, the CPA will need to be a registered investment advisor. To sell insurance products, the CPA will have to be licensed by the state. These licenses require training and continuing education.
- Due Diligence/Compliance - As CPAs, we have two basic alternatives to enter the PFP field, either a) provide all services in-house or b) develop an alliance with financial institutions/professionals. An in-house financial planning operation will require significant capital and time commitments. Forming an alliance is the easiest way to enter the PFP field. Whichever alternative is selected, due diligence and compliance with the laws will be critical to your survival in the PFP field.
- Time Constraints - A venture into the PFP marketplace requires a time commitment to learn products, laws and most significantly, the time devoted to the client in developing and implementing a financial plan. We all need to assess whether we can make that commitment and, at the same time, maintain our accounting practices.