Ten years ago, financial planning reached a milestone when the American Institute of CPAs issued the first regulatorily enforceable financial planning standards. Today, the Statement on Standards in Personal Financial Planning Services (SSPFPS) remains the only regulation specific to financial planning practice. This 10th anniversary provides a chance to reflect on this revolutionary establishment of financial planning as a profession.
Alignment with the public interest and consumer protection are hallmarks of a profession. Therefore, regulatory enforcement is crucial for enabling consumers to seek justice from a regulator at no cost. This is significant because arbitration clauses often restrict financial planning consumers' rights. Moreover, if consumers seek compensation through legal action, the SSPFPS can serve as the professional standard of care — unlike credentialing standards that aren’t intended as a basis for civil liability, and which can be compared to a code of conduct enforceable on the members of a private club by the club only.
How did such an achievement, defining financial planning as a profession, come to be? The answer might surprise you.
The SSPFPS emerged from the accounting profession, following its long-established alignment with consumers' best interests and protection. Unlike financial planning evolving from the investment and insurance industry as a consultative sales approach, financial guidance from CPAs was historically a stand-alone advisory function. Until the Federal Trade Commission forced a change in the 1990s, CPAs were restricted from receiving commissions because of their inherent conflict of interest. Overall, the conflicts often found in investment-driven financial planning didn’t impede CPA financial planning from developing with consistent alignment with clients' best interests.
The Rise of CPA Financial Planning
By what process did CPA financial planning become regulated?
American accountancy emerged in 1896 when New York created a state board of accountancy and administered the first CPA exam. By 1921, all states had a board of accountancy. In addition to administering the CPA Examination, boards of accountancy license CPAs, set ethical and professional standards, and enforce compliance with these standards. Simply put, they are regulatory bodies.
After the Securities Exchange Act of 1934 created the SEC and set auditing requirements, the SEC delegated its authority to set accounting standards to the American Institute of Accountants and its committees. The role of CPAs was to empower investors to make informed decisions and to protect them from the excesses of the investment industry, which had led to the Great Depression.
The AIA became the American Institute of Certified Public Accountants in 1957. Through the AICPA, the legacy of self-governance accorded to the accounting profession continues to this day. As such, state boards of accountancy generally adopt the standards promulgated by the AICPA. Simply put, the AICPA can issue standards enforced by state boards of accountancy.
In the 20th century, personal finance became increasingly complex due to the expanding tax code and financial options available to consumers. By the 1980s, the vast array of tax-advantaged accounts and the decline of defined-benefit pension plans propelled financial planning to a new level of significance and complexity. As taxation impacts every aspect of personal finance, the range of advice CPAs were called to provide their clients grew into holistic financial planning (see The CPA Community: Celebrating 40 Years of Client-Centric Planning).
A Framework for Standards
CPAs needed guidance on applying their evolved code of professional conduct to this expanding practice area. Consequently, in the late 1980s and early 1990s, the AICPA's Personal Financial Planning Section began exploring a suggested framework for delivering PFP services consistently with existing standards. This led to guidance in the form of the Statements on Responsibilities in Personal Financial Planning Practice (SORs).
Dirk Edwards spearheaded the SORs effort and was the driving force in getting them finalized and established in 1993. The SORs were authoritative guidance for CPAs throughout the 1990s and into the early 2000s. Under Andrea Millar's leadership as head of the PFP Section, a plan was devised to update the SORs and for the PFP Executive Committee to request standard-setting authority from the AICPA. The updated SORs could then be elevated to enforceable standards and be adopted by state boards of accountancy.
The process was not as straightforward as it may seem. Clark Blackman led the team that initiated the SOR revision. When Clark assumed the chair position for the PFP Executive Committee in 2010, Dirk Edwards took over as the SOR task force chair. Alongside Charles Kowal, Clark and Dirk devoted hundreds of hours over several years to finalize the SOR revision, secure standard-setting authority, and persuade all stakeholders to adopt the new guidance as enforceable standards. They accomplished these objectives in 2014. For their vision, tireless efforts, and advocacy work, Dirk Edwards and Clark Blackman are considered pioneers of financial planning as a bona fide profession.
The Anniversary of a Key Moment in Time
As we mark the tenth anniversary of the Statement on Standards in Personal Financial Planning Services, it's clear that this milestone was more than a mere regulatory update — it was a foundational moment for the financial planning profession. The development and enforcement of the SSPFPS have provided a blueprint for how financial planners can operate with a high standard of care and accountability, aligning closely with the ethical practices traditionally seen in the accounting profession.
Although the standards apply directly to a select group of financial planners — those who are CPAs — they pave the way for broader acceptance and implementation of similar principles across the entire financial planning profession. As we look ahead, the hope remains that all financial planning clients will someday benefit from the same level of protection and professionalism in a future where financial guidance is universally synonymous with trust and integrity.
Jean-Luc Bourdon, CPA/PFS is the founder of Lucent Wealth Planning, a wealth management firm located in Santa Barbara, California. In the past, Jean-Luc served on the PFS Credential Committee and on the Personal Financial Planning Executive Committee of the AICPA. He has written numerous financial planning articles for professional and consumer publications.
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