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April 30, 2008

Financial planning services on the rise

A recent study has shown there is a trend in the growth of CPA financial planning and investment advisory practices in the US.

The findings were revealed in the study published by the American Institute of Certified Public Accountants (AICPA) and Praxity participant firm Moss Adams.

Lyle Benson, who served on the task force that oversaw the study, told the International Accounting Bulletin: “There has clearly been a trend of CPA’s moving in this direction. Growth has accelerated in the past few years. CPAs are well equipped to help clients with broader personal financial planning issues and their clients have a high level of trust in their relationship.”

AICPA gathered the information from 431 CPA and CPA-affiliated member firms and revealed that CPA financial planning and investment advisory practices have had significant revenue growth and are expanding at a faster rate than their non-CPA competitors.

Between 2004 and 2006, the average revenue for these practices rose by nearly 35 percent each year and between 2000 and 2007 nearly half of the firms had started offering financial planning and advisory services.

Thirty-five percent had begun providing these services in the 1990s and only 15 percent reported having financial planning practices prior to 1990.

The study revealed that there are four basic business models for CPAs practicing in this area: referral partner, solo practitioner, single entity and stand-alone subsidiary. The study found that CPA practices in this area tend to be smaller but achieve higher profit margins than the industry overall.

The report is the first of its kind to focus on the CPA financial planning arena exclusively. Benson added: “No one had ever done a study of the CPA financial planning arena exclusively and we plan to continue assessing the status of CPAs in the financial planning/investment advisory profession.

“The study showed us some of the key elements of success by highlighting certain business practices of higher profit firms. The respondents provided very useful financial statement information that members can use to benchmark their own practices.”

Nicola Maher

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