Entering the Realm of Investment Services

It's only natural that CPAs, who know so much about clients' financial situations and expectations, might want to help them plan and implement their long-term investment strategies. Investment services can be a dynamic and lucrative addition to a practice, but this niche often is challenging to launch and maintain. To make it easier, a number of companies offer services designed specifically for finance professionals branching into this niche. What they provide varies widely. Some offer consulting and training alone, while a number supply extensive operations support as well as access to money managers or investment funds that otherwise would be unavailable to the CPAs' clients. All of the providers on the list beginning on page 76 offer investment management, although some also enable CPAs to sell individual stocks or other financial products through their securities or insurance arms. Some work only with CPAs who have already registered as investment advisers (R/As), while others don't have this requirement or will help practitioners become R/As so they can offer financial planning for a fee or become registered representatives of the broker-dealer. FORGING ALLIANCES Investment services are complex and risky because of the multitude of regulations that apply to them. Since insurance and securities usually are sold by people who depend on commissions, many clients see value in investment advice that can be obtained from professionals who work independent of commissions and who have solid technical backgrounds. This is the foundation for CPAs who want to enter financial planning and establish specializations in wealth management. To excel in this challenging field, Phyllis Bernstein, AICPA director of personal financial planning, says it is important to resist temptation to offer services outside the niche. "It is very difficult to become an expert in a number of fields. CPAs need to keep up technically, and the investment business--for investment advisers and brokers--is really one of the most complicated from a regulatory point of view" Practitioners who don't specialize in this area often find it difficult to fully comprehend its complexity. To stay current, CPAs must understand macro-and microeconomics, modern portfolio theory, capital market theory, investment management, equity securities, securities analysis, options, futures and combination securities, fixed-income securities, investment policy development, manager and mutual fund selection, performance monitoring and asset allocation, in addition to tax planning, estate planning, retirement planning and risk management. KNOW THE RULES Investment services present an excellent practice opportunity for CPAs, but those who choose to offer them should have the training required. "It is unlawful for anyone to provide investment advice or sell securities without being properly licensed, and it is important to consult with an attorney about this," cautions Bernstein. She also suggests that CPAs consider the ethical issues concerning the practice of investment advising or securities sales by CPA firms that perform audits. The AICPA Web site (www.aicpa.org) lists state laws regarding commission and contingent fees. Bernstein estimates that it takes a few years of dedicated study to become proficient in this field. One good introduction is through conferences, such as the AICPA Investment Service Conference and PFP Technical Conference, and continuing professional education courses offered by a variety of sources. "Training is relatively inexpensive," she says, "but it takes a lot of time and study to complete." She also recommends that newcomers get involved with their state CPA societies to meet knowledgeable PFP professionals. ADVICE NOT NEEDED Once a practice has assembled the expertise and licenses required to enter this area, it's time to consider outside assistance, which comes in many forms. …

Field of study: Business