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CPAs Represent Growing Channel


In 1983, Jeffrey Rattiner, an accountant with a practice in New York City, began offering financial planning services to his clients. He was one of the early ones.

At the time, a CPA who told his clients how to invest was virtually unheard of. For Rattiner, it was a matter of personal interest as much as it was a business decision. While his role as an auditor had him poring over his clients' financial histories, he became fascinated with the idea of projecting their futures. "I loved it," he said. And, with a laugh, he added: "I wasn't too good as an auditor, because if you become too creative an accountant you end up in jail."

Financial planners, meanwhile, couldn't fathom how or why a CPA would enter the business. Rattiner's move proved controversial. "We were scorned," he said of the handful of CPAs who made similar moves during the early 80's.

Still, Rattiner was persistent. Through the American Institute of Certified Public Accountants, he headed a training effort for CPAs who were building financial planning businesses. He took jobs with other industry associations such as the Institute of Certified Financial Planners. He established an annual conference for CPA cum planners. He wrote training manuals. And he published a book on the subject last year.

CPAs Flood Financial Planning Market

Things have changed during the past two decades. Today, his practice, now located in Inglewood, a Denver suburb, is called JR Financial Group and offers both financial planning and accounting services. Rattiner is now among an estimated 196,000 CPAs in the U.S. who offer or plan to offer investment advice to their clients. That's 56% of the accountants served by the AICPA.

The push has come during the past six or seven years as clients have continually asked that their accountants, not just keep the books, but help them shape their financial futures.

Regulations that once guarded against improprieties in the accounting business by capping fees are now relaxing, allowing CPAs to charge for the advice. The move is also defensive, according to financial researcher Cerulli Associates. With more broker/dealers offering basic tax and accounting services, CPAs feel they need to strike back.

CPAs Turned Planners: A Logical Evolution

Planning is also a good fit for CPAs, say those who support accountants in the move, because they obviously know their clients' tax histories and other information that comes with a longstanding client relationship. "In my mind, there's nobody better to do it than a CPA," Rattiner said.

And so the CPAs keep rolling into the business, to bolster their bottom lines, to keep things exciting, and in many cases, to duck the nightmare that they once knew to be tax season.

"The bottom line is clients are asking for it," Rattiner said. "They're asking for it in droves."

Accountants approach financial planning the way one might expect them to: They aren't attracted by hot, short-term investment prospects, nor sales gimmicks, such as the junkets in warm places that have historically been offered by fund companies, said Doug Wright, president of Capital Professional Advisors and head of financial services for CPA2Biz.com.

CPA2Biz.com is a Web site for accountants that was spun off from the AICPA, and began offering financial planning tools from Morningstar and other sources late last month. (The site is also partnered with Thomson Corp., the parent of MFMN publisher Thomson Financial.)

"They're very independent, they're very analytical," Wright said of accountants. That's partly because CPAs face higher stakes in plotting their clients' financial futures, he said. For many, the accounting side of the business is still a staple. And if accountants drive their clients' books straight into the dirt, they will destroy their client relationships.

What It Means For Fund Companies

All this adds up to a unique challenge for fund companies, observers say. CPAs new to planning need a lot of hand holding and training. They have no brand loyalty during the early part of their newly expanded careers, and they will look for "best-of-breed" products to offer their clients. "Mutual fund companies that don't recognize that are going to chase their tail," Wright said. And Dennis Gallant, a researcher at Cerulli Associates, said many CPAs won't want to pick their own investments and will therefore turn to packaged products.

Channel Difficult To Decipher