SIGNS DEAL WITH 50-FIRM ASSOCIATION: EQUITABLE LINING UP BEAN-COUNTER ADVISERS

Equitable Life Assurance Society of the United States is the latest entry in the certified-public-accountant referral sweepstakes.

Six months after launching a program for CPAs wanting to get into the securities business, the New York-based insurance giant has scored its first coup — an exclusive alliance with IA Consulting North America LLC, an association of 50 CPA firms.

Meanwhile, a similar program run by Salomon Smith Barney Inc. has forged alliances with about 140 accountant firms in 30 states, Salomon announced recently.

Those two companies, along with other brokerages like Merrill Lynch & Co. and Raymond James Financial Inc., are aggressively marketing investment services to CPAs as more states relax their prohibitions on accountants accepting commissions. Thirty states now allow the practice with more expected to do so. California is making the change at yearend.

Now that accountants are freer to share in securities revenues, more are looking to enter the financial planning business, either directly or through referrals. But there still is trepidation within the industry as CPAs, who position themselves as their clients’ most trusted and objective advisers, worry about conflicts of interest.

Of IA Consulting’s 50 member firms, just eight or so are pursuing arrangements with Equitable, and only one or two are doing so “aggressively,” says Art Goessel, the Miami-based group’s CEO and executive director. That number may grow over time, but only a minority of accountants — the profession isn’t exactly renowned for its sales skills — can be comfortable providing investment advice, he says.

by and large a quiet bunch

“There will be far fewer accounting firms going out there in the full financial market than many people project,” Mr. Goessel forecasts. “You can only take a certain group of those people and say, ‘Here’s a wonderful way to make money,’ and have them go out and sell.”

But Equitable believes more firms than the ones initially showing interest eventually will participate, particularly as they see the success the first CPAs have.

“You’ve got the early adopters,” says Greg Winsper, assistant vice president for Equitable’s relationship marketing group. “They’re the opinion leaders within the association.”

Even if relatively few firms take advantage, Mr. Goessel says he felt compelled to give a choice to those that do want to offer investment advice to their clients. By going with Equitable, he gets a company with 7,300 affiliated reps, a large stable of life insurance products and mutual funds, and selling agreements with more than 1,000 different outside money managers and other carriers.

Revenue-sharing arrangements will range from a few percentage points for a simple referral to as much as 50% or 60% if a CPA wants to do most of the financial planning.

exclusive on both sides

The deal requires IA Consulting’s members to work only with Equitable and bars Equitable for three years from striking similar pacts with the 10 or so IA-like associations in the United States. But Equitable is free to woo individual firms.

“We’re taking a look and saying we have to position the medium-sized accounting firms to compete,” Mr. Goessel says. “Why? Because of what is happening in the accounting industry.”

Specifically, the accounting world has seen well-capitalized acquirers multiply, led by American Express Co., which is buying large CPA practices in major metropolitan markets like New York, Chicago and Atlanta. That leaves smaller firms vulnerable.

It also has opened the eyes of people like Mr. Goessel, who has a vested interest in keeping his member firms independent.

On the positive side, the interest shown by Equitable, Salomon and Merrill Lynch shows how much respect CPAs have earned from brokers.

“Five years ago,” Mr. Goessel says, “there is no way an Equitable would have looked at an accounting firm and said, ‘We’re going to share our profits with you.’ “