Financial planning is a generic term for all of the services that CPAs perform that deal with a client’s individual wealth. It is also a specific term that relates to a single service that is performed. What can CPAs provide in this field, and how is a business established around financial planning services?

What Financial Planning Is

Financial planning as a generic title encompasses family budgeting; helping a client establish goals and a plan to achieve them; planning for children’s educational funding; compensation planning; retirement and estate planning, including family liquidity, postmortem, and estate tax planning; IRA, 401k, 403b and pension distribution planning; elder care planning, possibly including bill paying services; planning for someone who is terminally ill; insurance coverage; asset allocation; assistance with preparing an investment policy statement; evaluating investment performance, including the asset manager’s performance; investment and risk management; tax preparation, compliance, and planning; and, if the client owns a business, succession planning, buy-sell agreement planning, and exit strategies.

As a specific term, it involves reviewing an individual’s overall financial situation and goals, as well as considering the security they will need when they are no longer actively employed, and then helping to achieve those goals.

Financial Services

Many financial planners offer “financial services,” meaning financial products such as annuities, various insurance (e.g., life, long-term care, disability), and mortgages, as well as managing investments, either directly or through a professional investment management organization. Financial services fall under the umbrella of financial planning and will be covered here along with generic and specific financial planning.

Licensing and Credentials

The authors believe that the CPA certificate is the best credential for professionals providing financial services, but other designations also signify relevant expertise. These include the Personal Financial Specialist (PFS), accredited by the AICPA; the Certified Financial Planner (CFP), offered by the College of Financial Planning; and many other recognized credentials and certifications. [For more, see the authors’ September 2016 column (“Advisors Involved in Financial Planning,”] Other things that may indicate expertise are article and book writing, speech presentations, purchased and self-published newsletters and brochures, blogs and websites, letters of endorsements from satisfied clients, being active in and serving on boards of professional organizations, and awards from recognized organizations.

How Services Are Performed

Financial planning services differ from attestation services in several important respects. The work is not scalable, systematized, or commoditized; it cannot be performed by lower-level staff; it does not employ uniform processes; and it cannot be done using artificial intelligence or robotics. Many of the planning services involve meetings, either in person or remotely, between the firm and the client. Some financial planning services require considerable back office work, such as when an estate plan is made and net worth statements and cash flow analyses need to be prepared, but most involve minimal back office attention and considerable face time with the client by the partner or expert.

Business Model for a Services Business

People in business need to make a living, accumulate funds for their retirement, and generate profits to distribute to the owners and invest in the business for future growth. Businesses also need to establish a sustainable cash flow stream and be somewhat leverageable. Those firms engaged in financial planning have staff-to-owner ratios much lower than those in similar-sized firms that perform traditional accounting and tax services.

Financial services involve selling and business development, some portfolio performance oversight, and interaction by the partner or a high-level staff person. The only part of financial services that is scalable is investment management, which is discussed separately below.

Another factor of financial services is selling annuities, life insurance, and mortgages. These are all commissionable activities, but usually involve one-time sales. They also require a high concentration of one-on-one time with clients by the owners of a CPA firm.


On some level, all CPA firms compete with all others. Some charge more, some less, but the basic ranges of services and fees are similar. In financial planning, and especially with investment and goal planning, the competition is not with other CPA firms, but with asset or investment managers, many of whom are or were accountants and offer these services either at no charge or reduced fees. Even tax returns are often prepared at fees lower than cost.

Accountants, and in particular CPAs who perform financial planning services, charge fees for those services, usually in line with their fee structure. Clients tend to believe the same services are available at much lower fees from equally qualified asset managers. In many cases this is so; however, the primary focus of CPAs is to provide the best advice they can to the client, while asset managers want to sign up clients that will provide substantial revenue for a prolonged period. A 1% “assets under management” (AUM) fee on $1 million for 10 years is $100,000 in potential revenue, without taking into account portfolio growth. An accountant’s fee, however, could be a onetime fee somewhere between $2,000 and $5,000, plus fees for annual look-sees at about half of the original fee. Note that a CPA’s fee will be higher for clients with greater investable assets since more work will need to be performed, more alternatives will need to be considered, and more meetings with the client will be required. For example, someone with a $10 million portfolio can expect to be charged about $15,000 to $20,000 by a CPA.

There are various methods by which CPA financial planners charge for their services, but they are all in the same, relatively small range. In contrast, the potential annual fees to an investment manager could be $75,000—$125,000 a year on a $10 million portfolio. With that potential, many services can be provided for minimal charge.

The accountant’s charges are miniscule compared to the potential overall costs to the client, but there is still a reluctance to engage accountants for financial planning; their fee is being compared to either no fee or an unrealistically low fee used by asset managers to weed out curiosity seekers. To many in the general public, there is no perception of differences in who performs financial planning services. But the authors believe that CPAs who do not manage assets provide totally objective analysis, while some asset managers have a strong bias to recommend courses of action that result in substantial continuing cash flow for themselves.

The authors do not want to give the impression that asset managers perform subpar services; there are many who do excellent jobs, especially those who are CPAs and have the PFS accreditation. Furthermore, the purpose of this article is to discuss personal financial planning as a business model, not to assess the services various groups perform.

The authors believe the above is pretty well known among active financial planners and the investment management community, but not so much among the traditional smaller CPA firms that actually make up over 90% of all firms. It is the authors’ opinion that financial planning as a stand-alone service is not a viable business model for most smaller firms, and that many of the more knowledgeable CPA financial planners are entering the asset management business using their expertise and experience to attract clients. There is a marked disparity in the potential for sustainable cash flow for CPAs who do not manage assets, compared with those who do.

Becoming an Investment Manager

Entering the asset management space is not difficult. Licensing is necessary, which can take approximately six months. The next step is affiliating with an investment management organization, of which there are many. The authors do not believe it is difficult to find and vet, or be found and vetted by, such organizations. There are also many CPA firms that manage investments; Top 50, 100, and 150 lists are published annually that list the firms, AUM, and the number of personnel. Looking at these lists shows that many firms managing from $100 to $500 million have only two, three, or four employees. The ones with larger staffs usually manage the funds themselves with research departments, traders, investment managers, and compliance departments. The ones with smaller staffs usually have the investments managed by larger investment management organizations; the financial planner works with these organizations as an affiliate, and the remainder of the staff handle sales, customer relations, some investment oversight, and possibly initial and periodic financial planning services and tax preparation. None spend considerable time in investment management. These firms receive a percentage of what the actual investment manager collects, including commissions from sales of products such as annuities and life insurance.

The Future of Traditional Services

The authors believe the future is very bright for smaller CPA firms, particularly with respect to small business consulting. Some traditional services will decline, however, such as tax return preparation and compilations of financial statements. In addition, many smaller CPA firms are exiting the attestation space because of the growing costs of remaining competitive. These services are being replaced by outsourced CFO-type services and strategic business planning. CPAs are also continually adding to their arsenal of services, as with the asset management model. They are looking for new ways to service clients, and clients are trending toward consolidating their financial service purveyors, including tax and accounting services and asset management and oversight.

In short, the authors believe the financial planning services model is not viable for many CPA firms, and that investment management is an area that will grow and ultimately replace it in many firms.

Sidney Kess, CPA, JD, LLM is of counsel to Kostelanetz & Fink and a senior consultant to Citrin Cooperman & Co., LLP. He is a member of the NYSSCPA Hall of Fame and was awarded the Society’s Outstanding CPA in Education Award in May 2015. He is also a member of The CPA Journal Editorial Board.
Edward Mendlowitz, CPA/PFS, ABV is partner at WithumSmith+Brown, PC. He is also the author of a twice-weekly blog posted at