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Fit For The Future

The culture of personal financial responsibility is strong in the US and is moving that way in the UK. Richard Bertin reports on this year’s AICPA conference

US Certified Public Accountants are already ahead of the curve in their focus on personal financial planning services, and their appetite to diversify into this growing market is on the rise, judging by this year’s financial planning conference arranged by the American Institute of Certified Public Accountants (AICPA).

Anxieties about future profit and compensation have hit home for many AICPA members in practice, and this is, in part, driving the search for new areas of business. There are many similarities with some of these commercial pressures affecting the accountancy profession in the UK, for example where margins for tax compliance work and the effects of technology are undermining revenue streams.

But it would be a mistake to think that the growing interest in the financial planning market is just a defensive reaction motivated by the need for a quick financial fix. Many US accountants in practice clearly view personal financial planning as a stand-out long-term opportunity to diversify their businesses and expand their fee base.

UK chartered accountants are also aware of the growing demand from clients for financial advice as people are required to take greater personal responsibility for their pension and retirement saving. But so far there has been much less evidence that UK accountants in practice are fully factoring this shift in clients’ needs into their own strategic thinking and business planning.

Business planning

The AICPA conference was a real reminder that accountancy partners sometimes need to take a step back from working in the business in order to work on the business. For people who are constantly doing business planning for clients, accountants are often guilty of not allowing enough time to look at their own business plan.

One of the overriding messages from the AICPA event was that building a financial planning business is not an instant decision with an instant payback. There are numerous business models and approaches to consider. Do you want to create a fully integrated financial planning practice? Do you want to build the skills and resources needed to manage assets? What range of services do you want to offer – estate, tax and retirement planning, risk management, insurance or investment advisory services?

It takes time to decide which model is right, put a business plan around it, think about your targets and have a transition process to make it happen.

The AICPA conference highlighted the depth of demand in the US for practical advice about how to build a financial planning business. For example, there was a full weekend of practical workshops offering lessons from practitioners who had built a range of successful financial planning business models as well as advice from compliance, technology and practice management experts.

The AICPA also offers a wide range of ongoing resources to help members keep up with the latest financial planning strategies, trends and regulations. There are plenty of training courses available and support offered by the AICPA’s technology partners to help members develop new financial planning services.

Offering this level of support is much easier given the scale of the US market (there were about 1,500 delegates at the AICPA conference). But the needs of ICAEW Chartered Accountants in UK practice are similar: they need more help with business planning and guidance on the practical steps to build a financial planning business and technical and regulatory support.

Talking the talk

The need for greater soft skills training remains a common theme among US and UK accountants in practice who want to diversify into financial planning. Small and medium-sized firms on both sides of the Atlantic need to invest more time in building their human capital so that accounting can be seen as a hybrid career of financial and social skills.

The first step is for accountants to realise how much they already know about the personal financial affairs of business clients from their tax returns. The next step is to learn how to take that to the next level and become the family finance director. It’s a slightly different discipline that requires the right mindset and approach, but it can be mastered with the right training.

A call to action

The culture of personal financial responsibility is much stronger in the US but the signs are that the UK is rapidly moving in the same direction. The pension freedoms introduced by the UK government last April have changed the market for information and advice about how to access pension savings. ICAEW Chartered Accountants don’t have to give advice on pensions, but clients will expect them to answer questions about how their pension choices are changing and how much is needed for a secure retirement. If they can’t, then someone else will fill the gap.

The merger last year of the UK’s Institute of Financial Planning with the Chartered Institute for Securities and Investment is set to create a stronger financial planning body in this country. UK accountants should be aware that a stronger professional body supporting certified financial planners has the potential to take significant market share from UK accountants as has been the case in the US.

ICAEW’s work to understand Tomorrow’s Practice (see The future of financial planning, above) is a positive step towards understanding how changing regulation, technology and competition is altering the market for accountants in practice. The next stage is to equip our professionals to be able to deal with a new set of questions that reflect clients’ hopes and fears as well as business challenges.

We’re moving to a world in which everyone needs financial advice because there isn’t going to be a system to look after us. ICAEW Chartered Accountants could play a critical role in helping clients to look after their long-term financial interests but they need help building a business plan that is fit for the future.