Two years after the passage of a bill that clears the way for CPAs to sell insurance and securities, few seem to have developed any real appetite for the new businesses. The problem is not that clients don’t want to buy these products from their accountants. Actually, most would prefer to they trust their accountants more than an insurance salesman. So what’s stopping CPAs from rushing headlong into these new businesses? In most cases, it is the CPAs themselves. Some just don’t like the new businesses and have resisted adding them. Others say they are too busy with their practices to learn the intricacies of insurance or mutual funds. Still others will bluntly tell you they don’t have the personalities to be salesmen. But mostly, these accountants say, the very thing that makes them so trustworthy in the eyes of their clients also makes them wary of expanding their roles. “If it proves that CPAs made bad decisions or vast numbers of clients lose substantial sums of money, then it’s possible our reputation as objective and unbiased individuals could suffer,” said Mitchell Freedman, a CPA whose practice, Mitchell Freedman Accountancy Corp. in Sherman Oaks, specializes in fee-based personal financial consulting. “And that’s the fear of 30,000 CPAs in California.” The California Society of CPAs estimates that less than 10 percent of its 27,000 members have taken up the sale of insurance or other financial products. Those who have don’t typically push the service. They usually wait for their clients to bring the subject up and, as a result, these auxiliary businesses often account for less than 5 percent of their practices. “I’m not a salesperson,” said Gregory N. Lippe, managing partner at Lever, Lippe, Hellie & Russell LLP in Woodland Hills. “My thrust is in making sure they’re getting something they need, and I think that’s why they’re coming to me.” Accountants have for years evaluated a client’s investment or insurance needs and made recommendations in the course of their regular duties. The time was calculated into their hourly fees, but when it came time to buy the financial products, the client would be turned over to a salesperson. “I’ve heard for years, we did all the work,” said Freedman, “and then the life insurance person came in and offered a few products and made a five- or six-figure commission when all the groundwork was established by the CPA.” But the passage of California’s SB 1289, which went into effect in January 1999, allows CPAs to collect commissions, expanding their range of options from consulting on financial products to actually selling them, provided they secure the required licenses. Broker alliances sometimes help Those who have ventured into these new areas commonly set up alliances with so-called “broker/dealers,” firms that represent a variety of policies and financial products from many different companies. In most cases, the accountant evaluates the client’s financial situation and needs and leaves it to the broker/dealer to recommend the specific products that meet those needs. Wholesalers (those who sell financial products to brokers) and broker/dealers greeted the law with enthusiasm because they believe accountants are gatekeepers of a target market that is not nearly as accessible to the traditional sellers of such products. “People will normally trust their CPA more than they’ll trust a salesman,” said Barry Wolfe, president of CentreLink Insurance and Financial Services in Woodland Hills, a wholesaler of life and long-term care insurance to brokers. “People feel comfortable talking to their CPA as long as they know he’s got the skill set to provide them with guidance.” Wolfe said he’s seen his business grow by about 30 percent annually in recent years, thanks, in part, to an increase in non-traditional sales outlets such as accounting firms. (Many other states have for some time permitted CPAs to sell these products.) By the same token, insurance brokers and agents who sell directly to consumers worried that CPAs would prove to be fierce competitors for their market. But, so far at least, the fears have proven to be unfounded. “I don’t see this law as having much of an impact on either business,” said Bonnie Milani, who owns Milani Insurance Services in Encino. “My experience with CPAs is that is one profession that understands the liabilities involved in representing a product you’re not an expert in.” It turns out that many CPAs are reluctant to trade on the trusted relationships they have with their clients. “I have to learn the products and be up on them. That’s non-billable time, and then I have to sell,” said Dale Jacobs, a partner with Sandler, Powell, Jacobs & Berlin LLP, an accounting firm in Tarzana that opted not to enter the new businesses. “I’m an accountant. I don’t want to sell. It’s a different mindset. It’s a different product. It just wasn’t for me.” Participants are still cautious Those who have opted to enter the new arena say they are treading very lightly, often waiting for their clients to initiate the conversation. “It took us a year after the law was passed (to decide to enter the business),” said Mel Kohn, managing partner at Kirsch Kohn & Bridge, which has moved to begin selling insurance. “We are just on the fringe. We sold a couple of policies, but we aren’t marketing it at this point.” Some procedures, such as drawing up a buy/sell agreement that spells out what would happen if one partner in a business were to die or retire, often lead directly to questions about insurance. At other times, the chance to sell financial products may be dropped in an accountant’s lap if, for instance, a client has just lost a considerable sum of money in the stock market. At times like those, the client’s accountant may be the only professional he or she trusts to give sound advice. But even when the need for such products and services is evident, accountants say they prefer to leave a lot of the work to broker/dealers, although doing so usually means a fee-splitting arrangement that can leave the CPA with only 40 percent of the total commission or less. “You do need to have a more dynamic personality, and that’s actually another reason why I’m involved with a broker/dealer,” said Norm Goodman, of his practice at Goodman & Associates in Encino. “I know I’m not that dynamic personality, so it takes two of us.”
