The proposed statement on standards in personal financial planning: what does it mean for you?

• Author: Sarenski, Theodore J.

OVER THE PAST 30 YEARS CPAs HAVE EXpanded the planning advice they provide to individuals and families regarding personal finances. As a natural extension of the CPA's position as the trusted adviser whom individuals call upon for tax advice, personal financial planning (PFP) services have grown to encompass a broad array of services and expertise. To adapt to this rapidly evolving area of practice, the AICPA released this spring an exposure draft of the Proposed Statement on Standards in Personal Financial Planning Practice.

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Between 1992 and 1996, the AICPA Personal Financial Planning Executive Committee (PFP EC) issued five Statements on Responsibilities in Personal Financial Planning Practice (SORs) to provide guidance to CPA financial planners and ensure that the highest standards of integrity, professionalism, and competence were being applied in the delivery of PFP services. These practice aids were originally published following a public exposure, with a revision, that included merging the five statements into one, the SOR (available at tinyurl.com/cqmlmxg), which was published in December 2010.

As a practice aid reflecting best practices, the SOR was intended to provide CPAs with a conceptual framework in their PFP work, versus a prescriptive listing of "must-do" steps or activities. This framework was designed to capture best practice in such PFP areas as:

* Cash flow planning and budgeting;

* Income tax planning;

* Risk management and insurance planning;

* Retirement planning;

* Investment planning; and

* Wealth transfer planning.

While it was issued as a practice aid, the SOR over time became the de facto standard for CPAs practicing in the PFP area. In addition, seven state boards of accountancy (Colorado, Florida, Indiana, Kentucky, Michigan, Washington, and Wyoming) adopted the provisions as the required standard, thereby raising the SOR to an authoritative level in those states.

With this background, in October 2012 the AICPA Council designated the PFP EC, a senior committee authorized to make statements without clearance with the Council or the AICPA board of directors in matters related to PFP, as the standards-setting body in PFP for Institute members. The Council's action was based on the goals of establishing definitive standards (versus practice aids) for CPAs providing PFP services, to protect both them and the public and to recognize the growing importance of PFP services. In addition, the...