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Study Likes CPAs' Chances as Financial Advisors

It's a subject with a long history; what's different now?

David J. Drucker, 08/21/2008

The AICPA's April 28, 2008, news release starts out with, "CPA financial planning and investment advisory practices are enjoying significant revenue growth and are expanding at a faster rate than their non-CPA competitors, according to a study released today by the American Institute of Certified Public Accountants and Moss Adams LLP."

"Faster than non-CPA competitors"... can this be true? To find out, I talked with two Moss Adams employees connected with the study--Ken Evans, an on-staff consultant who headed up the AICPA planner benchmarking survey, and Dan Inveen, Moss Adams' senior research manager, who's overseen the last couple of annual advisory firm studies by Moss Adams.

Based on a study of 431 CPA firms or CPA-affiliated firms between 2004 and 2006, Evans told me that these firms have been enjoying revenue growth, on average, of 35% on the financial planning portion of their businesses (which averages about 30% of respondents' total revenues).

"Things have changed over the last four or five years; revenue growth has been good," Evans said. Of course, these results vary by business model. Evans said that they distinguish between solo practitioners, multi-partner firms, stand-alone business units (like Moss Adams Wealth Advisors), or separate business units within the accounting firm, complete advisory firms under common ownership with the accounting firm, and joint ventures between accounting firms and third party advisors. The 35% growth statistic can be as high as 41% for solo practitioners, he adds.

Are these CPA planners offering the same services as their non-CPA counterparts?

"The leading services CPA planners offer to better than half their client bases include income tax planning and prep, retirement planning, estate planning, and the development of a financial plan," Evans said.

Are CPA planner revenues constituted similarly to those of non-CPA planners?

"We don't find CPA planners to be more or less commission-reliant than other kinds of advisors," Inveen said. "This year's data for the Moss Adams study of non-CPA planners shows 78% of revenues correlated with asset management, while similar studies of CPA planners clock the number at 79%." The remainder, he speculated, represents hourly fees, retainer fees and commissions, which puts CPA planners roughly in line with the overall universe of advisory firms.

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