AICPA Issues Practice Standards for CPAs on Personal Financial Planning Services

As consumers are increasingly inundated with a barrage of financial information – both online and in advertising – that is designed to help them make complex financial decisions about their futures, many are turning to their CPAs for objective advice on everything from retirement and estate planning to investments and risk management.

And, according to the American Institute of CPAs (AICPA), a growing number of CPAs are willing to extend their newly honed personal financial planning (PFP) services to help their clients navigate these waters.

The AICPA earlier this month released additional guidance, Statement on Standards in Personal Financial Planning Services, that ensures the profession’s “rigorous code of professional conduct” applies to all CPA financial planners.

The practice standards cover all aspects of the PFP process, from obtaining information to communicating and implementing recommendations, according to the AICPA. The standards are an evolution of principles that have guided CPA financial planners for two decades and require complete transparency on factors, such as compensation and potential conflicts, that could influence client decision-making.

AICPA officials said the standards “build on the robust oversight of CPAs,” and they are authoritative, enforceable, and must be followed by all AICPA members who do financial planning.

“CPAs, through state licensure and professional oversight, must meet the highest bar of competency, objectivity, and integrity,” Lyle K. Benson, CPA/PFS, who chairs the executive committee of the AICPA’s PFP section, said in a written statement. “These standards provide a clear roadmap for achieving that benchmark in a rapidly evolving practice area. They are built on the cornerstone of the CPA profession – the public interest – and enhance the consistency and rigor that CPAs are known for in the financial planning discipline.”

AICPA officials believed it was critical to establish stringent professional standards for PFP as the discipline continues to grow.

Recent statistics revealed a significant surge in the number of CPAs offering personal financial services. Membership in the AICPA’s PFP division has increased 32 percent over the past five years, while the US Bureau of Labor Statistics has projected the number of financial advisors to grow by 27 percent nationwide between 2012 and 2022.

Steven Levey, CPA/PFS, senior principal of GHP Horwath and senior principal of GHP Investment Advisors Inc., was one of the first CPAs to attain the AICPA’s Personal Financial Specialist (PFS) credential and add personal financial services to his CPA firm’s offerings in the 1980s.

Levey, who is also a former member of the AICPA’s PFP executive committee, said he has seen the PFP discipline within the CPA profession grow “exponentially” in recent decades and particularly over the past few years.

“Our firm started offering PFP on DOS [disk operating system] platforms before Windows and the advent of the Internet. Software, educational, and PFP technical materials were not readily available from one resource,” Levey said. “Registration with state and federal agencies and the additional compliance were widely debated. But now the Internet has led the way to resources previously available only to brokerage, insurance, and investment firms.”

Levey believes more clients are turning to their CPAs for PFP services today because, despite the torrent of information available to consumers online, the PFP terrain is still too difficult for them to navigate on their own.

“Unlike Expedia or Travelocity, which puts travel into consumers’ hands, do-it-yourself PFP is still way too complex,” he said. “Our clients actually asked us for advice on proper insurance coverage, appropriate investments, planning for retirement and education, and many other areas. CPAs are highly regarded as objective, and clients have become accustomed to asking their CPAs for guidance. More CPAs are now doing as we did early on – offering and packaging PFP/wealth management services.”

Levey said adherence to the AICPA standards is critical in helping CPAs avoid the potential pitfalls of the PFP industry.

“The standards provide a great platform [for CPAs] to read and constantly refer to. CPAs are used to rules and regulations, and we recommend that they also seek proper legal counsel. The AICPA PFP division has great resources,” he said. “It is also important for CPAs to personally budget time, financial, and human resources to PFP as this takes a full-time and year-round commitment to do it properly.”

But that personal investment, according to Levey, can pay off for any CPA who is willing to commit the time and effort to pursue the AICPA’s PFS credential.

“The CPA/PFS designation is a great marketing differentiator because only a CPA who has undertaken additional studies and passed a comprehensive exam can earn the designation,” said Levey, who was recently awarded the AICPA Special Recognition Award for his contributions to PFP within the profession. “It is a great selling point.”

The AICPA PFP executive committee issued the Statement on Standards in Personal Financial Planning Services, which take effect on July 1, through authority granted by the AICPA’s governing council in October 2012. They are based on the AICPA Statement on Responsibilities in Personal Financial Planning Practice that was first adopted in 1992.

Related article:

Growth of CPA Financial Planning Practices Is Subject of New AICPA Study

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