Executive Summary
Last month witnessed the national conference for the Personal Financial Planning section of the AICPA – a world of CPA financial planners that have lived a relatively separate existence from “the rest” of the financial planning world. They have their own membership association (the Personal Financial Planning {PFP} section of the AICPA) with its own member benefits, their own professional designation (the Personal Financial Specialist {PFS}), and as just noted, their own national financial planning conference.
Yet CPA financial planners are a rising force in financial planning… and at some point in the next few years, will have to make a decision about whether or how they will engage with “the rest” of the financial planning world.
The inspiration for today’s blog post comes from the collective discussions I had and people I met while speaking at the AICPA’s Personal Financial Planning (PFP) national conference a few weeks ago. The PFP event has already set an incredibly high bar for every other conference for the remainder of the year – a bar that I suspect few other conferences will be capable of reaching. Simply put, I think the event has already locked in a place as one of the top financial planning conferences of 2012, and with over 600 paid registrants and nearly 900 total attendees, it’s already the 2nd biggest purely financial planning conference of the year. But the point of today’s discussion is not the conference itself; rather, it’s the people I met there and the organization that supports it.
AICPA PFP (Personal Financial Planning) Section
The AICPA’s PFP section has quietly grown to almost 7,500 members, which still puts it at only about 1/3rd the size of the FPA, but approximately triple the size of NAPFA. But given the fact that there are probably tens of thousands of CPAs out there who provide at least some “dabbling” financial planning advice in conjunction with their accounting and tax practices – a target audience the PFP section is acutely aware of – the organization is poised for some very significant growth if they can offer a compelling value proposition for members.
And so far, the PFP section is doing a pretty good job delivering on member value. While the FPA has focused much of its efforts on advocacy and bringing in affiliated members in recent years, the PFP section of the AICPA is squarely focused on providing value to its core financial planner membership. This has translated into a member offering that includes services such as Forefield Advisor (a popular education and communication tool for financial advisors) and Bob Veres’ well-known practice management newsletter “Inside Information” available for free to all AICPA PFP members. In fact, the cost of PFP membership ($215 for AICPA non-CPA Associate membership + $200 PFP section fee) essentially pays for itself with either those two services alone, not to mention the $300 member discount for the fantastic AICPA PFP national conference! In addition, the PFP section offers a broad array of continuing education for its members (usually eligible for CFP CE as well), who demand – and generally receive – a pretty high caliber of content. After all, the core of the AICPA’s membership are CPAs, who by the self-selection process of completing the education and examination requirements for the license, are a pretty cerebral, high-caliber bunch.
The CPA/PFS Designation Of The AICPA
In fact, not satisfied with the rigor (at the time) of the Certified Financial Planner marks 25 years ago, the CPA financial planners created their own designation, called the Personal Financial Specialist (PFS). Although early on, the PFS credential required little more than having a CPA license, attesting to delivering financial planning services, and paying a fee, the PFS marks have been bolstered significantly in recent years, and now include their own education requirements (although the CFP educational curriculum would qualify) and their own 6.5-hour exam (although having completed the CFP certification exam currently waives the PFS exam).
Historically, the AICPA’s PFP section has been focused squarely on the CPA financial planner, a niche unto itself that has unique issues of its own, from the level of educational content (given the CPA license as an existing knowledge base) to the practice management challenges (integrating financial planning into an existing tax or accounting practice is entirely different than building a financial planning firm from scratch). But recently, the PFP section has opened its doors to non-CPA financial planners as well; not only did their conference boast a significant number of non-CPA planners, but membership itself in the PFP section is no longer restricted to CPAs (although the PFS credential still is). Accordingly, anyone who finds the AICPA’s PFP member benefits compelling may choose to sign up, although a brief look at the PFP section materials makes it clear the “primary” member is still the CPA financial planner.
The Future Of AICPA PFP And The CPA/PFS Designation?
The question in my mind, though, is where this is all going over the next 5-10 years. Does the financial planning world really have room for “another” membership organization on top of the FPA and NAPFA (not to mention the financial planners who are members of the SFSP)? If the AICPA’s PFP section is successful in converting a large number of CPA “dabblers” into bona fide financial planners, the reality may be that the financial planning practitioner space is a far larger pool than anyone realized. But what happens if the PFP sections is wildly successful? If the AICPA’s PFP section eventually grows larger than the FPA and NAPFA combined – which theoretically is quite possible in light of the number of CPAs out there – could the center of gravity of the entire profession shift… especially given that many CPAs already believe that the true roots of financial advice lie not in the insurance and investment industry but as an extension of their existing profession? And what if the AICPA’s PFP section is successful in soliciting non-CPA financial planners on the strength of the member benefits offered, without making them feel like “second-class citizens” for not having a CPA? Could AICPA PFP membership grow not just by expanding the pool of financial planners (converting CPA dabblers into full financial planners) but also by drawing members away from the FPA and NAPFA? Anecdotally, this may be happening already; in my own experience, I’ve heard NAPFA planners state that they found an affinity for the fee-only roots of the accounting profession, while many of the highest quality FPA members have told me they are drawn to the caliber of the peers they find at an AICPA PFP event.
Perhaps an even bigger question, though, is the path of the PFS designation. As the AICPA PFP section invests more time, energy, and resources into the PFS credential, the question inevitably arises: will the PFS become a “competitor” to the CFP certification? After all, if the PFS is simply the same as the CFP, it has no meaning; members will simply choose whichever credential has the greater visibility and perceived value. And right now, that edge has to go to the CFP, which has nearly 13 times as many certificants (with approximately 5,000 PFS credential holders compared to 65,000 CFP certificants), has added almost as many new certificants in the past two years as the PFS has in its 25-year history, and is engaged in a multi-million dollar marketing campaign to further improve its public perception as “the gold standard in financial planning.” Which means in turn, if the PFS wants to compete, its only real option is to try to claim to be an even higher standard, engaging in a war of public perception in which it is clearly an underdog in resources lagging far behind the CFP’s head start. Otherwise, frankly, the PFS will just fade away as CPA financial planners voluntarily choose the more visible CFP anyway… which in turn, implies a lot of wasted resources of the AICPA PFP that could instead be allocated back to further bolster its core membership value proposition.
The bottom line is that while the AICPA’s PFP section and its PFS credential has existed in its own financial planning parallel dimension for the better part of 25 years, the divide between itself and the rest of the financial planning world is narrowing as the financial planning world itself continues to grow and extend in a more fiduciary-advice-oriented direction. And while I’m skeptical that the PFS credential can ever catch up and compete with the CFP certification, whether the AICPA’s PFP membership section can compete with the other membership organizations is a different matter. With their strong internal base of prospective member growth (existing CPAs who wish to expand into financial planning), potential resources from the broader AICPA parent organization with its 377,000 members globally, and a focus on directing value to members that has already anecdotally been drawing some great practitioners away from the FPA and NAPFA, expect to hear a lot more about the PFP section in the years to come.
So what do you think? Does the AICPA PFP section’s membership offering compare favorable to the FPA or NAFPA? Can the PFS compete with the CFP? Have you ever been to an AICPA PFP event? Are you considering their 2013 conference or joining as a member?
Michael –
Maybe the most important role of the AICPA in financial planning will be complementary to that of the CFP/FPA community, instead of competitive – helping people of financial means below the CFP/FPA market, in the “rest of the population” addressed in two of your recent blogs.
There are now strong sources of financial help for people toward the two ends of the financial-resources range – for those of wealth above $X, full rich CFP/FPA level services, and for those just getting by, Financial Literacy. But for folks in the middle, with modest savings to invest for retirement, what? – they are left in a deep dark forest of investment “information” that’s confusing and to a great extent misleading. I think this is the big hole or gap in the world of financial advice.
As long ago as the late 1990s, I heard predictions that CPAs would dominate financial planning because (a) they rank especially high in the public’s trust and (b) they are already providing tax and maybe other financial services for “nearly everyone.” Well – maybe if they are already providing tax services to people with modest sums to invest, they could also very economically provide those clients good investment advice.
In addition to the AICPAs’ PFS credential and PFP section for financial planning services like those of the CFP/FPA end of the population, which you discuss in this blog, the AICPA also has a strong program in “financial literacy” for those just getting by – its “360 Degrees of Financial Literacy” program by. Maybe the AICPA and its members will lead and dominate in meeting the investment-guidance need for folks in the middle?
Dick Purcell
Michael,
Thank you for this blogpost. As a non-CPA CFP, I have been interested in the AICPA PFP section for some time now, but was unable to join until they opened up their membership to non-CPAs just recently. Now the question is whether to join the PFP section in addition to the FPA – I don’t think I would drop the FPA membership. One of the primary benefits of FPA membership in our area are the monthly chapter meetings, which the PFP does not have.
You are an enthusiastic proponent of the PFP annual conference in January. I attended the FPA Experience last September and found it be valuable. Would I attend both conferences? Probably not – too expensive.
So the question for me is, Do CPAs (or more precisely the PFP section) know, teach and promote something important about financial planning that the FPA does not? For example, do their members have some kind of technical edge?
Probably the only way to find out is to join the PFP section and go to the annual conference.
As always, thank you for your thoughtful insights.
Best regards,
Art Dicker
Thank you Michael!
I’m particularly passionate about the PFS credential because, as recently pointed out by Blaine Aikin in Investment News, the AICPA Code of Professional Conduct sets true professionals standards. As such, the PFS credential has grown FROM and not TOWARDS a responsibility to clients and society. This forms a like-minded group of cohesive practitioners with a strong sense of professional identity and responsibility.
Rooted in that responsibility, the focus of the credential has been in helping its holders best help clients (best practice focus). As a PFSer, I find the debates that consume much of the domestic financial-planning world to be foreign. A PFSer has not only a fiduciary duty, but a standard of due care. Here’s an excerpt:
The quest for excellence is the essence of due care. Due care requires a member to discharge professional responsibilities with competence and diligence. It imposes the obligation to perform professional services to the best of a member’s ability with concern for the best interest of those for whom the services are performed and consistent with the profession’s responsibility to the public.
As such, the goal of the PFS credential is not to compete with anyone. Being the most selective financial planning credential, it will never come close to the numbers of other credentials. The goal of the credential should not be size, but as due care requires, excellence in practice. The best way to promote an individual financial-planning practice is to reach excellence (most new business comes from word-of-mouth, not a credential). Why would a financial planning organization or credential promote itself any differently than by helping members reach excellence? Therefore, I believe PFS will continue to attract CPAs to a familar community that requires, exemplifies and furthers excellence.
Your question about CPA financial planners joining the rest of the financial planning world is answered by “the divide between [CPAs] and the rest of the financial planning world is narrowing as the financial planning world itself continues to grow and extend in a more fiduciary-advice-oriented direction.” Who’s joining who? 🙂
As always, thank you so much for your dedicated contribution to professional excellence.
Respectfully,
Jean-Luc
Jean-Luc,
Thanks so much for the feedback and for sharing.
I think my challenge in this space is that what you’re describing is not really a “PFS”. You’re describing a CPA Financial Planner. And I’m not clear why you need a special label called the “PFS” to describe that.
If we strictly look at the actual educational, exam, and experience requirements for the PFS, along with enforcement of the credential after the fact, and compare it to the CFP, I find it questionable to claim that it is the ‘higher standard’ or the most selective. Being a CPA financial planner is unquestionably more selective, due to the CPA path at its roots, but again that’s technically about being a CPA financial planner.
So I guess what I’m not clear about is if the REAL point is the value of a CPA financial planner, why can’t we just say CPA/CFP instead of CPA/PFS? Does the AICPA PFP section really plan to put resources into the PFS to make it a truly higher standard? Will they have greater educational requirements that the CFP? Will they establish a tougher exam? Will they insist on more experience? Will they have more stringent enforcement of the marks?
I suppose that is a path to go down, but I’m still not clear what the point is. What is it that CPA/PFS conveys that CPA/CFP doesn’t?
The point here is not to hold out the CFP as the penultimate of professional certification – they have further to go too – but I still struggle to see the purpose of a PFS that doesn’t make its point with “CPA/CFP”.
Respectfully,
– Michael
Michael,
Those are very good questions. If you get 3 financial planners in a room, you’re likely to get at least 4 answers to each 🙂
I can only speak for myself. From my point of view, CPAs have a well-established and defined profession with strong values, mission, and vision. Within that profession, are specializations (like law and medicine have). Financial planning being an important specialization within the core purpose of the CPA profession (making sense of a changing and complex world), it is logical to both support and certify the specialization within the profession–building on the same professional framework and culture (code, standards, values, history, community, etc.)
Medicine and law validate specializations within their profession. Who else could validate them as specialized professionals? That’s why the PFS credential is important. All pieces fit: CPA is the profession, financial planning the specialization, the PFP section provides a specialized community and PFS demonstrates accomplishment (equivalent to board certified).
To me, CFP is a solid, but stand-alone credential (among others) still trying to define the profession it represents and short on the resources it offers. The question for me is: what credential makes sense as a specialized CPA? CFP is good, but PFS emerges from a professional organization that offers community, resources, benefits and represents my professional home.
A PFSer must be (1) a CPA and (2) a member of the AICPA. That’s simply why it’s already more selective and sets a higher standard. The entry-way is much narrower.
That is also why there’s a difference between a CPA/PFS and a CPA, CFP. A CPA/PFS must be an AICPA member, so is subject to the AICPA code of conduct. All CPA/PFSers belong to a supportive community of like-minded peers (the PFP section). CPA/PFS conveys a cohesive and integrated professional identity, rather than a split personality.
All this said, any credential conveys one has met some minimum competency to practice. Beyond that, practitioners are not as good as their credential… they are as good as they make themselves.
Many thanks for the stimulating thoughts.
Respectfully,
Jean-Luc
Michael’s blogs show that he is a thought leader in our profession. The issues raise should be discussed.
I agree with Jean Luc’s remarks. For full disclosure I am a member of the FPA and NAPFA but am not a CFP.
When the fiduciary issue was bubbling-up, FPA resisted it. The CPA requirements do not call it a fiduciary duty, but prescribe the steps to be impartial, independent, etc., that is, to be a fiduciary.
When there were questions if financial planning was a profession, the CPAs were already recognized as a profession.
Today the FPA is marketing and lobbying to be the premier organization for financial professionals. Bankers, insurance agents and stockbrokers are looking to the CFP to become perceived as professionals.
CPAs have and should continue to be the leaders in setting the standards. The PFS designation is not well known, even within our profession. Confusing the issue is that many financial planners active in the public arena are CPA/PFS and CFPs. Before the AICPA had PFS designations and when the AICPA indicated they were not sure if they wanted to support the PFS many CPAs sought the CFP as the leading financial planning organization. When they appear in public they are sometimes identified with designations of; AICPA/PFS, CFP or both. This gives the public a mixed message.
The AICPA should continue to support the PFS and increase its efforts to make it well recognized. The attributes of a CPA are ideal to provide the type of professionalism that is required in the financial planning profession.
A question that could be implied from Michael’s blog is if the CFP designation should be embraced by the AICPA. Then the designation for a CPA that specializes in financial planning would be CPA/CFP. This would require time to evaluate to see if it was practical. If it is to be considered, the process should begin now not in 5 or 10 years.
Joseph,
Thanks so much for the feedback.
Indeed, your final paragraph I think is a key question for the PFP leadership. When I look 10 years out, I easily see 100,000 CFP certificants. At that point, unless the AICPA has DRAMATICALLY expanded its marketing and promotion of the PFS, I suspect most CPAs will go with the “more publicly recognized” designation anyway.
Which means the proactive strategy discussion is to be had now: will the AICPA promote the PFS as an alternative mark to the CFP – with all the costs that really building a competitive designation would entail – or not. If the AICPA isn’t ultimately going to invest far more into the PFS, then I have to question whether it’s a constructive use of resources to keep supporting it until it is dwarfed even further by the CFP anyway.
And as you note, what I think that ultimately comes back to is: Does “CPA/CFP” still say everything that you’re trying to communicate about CPA professionalism combined with being a CFP practitioner?
Respectfully,
– Michael
Michael,
As Joseph mentioned, the PFS credential was called into question in the past. That experience galvanized the CPA financial planner community, led to passionate volunteer efforts, activism and resolve. We are a far stronger community for it—yet, at this point, don’t need any doubt about the future of PFS. So, thanks but no thanks 🙂
Whatever the future of financial planning credentials is, it is unlikely to be a linear trajectory leading to some credential super-bowl where size wins all.
In 10 years, where those 100,000 CFP certificants are employed will define CFP far more than any ad campaign ever could. If the jobs new CFPs find don’t live up to a high standard, CFP will lose luster. If new regulation requires a financial-planner license, credentials could be far less important. Organizations, like ISO, might bring out new standards and certifications.
Whatever comes, in 10 years, credentials will matter far less than today. If all you know about a financial advisor are the letters behind her name, it matters much—but not when you can find out anything about her. In 10 years, you will be able to instantly compare everything there is to know about advisors. Consumers will search for high profile and/or specialties—not baseline credential. Today, unlike 10 years ago, clients can lookup professionals’ specific info on Google, LinkedIn, AngiesList, Yelp, BrightScope, Twitter, Facebook, etc. They reach for their iPhone and ask Suri who to hire!
10 years from now, we might talk about crowdsourced credentialing. Algorithms or simple search menus could match a client to an advisor with ideal background: education, location, CE hours, experience, peer rating, customer ratings, mentors, professional memberships, etc. Each advisor could have a score assigned by FICO!
The point is: Credentials aren’t engaged in a resource draining competition against each other. That’s picking the wrong fight. It isn’t about which credential gets the biggest numbers or gets the most recognition from the public (THAT is a waste of resources). It’s about building a community that helps each member adapt and excel in a fast changing world where consumers make decision based on specific, not generic, qualifications. A peer-conferred credential is part of that community bond.
Therefore, in 10 years, a stand-alone credential may not find relevance. The fragmented multiple-organization model doesn’t unite the profession and does not serve practitioners well. That model could truly find a better use of resources by integrating them. Now is the time for lone credentials to decide to follow the example set by AICPA: One member-organization with integrated identity, combined staff, passionate volunteers, active members, resources to adapt and excel, one professional code, one credential, one due payment. That is the model that can lead a profession into the tumultuous decades to come.
For now, unlike a CPA/PFS, a CPA, CFP could be disconnected from any member-organization: AICPA, PFP section, FPA or any other nurturing professional community. So the short answer is no 🙂
I truly appreciate the opportunity to have this important (and long) discussion.
Respectfully,
Jean-Luc
Jean-Luc,
Thanks for the discussion.
Given the impassioned argument you just made against the relevance of credentials at all 10 years from now (which is an interesting discussion unto itself), I still don’t see why it’s productive for the AICPA to invest resources into the PFS. If everything you just said about the irrelevance of credentials in a decade is true, isn’t the AICPA just wasting resources developing, supporting, and promoting a designation that won’t matter by the end of the decade anyway?
You suggest that credentials aren’t engaged in a resource draining competition against each other, but there I must disagree. The AICPA does expend dollars, time, staff resources, and volunteer resources, to support the PFS; those resources could be expended in other ways to support members if they weren’t being allocated to supporting the PFS.
To me the issue is not really about whose designation is going to win, per se. I have issues with aspects of the CFP, too. The point here is about whether it’s a productive use of limited resources for the AICPA to promote PFS as an alternative to the CFP. And it would seem to me that you just made a very passionate case about why we may look back in a decade and see all those resources expended on PFS as a “waste” in a world where credentials won’t matter anyway (or in a world where the CFP has had such success that the PFS is similarly rendered irrelevant)?
I guess the fundamental point is this: If the AICPA is going to continue to expend resources to support the PFS, it should be for a long-term strategic reason (the same lens I’d use to evaluate any decision about allocating resources).
So what IS the long-term strategic reason for why AICPA should spend resources to make sure the PFS is around 10 years from now? Not why might it have been relevant in the past, nor even why it might be relevant today, but strategically why does it matter in 10 years? I’ve made the case that the PFS won’t be relevant in 10 years, and ironically your response seems to agree with me, albeit for different reasons?
Respectfully,
– Michael
Michael and Jean-Luc –
In discussing fiduciary financial planning education and services with respect to the CFP and the AICPA, and citation of Blaine Aikin, there’s need to look at what is being taught and practiced with respect to investment selection.
Back in the 1990s a two-step investment-selection process emerged that is not at all fiduciary:
Step 1 was to select a mix of asset classes based on comparison in the pair of technical specs for return-rate probability for the individual year that are widely labeled “expected return” and “risk” – a comparison that fails to address the client’s future dollar needs and goals, fails to even incorporate dollars, years, and the mighty effects of compounding along the way. This is selecting double-blind: neither client nor planner can see, or even is looking at, what may be best or worst in result probabilities for the client’s future. And focused on measures for the individual year, neither can they see the long-term compounded cost of annual fees.
Step 2 was to switch the client from that blindly chosen asset-class mix into any of thousands of actively managed funds or other gambles within the asset classes, in a process that gives the false appearance that anything within an asset class is equivalent to the asset class. Compared to the asset classes from which the client is switched, most of those gambles have greater future-performance uncertainty, and larger deductions for costs and fees.
Last I looked, this not-fiduciary two-step still existed in training and tools of practitioners given and bearing fiduciary credentials.
The best financial planners reject this two-step. They seek investment mixes chosen for best result probabilities for the client’s dollar plan and future net dollar value needs and goals, and execute using investment vehicles that conform to those used for the comparison-and-selection. I think there’s need to bring the training and practice standards of the fiduciary credentials up to those that the best financial planners practice now.
Dick Purcell
Great comments Michael. I am a long time compensation and benefits planner but a new CPA and wondering about whether to join the PFP section of AICPA. I have real concerns about voluntarily about subjecting myself to any additional regulatory requirements, not to mention the additional dues and cost of functions, of additional professional organizations. Moreover, I am beginning to read and hear from consumers that they really don’t care much about these professional designations. At this point I have not made any decision.
Tony,
I would make some distinction between the value of joining professional membership associations and their various specialization sections (e.g., AICPA and the PFP section) versus obtaining professional designations (e.g., CFP or the AICPA’s PFS). They are separate decisions with separate value propositions and separate potential benefits (and separate compliance requirements!).
– Michael
What thoughts has the AICPA given to creating a non CPA / PFS credential, including a two or three experience requirement? Similarly, it would be great if candidates could take the PFS exam in parts, simi!ar to the CPA exam. Your thoughts?
Eric,
You can join the AICPA’s PFP membership section as a non-CPA, but I’m not aware of ANY momentum (or even discussion) to make the PFS a non-CPA credential. Ironically, I suspect the existing PFS folks would all be very negative about that, as they would claim that opening up to non-CPAs will “water down” their designation…
– Michael