Some business people see their CPA as a most trusted advisor. And empowered by recently enacted legislation, CPAs may soon take on an even broader role in business finances.
A new California law, SB-1289, allows CPAs to collect fees involving financial services or products such as securities or insurance. That expanded role can have a positive impact on your business and personal finances, if you know what questions to ask.
There are four important specifications in this new law that you should be aware of:
- CPAs must undergo a strict licensing process in order to offer any product or service beyond their current scope of accounting services.
- CPAs may not simply refer a client to a financial services provider in return for a referral fee. Instead, the CPA must be an active participant in the process, working directly with their clients in conjunction with their accounting practice.
- Perhaps most importantly, CPAs must disclose to clients that they are receiving a fee for the sales of financial services or products. Furthermore, clients are required to sign a document stating that they are aware of the amount of compensation the CPA will be receiving as a result of the transaction.
- CPAs who perform attest work for a client (such as audits, compilations and reviews of financial statements) are strictly prohibited from receiving fees or commission from the sale of financial products or services from that client.
Many of the ramifications of this new law are yet to be realized. However, one thing is clear: there will be very few "lone wolves" taking on this new financial services business line. Most CPAs will either associate themselves with other financial service companies or form CPA alliances to share the burden of staying current with all the details of the financial services industry.
Anticipating this new trend, most brokerage and insurance companies have been courting CPA firms and individuals over the past year. Thus far, the courtship has been a rocky one, as CPAs tend to be somewhat leery of the true intentions of their powerful suitors. As a result, alliances between CPAs and financial services companies have had a slow start.
So what's in it for you as a business owner? There are two very significant potential benefits to using your CPA as your liaison for investment.
First, since your CPA will be receiving a fee or commission on his or her services, you might be able to negotiate a reduction of your normal accounting fees, known in the industry as fee offset. You will know this amount from the disclosure statement you sign. Many CPAs have expressed a willingness to "credit" their clients for these amounts.
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