High standards: is your practice subject to the new AICPA PEP standards?

• Author: Chironis, Gina
• Position: Regulatoryupdate

During the last 30 years, a 0 growing number of CPAs have expanded their practices to include personal financial planning services to satisfy growing client demand and because it's a logical extension of tax and accounting services. Membership in the AICPAs Personal Financial Planning Section has increased 32 percent during the past five years, a growth that tracks national trends.

With that expansion of services comes the requirement of being current on relevant regulations and issues. The AICPAs Statement on Standards in Personal Financial Planning Services (the Statement) provides authoritative guidance and establishes enforceable standards for members practicing in PFR.

Beginning July I the new Statement applies to all AICPA members who offer PFP services on either a verbal or written basis. The Statement reinforces the AICPA Code of Professional Conduct as it applies to PFP services and clarifies the CPAs fundamental fiduciary obligation to act in the client's best interest in providing financial planning services.

Does the Statement Apply to Non-AICPA Members?

The California Board of Accountancy states that it "does not adopt AICPA standards per se; however, licensees must comply with all applicable professional standards in accordance with secs. 5010 and 5018, Business and Professions Code. If standards have been adopted by the AICPA, those standards would be considered professional standards"--and are therefore applicable to California CPAs.

The courts will likely hold CPAs to the fiduciary standard of conduct when performing PFP services. Generally, if the following three elements are present in a client relationship, a CPA may be deemed a fiduciary to the client:

1. The CPA holds forth as an expert in an aspect of business;

2. The client places a high degree of trust in the CPA; and 3. The client is heavily dependent upon the CPAs advice.

To understand if the Statement applies to you, let's first examine its definition of PFP services: "The process of identifying personal financial goals and resources, designing financial strategies and making personalized recommendations that, when implemented, assist the client in achieving these goals."

These services typically include personalized recommendations concerning cash flow; risk management and insurance; retirement; investments; estate, gift and wealth transfer; elder care; charitable planning; education; and income tax. The term "personalized recommendations" refers to financial...