CPA Group Votes to End Ban on Fees for Financial Planning

The nation’s largest organization of certified public accountants voted Tuesday to end its 82-year-old ban on accepting certain fees and commissions, a move that officials said would allow CPAs to become more competitive.

The ruling council of the 272,000-member American Institute of Certified Pubic Accountants, under pressure from the government, voted 191-5 to drop bans against accepting compensation for financial planning that CPAs have long said invite conflicts of interest.

“We’ve been working on this change for five years, and we’re just delighted that it occurred,” said H. D. Vest, an Irving, Tex., accountant who threatened to sue the institute if it didn’t drop the bans.

The institute had been under pressure by the Federal Trade Commission to allow commissions for non-audit work performed by accountants. The FTC issued a letter of complaint in 1987 against the CPA group and threatened to sue, charging that the group’s restriction on commissions violated federal antitrust laws.

The FTC said the ban put CPAs at a disadvantage in the financial services market by preventing them from competing with others, such as bankers and stockbrokers. Since CPAs could not accept commissions, they had no incentive to provide the service.

The FTC on Tuesday declined to comment on the vote, because it had not received word of the action, said a woman at the commission’s Washington offices who did not give her name.

Vest said in a telephone interview that consumers will benefit most from the change because it will allow them to get business done “under one roof.”

Previously, accountants in most states could take no part in financial planning. They could accept hourly fees for giving advice, but if a client wanted to invest money or get loans, CPAs were required to send them to a third party.

“They don’t want to go three places to get things done. (The change) allows consumers to go to one person who knows their situation best, and that one person, the CPA, will make the recommendation,” Vest said.

Critics of the change focused on the issue of conflict of interest, saying accountants could give biased advice to get a bigger fee, Vest said.

“We wouldn’t start charging commissions,” said Steven Krinsky, a CPA with a small accounting firm in downtown Chicago. “My personal feeling would be that it would interfere too much with the accountant-client relationship,” he said.

Krinsky, a member of the institute, was not present at Tuesday’s vote.

States actually hold licensing authority, but the institute code of ethics serves as a model for many state regulatory boards.

The institute vote would permit accountants to earn commissions in several areas, including assisting in loans, acquisitions or mergers, devising cost-cutting plans and steering business to clients, Vest said.

Five states--Maryland, Oklahoma, South Dakota, Texas and West Virginia--allowed such commissions before Tuesday’s vote.

Smaller firms are expected to be big beneficiaries of the change.

“Large firms will have a very difficult time selling securities and auditing their clients because there is a conflict of interest there,” Vest said.

The FTC, in a letter to the National Assn. of State Boards of Accountancy, said allowing contingency fees could lower the cost and raise the quality of accounting services by linking CPAs’ fees to the results of a job rather than the time put into it.

The association of state accountancy boards, which regulates CPAs and licensed accountants, is expected to vote on a similar measure on Sept. 28.

Vest said passage by the board would be further incentive for states to change their laws.