Improving Your Professional Accounting Skills Workshop

1
Improving Your Professional Accounting Skills
Workshop

• The Changing Role of the CPA in Investment
  Services
• September 25, 2002

Dr. Tom Payne Horace and Sara Dunagan Chair of
Excellence in Banking Professor of Finance
2
The Changing Role of the CPA in Investment
ServicesSome Opening Thoughts

• Change is the law of life. And those who look
  only to the past or present are certain to miss
  the future. John F. Kennedy 
• The only way to improve your margins today is by
  improving your product. Southwood J. Morcott,
  CEO, Dana Corporation
• Im only attending school until it is available
  on CD ROM Anonymous 8th Grader
•          

3
The Changing Role of the CPA in Investment
ServicesRecent Trends

• Whats Changing?
• With so many consumers using packaged software
  programs to prepare their taxes, many CPAs are
  expanding into financial planning. So far, only a
  small number of accountants have made the
  requisite commitment to financial planning to
  establish themselves in the businessDonald Jay
  Korn Financial Planning, New York April 1,
  1999 pg. 1.
• And, an AICPA-sponsored survey of managing
  partners indicated that they expected the
  greatest percentage growth in billable hours to
  come from the consulting area - including
  personal financial services

Source The new mix of client services Larry J
Rankin The CPA Journal, New York May 2000 Vol.
70, Issue 5 pg. 38.
4
The Changing Role of the CPA in Investment
ServicesRecent Trends

• And, in 1999, a Journal of Accountancy study
  indicated that 29 of small to midsize CPA firms
  were either currently offering or considering the
  addition of investment services..

Source How to start an investment advisory
practice Robert K Doyle Journal of Accountancy,
New York Jan 1999 Vol. 187, Iss. 1 pg. 33.
5
The Changing Role of the CPA in Investment
ServicesRecent Trends

• More recently, accounting firms have
  accelerated their entry into investment services
  And, according to a recent survey of midsize
  accounting firms
• 26 provide investment/financial planning
  services.
• 10 offer insurance services.
• 56 are considering offering at least one of
  those services.
• 64 considering those services believe they would
  best be offered through an alliance with another
  financial services provider.

Source CPAs cannot ignore investment services
Jay Nisberg SmartPros, January 8, 2001
http//finance.pro2net.com/x29092.xml.
6
The Changing Role of the CPA in Investment
ServicesPerceptions About the Accounting
Profession
Source Accounting Education Charting The Course
Through A Perilous Future Steve Albrecht and
Robert Sack Accounting Education Series, Volume
No. 16, August 2000, pg. 39.
7
Andthe Relative (Market) Value Added of
Traditional Accounting Education is Declining..
Source Accounting Education Charting The Course
Through A Perilous Future Steve Albrecht and
Robert Sack Accounting Education Series, Volume
No. 16, August 2000, pg. 39. (Original data from
NACE salary study).
8
Additional Support . The CPA
Vision Project

• In January 1998, 57 delegates to the National
  Future Forum arrived at a consensus regarding the
  top five values, services, competencies and
  issues as identified in nationwide forums. This
  vision was based on
• Focus groups with CPAs in all segments of the
  profession.
• Interviews with users of professional services,
  business leaders, legislators and accounting
  trade reporters.
• Discussions with students who decided not to
  become a part of the CPA profession.
• Input from over 3,300 CPAs who participated in
  177 Forums held across the country.
• Finally, this grassroots dialogue led to a
  consensus view of the future of the CPA
  profession.

See http//www.cpavision.org/index.htm
9
The CPA Vision Project

• National Top Five Services
• Assurance
• Technology
• Management Consulting
• International, and
• Financial Planning
• To provide a variety of services to
  organizations and individuals that interpret and
  add value by utilizing a wide range of financial
  information. These include everything from tax
  planning and financial statement analysis to
  structuring investment portfolios and complex
  financial transactions. http//www.cpavision.or
  g/vision.htm

10
The CPA National Vision Project

• National Top Five Core Values
• Competence
• Integrity
• Attunement With Broad Business Issues
• Objectivity, and..
• Continuing Education and Life-Long Learning
• CPAs highly value continuing education beyond
  CPA certification and believe it is important
  to continuously acquire new skills and
  knowledge.

11
However, A Gap Exists Between Where We Are and
Where We Need to Be..

• In a recent national CPA survey 9 classified
  themselves as having a below-average
  understanding of basic financial topics, 53
  thought they had an average understanding and 38
  felt they had an above-average understanding..
• The CPAs surveyed grossly underestimated the
  potential losses that have occurred in the stock
  market in the past. Only 5 of the respondents
  correctly answered the question concerning how
  often the stock market declines by 20 or more
  (every five years). One-quarter thought that the
  stock market had never declined by 20. With
  regard to the volatility of the bond market, 84
  of the respondents underestimated what effect a
  1 increase in long-term interest rates would
  have on the bond's value. Only 42 of the
  respondents correctly ranked investments in order
  of risk.
• Unsettling Accounts Bruce P. Conrad and Bob
  Brown, Financial Planning, October 1, 2000
  http//www.financial-planning.com/Magazine/mag_oct
  00.html.

12
Challenges To Bridging the Gap

• The Need to Eliminate Cultural Barriers
• Ask anyone under the age of 45 and youll find a
  greater acceptance that commission and contingent
  fee services are, on the whole, fine. - Ken A.
  Dodson CPA, PFS Investment services as a
  specialty, Ohio CPA Journal, April-June, 2000,
  pg. 12.

13
Challenges To Bridging the Gap

• The Need for a Clear Strategic Plan for the Firm

• The Need for Additional Training and Assistance

14
Training The Certified Financial Planner

• The CFP CredentialHow they Describe Their Role
• The public's growing need for objective
  financial planning advice, combined with the
  rigorous standards demanded of CFP certificants,
  has placed the CFP credential at the forefront of
  the financial planning profession. Introduced in
  1972, the CFP designation has become the most
  widely recognized financial planning credential
  among consumers. In the absence of uniform
  government regulation of financial planners, this
  credential reassures the public that those
  financial planners who are CFP certificants have
  voluntarily agreed to adhere to high standards of
  competence and ethical practice established by
  CFP Board. CFP Board of Standards 2002.

http//www.cfp-board.org/cons_abtbrd.html
15
The Certified Financial Planner

• Guide to CFP Certification
• Detailed information available at
  http//www.cfp-board.org/cert_gib.html
• To become certified, you are required to meet
  the following four initial certification
  requirements (known as the four "Es")
• Education (http//www.cfp-board.org/cert_gibs
  2.html)
• Examination (http//www.cfp-board.org/cert_gibs3.
  html)
• Experience (http//www.cfp-board.org/cert_gibs4.h
  tml)
• Ethics (http//www.cfp-board.org/cert_gibs5.html
  )

16
Personal Financial Specialist

• Initial PFS Accreditation Requirements (http//pfs
  .aicpa.org/)
• The PFS designation is granted only by the
  AICPA. To qualify, an individual must
• Be a member in good standing of the AICPA.
• Hold an unrevoked CPA certificate issued by a
  state authority.
• Complete the online PFS Application/Assessment
  Tool (including a qualified examination) and
  accumulate at least 100 points in accordance with
  the PFS Point System.
• Submit references and other documentation to
  substantiate experience in personal financial
  planning-related services, and
• Agree to comply with all the requirements for
  reaccreditation.

17
Personal Financial Specialist

• The PFS Point System
• Experience based upon actual time spent
  performing financial planning service during a
  period of up to 5 years (requirement can
  reasonably be filled in 2 years).
• Life Long Learning based upon continuing
  professional education, conference participation,
  and accredited college credit during a 5-year
  period. Points are also awarded for advanced
  degrees, certifications, publications,
  presentations, etc.
• Examination All candidates must pass an
  examination. The PFS, CFP, and ChFC, exams
  accumulate the most points. However, NASD
  Series exams (65, 66, and 7) as well as the CFA
  also count.

18
Other Financial Planning Related Designations and
Information Sources

• Chartered Financial Analyst (CFA)
  Association for Investment Management and
  Research http//www.aimr.com/cfaprogram/
• Chartered Investment Counselor (CIC)
  Investment Counsel Association of America
  http//www.icaa.org/html/cicp.html
• Chartered Financial Consultant (ChFC)
  The American College
  http//www.amercoll.edu/
• Additional Resources .
  www.utm.edu/banking
• Thank You!!!