The American Institute of Certified Public Accountants (AICPA) and Moss Adams LLP have published jointly a wide-ranging analysis of personal financial planning and investment advisory practices, drawing on information provided by 431 CPA firms using various business models for their financial planning practices. The solo practitioner model (37 percent of respondents) was the most commonly reported, as it is the most commonly observed model among CPA firms, according to the study.
The report, the 2007 AICPA/Moss Adams CPA Financial Planning Practice Study, was created by Moss Adams LLP and overseen by a task force composed of AICPA PFP section members. Moss Adams is the 11th largest accounting and consulting firm in the United States and is headquartered in Seattle, WA.
The study shows significant growth for financial planning and advisory practices within CPA firms, and identifies trends, best practices, as well as some of the obstacles to continued growth for many firms. Appendices to the report include financial statements, key performance indicators, and a breakdown of respondents' answers to all survey questions.
Respondents report impressive year-over-year growth trends for CPA firms in the financial advisory market. For firms reporting revenue for all three years from 2004 through 2006, revenue has grown from $254,000 to $462,000, representing 34.9 percent growth for each of the last two years. What was once a part-time occupation for one individual is now on average a full-time job for one-and-one-half individuals.
Most of the growth of CPA financial planning practices has taken place since 2000, and this growth been more substantial than in the industry as a whole. The 2007 AICPA Moss Adams survey uses data for comparison with the industry overall from two broad surveys conducted by Moss Adams, the 2007 Moss Adams Compensation & Staffing Study of Advisory Firms, and the 2006 Moss Adams Financial Performance Study of Advisory Firms.
Data comparing CPA firms with traditional financial advisory firms show that average overhead for CPA firms of all sizes is lower than for traditional advisory firms, especially at lower levels of revenue.
The report surveys four distinct business models for the structure and delivery of financial planning and advice within or associated with a CPA firm. The majority offer tax services to at least half of their financial advisory clients, but many report that they offer only tax–related services to a large portion of their clients. The four business models are:
- A preferred referral partner or joint venture with a financial planning/advisory firm;
- Solo practitioner providing both CPA and/or financial planning/advisory services;
- Single-entity with multiple professionals providing both CPA and/or financial planning/advisory services; and
- Stand-alone financial planning/advisory subsidiary (entity or business unit), fully or partially owned by a CPA firm.
The solo practitioner model was the model of 37 percent of respondents. Stand-alone entities were the second most common business model, at 27 percent; single-entities (21 percent) and referral partners (15 percent) rounded out the field. The report provides entire chapters of detailed analysis of trends and challenges for each of the four models.
Integration of the financial planning practice with the practice overall is identified in the survey as the greatest single challenge for all CPA firms. Resource allocation is cited as the greatest obstacle to integration, although each of the four business models report distinct resource allocation difficulties related to its structure and focus.
Integrating financial planning and adviser compliance standards is the second greatest challenge for CPA firms entering into the financial planning/advisory profession. Standards for financial planners and advisers are new and different in many cases. While 43 percent of respondents cited compliance as a challenge to successful integration of the financial planning/advisory services and the traditional practice, the challenge of compliance does not seem to be affecting the integration between service offerings.
Gaining access to clients was cited as a major challenge by 26 percent of the respondents.
Information provided by the survey shows that CPA/financial advisory firms should consider the following actions as best practices. Firms should:
- Develop a plan and goals.
- Develop a process for monitoring the performance of the financial planning/advisory service offering.
- Formalize the compensation system.
- Devote time and resources to marketing.
The study's authors recommend that all readers begin with the Executive Summary and then make use of later chapters, tables, and appendices where they are appropriate for their firms and practices.