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Improving Your Professional Accounting Skills Workshop The Changing Role of the CPA in Investment Services September 25, 2002 Dr. Tom Payne Horace and.

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Presentation on theme: "Improving Your Professional Accounting Skills Workshop The Changing Role of the CPA in Investment Services September 25, 2002 Dr. Tom Payne Horace and."— Presentation transcript:

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 Services: Some 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 I’m only attending school until it is available on CD ROM — Anonymous 8 th Grader

3 The Changing Role of the CPA in Investment Services: Recent Trends What’s 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 business”…Donald 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 Services: Recent 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 Services: Recent 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;

6 The Changing Role of the CPA in Investment Services: Perceptions About the Accounting Profession Accounting… Percent of EducatorsPractitioners who agreed with the statement is more attractive than Finance is more attractive than I/S and I/S should be combined and finance should be combined and Business majors are too isolated Accounting is integrated enough 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 And…the Relative (Market) Value Added of Traditional Accounting Education is Declining….. Average Undergraduate Salaries Information Systems $41,402 Finance 35,500 Accounting 35,090 Average Graduate Salaries Masters of Information Systems $60,000 MBA 48,200 Masters of Taxation 43,800 Masters of Accountancy 41,800 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:

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.” –

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;

12 Challenges To Bridging the Gap The Need to Eliminate Cultural Barriers “Ask anyone under the age of 45 and you’ll 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 Credential…How 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

15 The Certified Financial Planner Guide to CFP® Certification Detailed information available at: 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_gibs2.html) Examination (http://www.cfp-board.org/cert_gibs3.html) Experience (http://www.cfp-board.org/cert_gibs4.html) 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 Chartered Investment Counselor (CIC) – Investment Counsel Association of America Chartered Financial Consultant (ChFC) – The American College Additional Resources …. Thank You!!!


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