Discussion:Adding CFP to the EA credential

Seeking your opinion whether EA plus CFP is a better career choice than EA with CPA, considering that there are a much larger number of CPAs around, as well as the growing need for financial advisors?

many CPAs don't make much money

and I could also say that about EAs

and certainly in today's environment, about financial planners

That being said, you can become a 'financial planner' without being a CFP.

to be sure what types of registration/license will be required for your financial planning activities (series 65, insurance license, etc.)

While the CPA is well respected by the public...it, alone, does not indicate proficiency in financial planning specialties such as insurance and investments.

Another consideration should be education requirements. In many states you are required to have 150 total semester hours including 30 semester hours of accounting coursework (above introductory level). I'm not sure what the CFP requires.

You may want to obtaining your CPA-PFS.

I have added ChFC and CLU to my EA, Amgain, but then I am also series 7 and 66 licensed in my state.

I was giving an option for killing two birds with one stone.

The EA license is cheap to get, can be maintained VERY reasonably and clients respect it.

I would not likely consult a CFP for any purpose except on a fee-only basis nor would I recommend that any client do so. Doubtless most CFPs are honest and ethical but the setup itself sometimes doesn't look very good. And this criticism is far from mine alone.

Given a realistic choice between CPA and CFP, I'd do the CPA hands down. No question.

I agree to the extent that I also do not deal with insurance salesmen. I buy my insurance through a mutual company that serves a restricted market (military members and former members) and through my employer.

In short, I don't go to ANY of them, credentialed or not. The conflict of interest is just too off-putting.

I should also point out that I am opposed to contingent fee agreements with attorneys, though such fees are usually legal and, in a few instances, mandatory. CFPs are not the only group with COI problems.

I am less adamant about this where the client has a clear and complete understanding of the professional's personal interest. This should include, at a minimum, the amount of commission the professional will receive from the sale of this or that financial product, exactly in the way that contingent attorney retainer agreements must do. But if CFPs do this, I am unaware of it.

Or go to the doctor unless you know how much he makes per year. Or at least what his cut is of your Blue Cross payment.

just out of curiosity, what was the gross margin that your grocery store earned on your food purchases last month?

As far as the 'fee only' method of earning a living, the same sources recommending someone see a CFP or ChFC also often recommend the 'fee only' option.

In my experience, many clients choose to transact business on a commission basis rather than fee only. Their resons listed generally include 'I only need 2 things changed, why should I pay a fee based on all 10?'; 'I don't meet your minimum account size where a fee is affordable';

more to come - my appointment is here.

'I just bought this other stuff recently from some other guy and paid a commission. I can't see paying a fee on top of the commission I've already paid.'

'I don't want an ongoing relationship with committments. Just an 'as needed' one.'

'I don't quite trust you yet to manage all of my money. But I will trust you with this smaller sum.'

I'm sure there's more. But those will start the dialog.

Anyways, back to tax.

I once had a client who objected to me calculating the 2210 Form penalty (back when you attached the form). 'You're just doing that to bump up my fee.'

"No, I'm just doing it to get the calculation correct so that you don't just accept whatever number the IRS says that you owe...and then think that I only did half a job because the IRS said you owed more than I said."

In any event, I've had other potential clients say 'Last year I got more back using XYZ firm, and they only charged me $ABC.' Seems he thought the fee should be reflective of the net refund (results) and not of the amount of work.

I understand the argument that says, "Why should I pay for the advice when this CFP will give it to me for free?" The same argument is used to justify contingent legal fees; they are called the poor man's keys to the courthouse.

Well, we must agree to disagree, I'm afraid. But as your post indicates, there are others besides myself that argue for the fee-only approach. I know that this is a matter of debate in the financial planning community (of which I am not a member) and I appreciate that honest minds can differ.

I've been puzzling over your last posts, trying to identify exactly what it is that bothers me so much. I think I know:

Does the client understand clearly whether he is dealing with an advisor or with a salesman?

If the answer to that question is, "Yes", then I have no objection to any fee arrangement. If the answer is, "No", then I am very troubled by the whole relationship. Sales in the guise of advice seem ethically questionable to me. Here's why:

When I buy a car or a bag of potatoes (or an insurance policy, for that matter) I KNOW that I'm dealing with a salesman and adjust my thinking accordingly. But if I sought financial advice from a credentialed professional, if I didn't know how he was compensated, I might think that he is entirely concerned with my welfare when in fact, he's also concerned with earning his commission. I might even make the profound error of believing that I have a fiduciary relationship with the CFP like I do with my attorney. But in fact, I wouldn't have anything like that level of legal protection.

When you go to Charles Schwab, they are up-front and hand you their commission schedule for purchasing securities. But the broker doesn't personally make all of the fee that the client is charged. He often makes less than half of it.

Securities sold by prospectus disclose the commissions/loads/CDSCs. And I would hope that all financial professionals would make a point of explaining them to their client. But here again, the professional doesn't make all of the load.

You are right, I think. I am prejudiced against "sales" which is kind of silly, really. Probably an artifact from my own days of selling things. Long ago and far away.

Also, am I really to believe CPAs and EAs don't "sell" anything for what effectively turns out to be a commission in the form of a bonus? I know plenty of CPAs who sell their services very aggressively and market add on services. There really is no difference.

A CFP can work hourly or bill by the job. Many do not charge commissions because they do not actually transact your business for further gain. They may recommend particular asset allocation and indexes to meet those goals but they don't require you to transact the trades with them.

I love when CPAs and EAs (I'm an EA) argue that their services are extremely important and beneficial for clients because their clients don't understand exactly how clueless they are. But managing a complex portfolio of investments is easy and any moron can do it for free. See a potential conflict in the thought process?

Lastly, I offer an hourly rate, a set percentage fee and a commission fee platform for all my clients. I can tell you right now, at least 90% are better off with the commission platform. There is a reason why brokerage firms are rolling their clients into fee based products - it's a much higher and more stable income stream.

I only have my CPA license. He would like me to do this on a type of rolling contingent fee (ie I get paid X% on a rolling 6 month profits calculation, so no gain, no payment to me). Since I have no financial certification, is this even legal and would this fee structure be allowed for a CPA?

I suspect my answer may lie in the Circular 230, but I haven't gotten that far yet.

But, it's got to be done right!

In my opinion, this is not merely incident to your accounting practice, and hence you must comply with the securities laws, which I'm not familiar with.

You have a lot of stuff to check out, and I think it's going to take some time (and a license/registration? Series 7?) before you can begin doing this.

You may already be afoul of the law! Exercise caution.

Although I wouldn't mind doing this for him, I'm not interested in going through and getting licenses and certifications as I don't think I would do this for anyone else. I don't plan on doing anything that may jeopardize my CPA license (or even make me look bad).

You may have a knack for it, and it could be a good living, or supplement.

I'm sure Kevin will be by, or others who know something about this.

Obviously, the client thinks something of your abilities, or he would not have been interested in having you do this.

Now, I'm not related to his wife...but she is a force to be reckoned with, and I don't need another mother, nor am I interested in appearing on Jerry Springer or Maury.

In fact, it's legal in a majority of states (granted, not in Minnesota, although any group of people that would elect [read: circumvent the election to send] Al Franken to the US Senate must be routinely flouting the law) to marry your first cousin:

http://www.ncsl.org/default.aspx?tabid=4266

According to definition: "If you share great-grandparents but have different grandparents you are second cousins."

I got this off Wiki, search "second cousin".

P.S. No, I'm not thinking of marrying my second cousin, but frankly, if I met my second cousin(s), I'd have no earthly idea that they shared such status with me.