Is it a Conflict of Interest for a CPA to offer Investment advisor services?

This question has come up sometimes in our recruitment efforts. Some CPA’s feel that offering investment advice can be conflicting with their tax services and recommendations. This page is to detail exactly when a cpa may  and may not be able to offer investment advice services to certain clients. Before getting in to it, know that there are CPA’s that are investment advisors in every state of the United States. So if there were large conflicts in this area then there would not be so many Investment Advisors who are also CPA’s. Also you should reference the AICPA’s guide on this topic located here. As of 4/1/2021 we have it available for download if you right click here: Statement on Standards in Personal Financial Planning Services. But here are some answers to some common questions regarding conflicts of interest for being an investment advisor in addition to an accountant.

  1. If you provide audit or attestation services to a particular client then in most cases you cannot also provide Investment Advice or financial planning services. To take it straight out of the manual: “If PFP services are performed for a client for which the member or member’s firm also
    performs an “attest engagement” (AICPA, Professional Standards, ET sec. 0.400.04), the member should meet the requirements of the “Nonattest Services” subtopic (AICPA, Professional Standards, ET sec. 1.295) under the “Independence Rule” (AICPA, Professional Standards, ET sec. 1.200.001), so as not to impair the member’s independence with respect to the client.
  2. It is a good idea to add a conflict of interest statement to your client engagement agreement for tax services. This solves the need to disclose. All disclosures on the Investment Advisor side are handled by our Client Profile forms, Form ADV disclosures, and the Investment Advisory Agreement form. The form ADV disclosure form also discloses to your investing clients your outside business as an accountant and also any other outside business you are engaged in. No business is done on the investment advice side without disclosing the compensation arrangements and the full scope of services.
  3. You must be able to provide the investment advice services objectively. If you feel for any client situation you can’t do this then you should decline the business or terminate the relationship.
  4. You may not advise a client to invest in a business that you personally have a financial interest in.

 

A few other notes. As a fiduciary you are required to act in the best interests of your clients in respect to investment advice. This means you would do with their money what you would do with yours. By being a fiduciary and charging a percentage of assets under management then your goals are aligned because if the client does well then so do you but if the client does bad then so do you.