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The AICPA provides information, tools, advocacy and guidance for CPAs who specialize in providing estate, tax, retirement, risk management and investment planning advice.

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

How One Next-Gen CPA Dreams Big: Part 2

Jeff Badu - CopyWe spoke with Jeff Badu shortly after he launched his own firm, Badu Tax Services, LLC. Jeff has a bold, intrepid, entrepreneurial spirit and is passionate about helping people and giving back to society. He recently started Badu Investments and is preparing to take the PFS exam this summer so he can broaden the range of services he offers to his clients, who are primarily millennials. In this second part of the interview, we continue to explore Jeff’s journey.

AICPA: We learned a great deal about what drives you in the first part of our conversation. You spoke about your passion to help people and your entrepreneurial spirit. And you’re planning to take the PFS exam this summer. What is motivating you?

Jeff Badu: As a CPA, I get to help people solve some of their most challenging financial problems. I am very passionate about helping people in general, and with their financial future in particular. I work mainly with millennials, like me, and use different strategies to help reduce their income tax liability and maximize retirement and other savings. I find that people tend to prefer working with someone they can relate to, and my clients come to me because we identify with each other.

I have been interested in taxes since I was in middle school. It seems natural to me that tax compliance and planning are key ways to help people plan for their future. It’s very important to me to increase people’s understanding of the significance of making wise financial choices, which I try to do with my radio show, website and social media presence. Being able to increase my own expertise and offer a range of services so that I can be seen as the go-to trusted adviser is what’s prompting me to take the PFS exam this summer.

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Don’t Let Clients’ Retirement Fall into This Trap

TrapHave you ever been at a party where the owner of a company was bragging about how he used a 401k to start his business? Or heard a story about how a couple’s individual retirement account (IRA) is invested in real estate and that’s going to allow them to live in the lap of luxury when they retire?

They’re talking about self-directed retirement vehicles. And much like real vehicles, when they are driven improperly, the result can be disaster.

What Are Self-Directed Retirement Vehicles?

Self-directed IRAs and self-directed 401ks are increasingly popular. While the usual custodians of IRA and 401(k) accounts will only allow certain investments (e.g., stocks, bonds, etc.), a self-directed IRA or 401(k) allows the owner to invest in such things as real estate, precious metals, businesses, etc. and make all the investment decisions. Profits from the investment build up tax-free until the owner reaches retirement and begins to take distributions, usually when the owner’s tax rate is much lower. Sounds good, right? What could go wrong?

Well, actually, a lot can go wrong. As a matter of fact, if you have clients in one of these situations, they could lose substantial amounts, if not all, of their retirement income. How can this happen and what can you do to help?

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How One Next-Gen CPA Dreams Big

Part I

Jeff Badu - CopyOn a mission to help people and entrepreneurially spirited, Jeff Badu represents the next generation of CPAs. At 24 years old, he runs his own firm, hosts a weekly radio show, volunteers his time, and is preparing to take the PFS exam this summer. The AICPA spoke with Jeff about his passion for the profession and his dedication to helping millennials save on their taxes and plan for their financial future.

AICPA: You’ve accomplished quite a bit for someone in their mid-twenties. Can you give us some background on yourself and how you became a CPA?

Jeff Badu: I came to the United States from Ghana when I was just 8 years old. My family settled on the north side of Chicago, where I still live. I have always been a numbers guy, but it was very early on that I discovered my love for accounting and business, and the opportunities those industries present. I was introduced to my first tax return in the eighth grade, and that was when I knew I was interested in this sort of work.

Graduating from the University of Illinois at Urbana-Champaign with both a Bachelor’s of Science and a Master’s of Science in Accountancy, I began doing tax returns for friends my freshman year of college and really enjoyed it, and that helped me set a path for my future. I developed a business plan and mapped out my road to the CPA. I only took one class my second semester of graduate school so I could focus on it. I was the first person in the library every day, and the last to leave at night. I was ecstatic – and exhausted – when I found out I passed.

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5 Silent Killers of a Financial Plan

Silent killer“The best laid plans of mice and men often go awry.”

As it turns out, poet Robert Burns was onto something. All too often, CPAs and advisers construct tax, estate, retirement, risk management and investment plans that are either never implemented or are misaligned with their clients’ values. Some common missteps could keep a client from adopting a well-crafted financial plan, thus diminishing the value you add to the process.

Let’s take a look at some of these silent killers and how to avoid them before another financial plan goes awry.

Unrealistic Expectations
Perhaps the most common (and avoidable) mistake is building a financial plan on highly aspirational, or worse, totally unrealistic expectations. A sound financial plan is only as good as its inputs, so it’s important to ensure that you are forecasting an appropriate rate of return, inflation rate and honest gauge of spending and cash flow needs. Digging into the client’s cash flow today can help determine a realistic spending level in retirement.

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Tax Refunds and Financial Responsibility

Tax refundThe very same week our accountant (my father) informed us we would be getting a $1,550 tax refund (thank you, 2016, for the purchase of our first home and birth of our second child), my husband and I discovered a sizeable leak in our garage roof. So now, instead of using that money for a home repair we actually wanted to make, or to boost our savings account, or add to college savings plans, or more likely, to help pay for two kids in diapers and daycare, we’re buying a new flat roof. Lucky us. But this episode got me thinking—what do most people do with tax refunds? And what do CPAs advise they do? Is there a happy medium between fiscal responsibility and fun?

Aim for No Refund at All

First and foremost, the goal, according to most CPAs, is to not get a refund. While many people love getting a large chunk of change every spring, it indicates you’re overpaying and essentially giving the government an interest-free loan. Getting no refund at all means you’re paying the IRS exactly the right amount. Of course situations change from year to year (see my home purchase and birth of kid references above) so you might not always get it right.

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What the Personal Financial Planning Body of Knowledge Means for You

Shutterstock_431851066Early in 2016, I heard tax icon Sid Kess speak about how important it is for CPAs to understand what housing alternatives our clients might need to consider as they grow older. I thought, well that’s an interesting aspect of our work that I hadn’t considered, and began to educate myself about the options and opportunities in the communities I serve.

That advice couldn’t have come too soon: within a month, my dad began expressing concerns about taking care of his home and asked to look at some local housing alternatives. While I had made myself aware of a few, I quickly realized there are so many choices that I didn’t have time to explore them all. Unfortunately, my father’s health declined rapidly and we had to move him three times: from his home to senior living; from senior living to a nursing home; and from the nursing home to hospice care where he passed away.

What this really brought home is that the work we do as CPAs is not cut and dried, and goes beyond what many people envision when they think of our profession. It’s probably also more than many budding CPAs—and those long in the profession—think we do. But the fact is that we must continue to deepen our knowledge and expertise as our clients’ needs expand and grow.

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Social Security and Divorce: What Clients Need to Know

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Put powerful emotions in the same cauldron as money and you get a volatile and highly flammable mix. If your clients need one reason to involve a trusted CPA in their divorce process, that argument is as strong as it gets. As a financial professional, you have likely seen first-hand that divorce has the potential to uproot the financial stability of your clients (see more in this latest trend survey released by the AICPA Personal Financial Planning Section). If splitting the family possessions and bank accounts weren’t complex enough, there is also Social Security and Medicare to consider.

By asking the right questions, CPAs can steer their divorcing clients around pitfalls and help them make smart choices that maximize their financial outcomes.

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Elder Financial Abuse: How CPAs Can Help – Part 3

Shutterstock_293152349The face of America is showing its age: According to the National Institute on Aging, the number of Americans age 65 and older is expected to double in the next 25 years, with those 85 and older constituting the fastest-growing segment of the U.S. population. These Americans are increasingly becoming targets for elder financial abuse.

Extent of the Problem

The phenomenon of elder financial abuse is not new. But today, increasingly sophisticated tactics are being used with significantly higher stakes. Assets totaling approximately $23 trillion are the target.

The National Adult Protective Services Association (NAPSA) reports that the rate of elder financial abuse is extremely high, affecting 1 in 20 older adults. However, at the same time, only 1 in 44 cases of elder financial abuse is reported. The greatest number of reported abuses were perpetuated by family or others known to the victim.

Continue reading "Elder Financial Abuse: How CPAs Can Help – Part 3" »

3 Reasons Every Client Should Complete a FAFSA

Shutterstock_538627324Are you wondering if all of your clients should complete the Free Application for Federal Student Aid (FAFSA) for their college-aged children even if they don’t anticipate qualifying for any federal aid?

Consider the following scenario: A successful couple own and operate a business and have two children in college. At 58 years old, the husband suddenly and unexpectedly passes away from a heart attack, rocking the family and ending the business.

The family, however, had faithfully completed the FAFSA annually for their children, although they had never previously qualified for financial aid. Within one week of the death of the father, both universities contacted the children with financial aid packages that allowed them to stay in school.

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Continuing Care Retirement Communities: Helping Clients Choose

Shutterstock_242465323With a rapidly aging population, more people will turn to their CPA in the coming years as a trusted source of guidance, especially when making senior living decisions. A popular, but also rather complex choice is the continuing care retirement community (CCRC or “life plan community”). 

By combining independent living with a continuum of care, CCRCs offer a viable solution for older adults who are healthy today but seek the peace of mind of having care services readily available in the future. Your client’s specific needs will likely determine which CCRC is best for them. There is no “one size fits all” approach here. Yet, due to the financially significant nature of the CCRC decision, it is important to make sure their first choice is the right choice, so you owe it to them to be well-educated and informed on this topic.

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4 Ways to Move Toward Practice Transformation

Shutterstock_538091704“Practice gratitude.”

“Be authentic.”

“Consider your story as you craft your goals.”

Not your typical soundbites from a gathering of CPAs.

When I leave an AICPA conference, I always bring home the best technical thinking in the profession and new and deepened relationships with peers across the country. This content and camaraderie is what brings me back year after year to these events.

As I gathered my thoughts after the recent AICPA Personal Financial Planning Summit, I noticed a shift in the tone of the key takeaways that I was anxious to implement in my firm. This innovative and intimate event sparked new thinking about how I – and other CPAs and planners who serve individual clients with their tax, estate, retirement, risk management and investment needs – can shape our practices for the future. Here are four challenges and some questions to consider from this year’s summit:

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Medicare Patients to be MOONed Soon

Signing medical formYou may soon be MOONed by your hospital. Beginning March 8, 2017, hospitals must now provide patients with the standard Medicare Outpatient Observation Notice (MOON).

When a Medicare beneficiary is admitted to a hospital as an inpatient most of the cost of the stay is paid under Part A, which covers the cost of a hospital stay. In 2017, the only cost the beneficiary must pay for stays of 60 days or fewer is the $1,316 deductible.

Most beneficiaries do not realize that they can also be admitted to a hospital as an outpatient. Your status as an outpatient has nothing to do with where you receive care or the type of care received. You may not even be aware of your status. You can be admitted to the hospital, be assigned a room and receive services as if you were an inpatient, all the while having been admitted as an outpatient by your doctor. Observation status gives the doctor time to decide if he or she should write an order to admit you into the hospital as an inpatient.

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Elder Financial Abuse: How CPAs Can Help – Part 2

SeniorsIn our first blog post of this series, we looked at three typical examples of elder financial abuse and some of the reasons why seniors are attractive targets. Helping safeguard your clients from financial abuse as they age, or experience a serious health problem, is one of the most important and meaningful things you can do for them.  In this article, we will delve deeper into types and signs of financial elder abuse, and ways to prevent it before it starts.

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Elder Financial Abuse: How CPAs Can Help – Part 1

Advising seniors

Scenario 1: Your usually chatty elderly client Nancy has become quiet and refuses to speak with you without her son Chris present. When they come in together, she is timid and acts nervous, while he is combative and secretive about sharing bank statements and other financial information. When you insist, you see discrepancies and unusual cash withdrawals, or other activity that he claims are for “household expenses, which are none of your business”.  

 

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What’s in a Name?

Name TagI recently had the privilege of speaking on financial planning to 150 CPAs at a Washington Society of CPAs conference. I began my remarks by asking how many in the audience considered themselves financial planners. Only two raised their hands.

That surprised me. I know that many CPAs help clients with some aspect of financial planning, from tax, retirement and estate planning to succession planning and wealth management. And, frankly, who better to help clients negotiate their financial futures than CPAs? Clients already rely on us to provide trusted advice on other financial matters.

The sparse response got me thinking back about my own experience coming to terms with the term “CPA financial planner.”

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Keeping it in Perspective: A Woman’s Take on the Profession

Financial planning adviserIt’s amazing how much things have changed. Back in 2004, I was recruited by my adviser and changed my career from forensic accounting to financial planning. I can clearly remember my first day in the firm’s Monday morning training; I was the only woman in the group and the firm owner addressed us as, “Guys… and gal.” I imagine his limited experience with women in this role (the firm had only employed a few other women advisers) caused him to want to tread lightly. His effort to include me was sincere, but in the process he made me feel different. It may not be surprising to hear that many financial planning firms simply do not have a large number of female advisers on staff in 2016, but they were even more scarce in 2004.

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Leave Yourself Behind When Working With Clients

Financial planner advising clientI once attended a workshop in which an established adviser shared a story from a conversation he’d had with one of his clients. The client was a young, affluent widow who decided she wanted to fulfill a lifelong dream to buy a condominium in her favorite city in Europe. While she could well afford the $2 million price tag, something was keeping her from pulling the trigger.

The adviser asked, "What is it that is really bothering you about this purchase?" After some deeper probing, she finally shared her issue: "It's just that I keep hearing my mother's voice in my head." (Her mother had died many years ago).

"And what is your mother saying?" he asked.

"She is saying that I am being frivolous with my money."

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Five Experts Advisers Should Follow

Social media 2 When I think about why I love being a financial planner, the first thing that comes to mind is the relationships I have with my clients. A close second is the community of other planners around the country who are some of the brightest and most engaging people I know. I consider myself extremely lucky to have been able to meet and learn from so many of these people. I could write an entire book about everyone who has impacted my career, but here are five who I think you should know:

  • Lyle Benson (@LyleKBenson) - Anyone who has been lucky enough to work alongside one of their parents will understand why I have my dad at the top of this list. I've been learning from him my whole life, but I'm certainly not the only person in our industry who has felt his impact. For years, he has been actively involved in the AICPA PFP Section and has put forth tremendous amounts of time and energy promoting CPAs who do financial planning. He is a driving force in our profession.
  • Bob Veres (@BobVeres) - Bob is a true visionary in the financial planning world, and he has an uncanny ability to see the future. He's a passionate advocate for financial planners and isn't afraid to ruffle feathers to make sure the general public knows who we are and what we stand for. He hosts the Insider's Forum each year, and his monthly newsletters are available to all AICPA PFP section members.

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Four Steps to a Happier, Successful “Business” Retirement


Shutterstock_339672998As CPA financial planners and advisers, we spend a considerable amount of time addressing the technical aspects of IRAs, 401ks and defined benefit plans. We work to convert enterprise value into retirement assets. We consider diversification, funding strategies and tax implications.

Those issues are important, but it can be the personal and emotional aspects of helping your clients retire from their businesses that set you apart from other planners. Here are four critical steps to help you be a better partner to your clients who own a business.

Step One: Adjust the Conversation

The first step, and for many retirees the hardest one, is the mental adjustment of retiring after decades building a business and creating value. Then, one day, they sign a contract and turn those work responsibilities over to others.

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3 Steps to a Secure Financial Future for Your Divorcing Clients

DivorceAnyone who has ever been through, or witnessed, a divorce knows that the pain of separating isn’t just emotional—it’s also financial. CPA financial planners may often feel at a loss as to what advice or guidance to offer distraught clients.

Let’s say your client Kate, age 50, calls in tears to tell you that her husband of 25 years, a high-level executive, wants a divorce.

“He wants to avoid using attorneys,” she says. “He made me an offer yesterday: He keeps all his retirement savings and I keep mine. I get the ski lodge; he gets the apartment in the city. We split cash and investments. I really don’t want to make him angry, but my own retirement will be so small. Is his offer enough?”

We all want what’s best for our clients and answering this complicated question will take some research. However, the most important factor is to avoid any conflict of interest. If you were advising the couple before the split, you may need a disclosure, a waiver or even a new engagement letter.

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A Passion for Education Proves Perfect Formula for Ross Riskin, CPA/PFS

Ross Riskin Profile PictureMeet Ross Riskin, CPA/PFS, CCPS, vice president of Riskin & Riskin, PC in Orange, Conn. Ross is definitely not your typical CPA; he has a unique passion for helping college students and their families,  a direct hand in CPA education and a thoughtful take on incorporating the AICPA’s Essentials of Financial Planning curriculum into the classroom.

AICPA: You’re founder and managing member of Riskin Advisory, LLC, described on your website as “a college financial planning practice.” How are you helping students and their parents plan for college expenses?

Ross Riskin: I work with families and recent graduates to help them develop plans to save and pay for higher education expenses in the most financially efficient manner. I approach the college and education planning process from tax, financial aid, and cash flow planning perspectives. Whether a family is trying to navigate the complex financial aid process, a grandparent is trying to develop a funding plan for their grandchild, or a recent graduate is trying to come up with a game plan to tackle their student loan debt, I am happy to advise them about the best course of action.

AICPA: How does being a CPA and a PFS support your expertise in education planning?

RR: Being a practicing CPA has provided me with the educational and professional experience required to enhance my knowledge of tax planning. Obtaining the PFS credential has helped me approach college and education planning from the perspective of an accountant and an adviser in order to develop comprehensive solutions for clients to help them see the big “financial” picture. Education planning is an area that hasn’t really been a focal point of planning to the same degree that tax planning and investment planning have been, and I am dedicated to working each day as a CPA/PFS to shift that focus and help families plan and take action in a holistic way.

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Helping Clients Plan Ahead for College Expenses

College savingsAs the cost of undergraduate, graduate and professional education continues to soar, having enough money set aside to pay for college is no longer a “nice-to-have” component of financial planning. It is essential to devise a thoughtful, cohesive plan to keep clients on course toward achieving their financial goals, within the larger context of their financial situation, investment horizon, risk tolerance, and resources.

Helping clients understand how much to save based on their education goals prepares them for the cost of college. 

Six Considerations

In trying to approximate future college costs and the amount clients will need to save to pay the college costs of the future, you’ll need to help them make several assumptions and determinations:

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Seizing Opportunity Like a Rapping Founding Father

HamiltonWhen hip hop music first became popular, very few people would have thought that the music could be a great way to tell the story of America’s Founding Fathers. Yet, the wildly popular Broadway musical “Hamilton,” which won 11 Tony Awards, merges the historical narrative of the nation's first Secretary of the Treasury with hip hop music and lyrics, and proves that it’s possible to successfully create something fresh by offering a new take on a familiar subject.

Alexander Hamilton, the man whose life inspired the musical, started his career as an accounting clerk in the West Indies, then went to colonial America, where he would eventually lay the groundwork for the United States financial system. The musical came to life because Lin-Manuel Miranda, its creator and the man who originated the role of Hamilton, saw an opportunity and seized it by utilizing his musical talents to tell a 240-year-old story and delight unsuspecting audiences.

What does that have to do with CPAs? A lot, actually. Every day, CPAs use their knowledge and talents to meet a wide spectrum of client needs, often in ways that weren’t initially envisioned 50 or 20 or even five years ago. If you’d like to set the stage for new options in your career or practice, here are several opportunities that mesh well with CPAs’ core competencies and experience.   

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2704 Regs May Eliminate Discount: Practitioners Must Plan Now


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Most practitioners are aware by now that the Treasury has proposed regulations under Code Section 2704 that would generally eliminate valuation discounts on transfers of interest in family entities. This means that practitioners should advise all wealthy clients to review planning options before year-end when these new rules might become effective.

The AICPA will examine the regulations and offer comments at the Dec. 1 IRS hearing; however, to be safe, advisers should proceed with the assumption they will take effect as is. Outlined below are four practical planning steps practitioners should address with their clients before year-end.

Step 1: Identify Clients Affected

Clients who own large real estate or valuable family businesses that can currently be discounted for transfer tax valuation purposes, but which may not be able to be discounted after the effective date of the regulations, should focus on planning for the new regulations. In 2012, when the estate tax exemption was modified from $5 million to $1 million, many clients rushed to modify their plans in advance of this change. We will likely experience similar activity this year, as clients strive to complete planning to address the discount rush before year-end.

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You Fancy, Huh? One in Four Americans Envious on Social Media

In these waning days of summer, my Instagram feed looks like a Lonely Planet top 10 list. I don’t know how, but it seems like the 300+ people I’m following have all conspired to be someplace awesome, while I’m toiling away in the office. It can feel frustrating when it seems like everyone (except for you) is having the time of their lives – and bragging about it online.

A new survey, conducted by Harris Poll on behalf of the AICPA, found that when it comes to feeling envious on social media, I’m far from alone. In fact, many Americans are caught in a cycle of feeling jealous of friends who post about their lavish vacations and extravagant purchases, while admitting that they also post things solely because they are fancy or expensive.

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6 Planning Ideas for CPAs Who Have Aging Clients

Aging clientsYou might have noticed the “graying” of your clients and thought “how can I, as a CPA and trusted adviser, provide services that meet their changing needs? What are the practice considerations surrounding those services?”

Recently, we served on a panel at the AICPA Conference on Tax Strategies for the High-Income Individual that focused specifically on these issues. Consider some of the following ideas gleaned from the session and how you may be able to incorporate them into your practice:

  1. Services: Cognitive challenges often affect executive functioning, such as the ability to handle day-to-day finances. Services you might offer include automating finances such as bill paying, monitoring investments, and reviewing banking records to identify elder financial abuse. With clients more commonly living into their 90s and beyond, budgeting and the recurring financial responsibilities of an individual or family take on a very different nature.

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The 4-Step Coach Approach to Client Service

CoachBefore CPA financial planners can provide expert counsel to clients, they first must get to know them in a very meaningful way. The process involves asking self-reflective questions and something I like to call the “coach approach” to client discovery.

The coach approach is a cooperative process, or a two-way street, and comes from material published by motivational expert Michael Pantalon. A good planner (the coach) guides and motivates, imparting knowledge along the way, but the client must also have some skin in the game with a commitment to executing the plan. After all, a basketball player could be coached to improve his game, but the player must commit to practice, and ultimately perform, before any real progress can be made.

Here are four steps to the “coach approach”:

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The Impact of Brexit on Your Clients’ Investments

BrexitUncertainty related to Brexit – the recent vote in the United Kingdom (UK) to move away from the European Union (EU) – sent shock waves throughout Europe and foreign markets. Here in the United States, investors have also expressed concern about the volatility of their portfolios.

Chances are good that some of your clients have already contacted you with questions about how this will impact their personal finances. To help you have this conversation, we sought advice from three well-known professionals: Chris Benson, CPA/PFS, L.K. Benson & Company; Jean-Luc Bourdon, CPA/PFS, BrightPath Wealth Planning, LLC; and Michael E. Goodman, CPA/PFS, Wealthstream Advisors, Inc. Here are their observations:

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CPA Financial Planning: Rewarding in Every Way

Lori LuckA client comment last week propelled me back to my business decision 15 years ago to jump in with both feet to the world of CPA financial planning.

Pausing on her way out the door after a particularly fruitful discussion, she remarked, “We’ve been together a long time.”

Indeed. I’ve been a CPA and tax adviser for her small business for 25 years. I added the full scope of financial planning and investment monitoring for her when I found that clients needed more focus on these services and I was in the best position as a CPA to give them the advice they were seeking.

We’ve monitored her assets and her retirement planning. We’ve made decisions about Social Security. We’ve helped her iron out various issues with estate planning, as many people have after second marriages. Her children were young when we started; now they’re out of college and on their own. Now she’s retiring and has sold her business. And we’ve been with her every step of the way.

It’s been wonderful, for both of us, really. And it’s that way with many of our clients. Shifting our practice to focus more intentionally on financial planning is one of the best decisions I ever made.

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Advising Same-Sex Married Clients After Medicare’s Rapid Changes

Same-sex coupleBy now, most CPAs should be familiar with tax strategies for same-sex couples, but due to a Supreme Court ruling in 2015, one possibly overlooked area CPA financial planners should address is the Medicare benefits available to couples in a same-sex marriage.

Before 2013, married couples of the opposite sex could qualify for Medicare benefits through their spouse, and before the U.S. Supreme Court’s Obergefell vs. Hodges ruling in 2015, state law still controlled whether a same-sex couple was treated as married. In layman’s terms, this resulted in inequality among same-sex couples, where some had full marriage rights because of the state in which they lived, while others were denied marriage rights because of their state of residence.

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Client Advocacy: Susan Tillery, CPA/PFS, Takes a Unique Approach

Susan TilleryWhat does an ancient biblical word meaning “holy spirit” have to do with financial planning in the 21st Century? Plenty, according to Susan Tillery, CPA/PFS.

Susan is president and co-founder of Paraklete® Financial, Inc., a fully-integrated personal financial planning (PFP) firm with offices in Georgia, North Carolina and South Carolina. With more than 30 years’ experience in financial services, Susan sticks to one, basic tenet: placing her clients and their financial well-being first. We recently sat down with Susan to learn about her unique service model, business mentality and outlook on the profession.

AICPA: Paraklete operates on a fee-for-service model and your catchphrase is “An Advocate in Financial Services.” What is this model all about, and how does the advocacy tagline ladder up to your firm’s operations?

Susan Tillery: “Your Advocate in Financial Services” comes directly from the meaning of the name of our firm; Paraklete is the Greek word for advocate, counselor and one who walks alongside you, which best describes what our business model is all about and what we offer our clients.

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What it Means to Be There for Your Clients as They Age

Elderly couple review financesMost people don’t think they need to plan for getting older. That is, until they are forced to make unexpected, and potentially no-win, decisions, or, perhaps they fall victim to a scam that targets elderly people. In the best cases, the reality of aging means the person merely finds they can’t do something they used to do with ease. Unfortunately, in many cases, the reality doesn’t hit them until after they’ve experienced a problem.

Getting older can be a challenge to your clients’ personal and financial security if their physical and mental capacity start to wane. As their trusted adviser, you can help your clients safely ease into the later decades of their lives by organizing, simplifying and monitoring their finances, and building important relationships to help them address senior issues. As you gain more experience in this area of practice, you may find yourself identifying a range of later life planning services that can offer significant practice development opportunities.

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Use a Flowchart to Illustrate Client Wealth Transfer Goals

You consider yourself to be proactive. By age X, you have a well-thought-out estate plan. Your will states that 80% of your wealth will be distributed to your two children, while 20% will be donated to a charity close to your heart. All of this is set in stone, right?

Once estate documents are drafted, some may feel confident that their wishes and intent will always be carried out; yet, this is typically not always the case. While estate documents are static, a client’s life is dynamic and ever changing. CPA financial planners are uniquely positioned to ensure a client’s wealth transfer goals are continually being met.

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The One Career Move That Changed My Life

David Oransky - hi resQ&A With David Oransky, CPA/PFS

Pilot … sailor … entrepreneur … CPA financial planner. David Oransky, CPA/PFS, is open for an adventure in both his personal and professional life. Embodying the ‘can-do’ spirit and desire for ownership that defines the millennial generation, David left public accounting to begin a career in financial planning and now serves as principal and founder of Laminar Wealth. In order to help other young CPAs understand the career possibilities in financial planning I sat down with David to learn how one career-defining move changed his life.

 

Sarah Bradley: What is the one career move that changed your life?

David Oransky: It would have to be when I made the decision to leave my job and join a wealth management firm. I felt I was doing well in my role there, but realized my natural curiosity was in personal, not corporate, finance. When I gave my notice, partners and colleagues expressed concern about my decision. Looking back, I’m glad I listened to my heart. Today, I get out of bed every morning excited that I get to not only do work I find interesting, but also get to make a direct and positive impact on the lives of my clients.

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Your Client’s Tax Return is a Gold Mine for Planning Opportunities


Gold mineNow that we’re past the April tax filing deadline, looking ahead to helping clients survive the upcoming 2016 tax year may very well be the last thing on your mind. Nonetheless, proactive CPA financial planners and tax professionals know that Form 1040 is a virtual gold mine with many nuggets of information to offer. The individual income tax return will not only yield opportunities to lower your clients’ tax liability and help them plan for their retirement, but is also beneficial for your practice.

You can expand your scope of services by adopting a more holistic financial planning approach. Portfolio managers, estate attorneys and insurance professionals focus on their specialized fields. However, a client’s CPA is likely the only professional on the team who is going to take the time to analyze the 1040.  This is nothing short of “having the window into everything going on in a client’s life”. For the practicing CPA financial adviser, it provides a natural springboard into deeper client conversations and provides opportunities to discuss new service offerings.

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Prince’s $250 Million Mistake

PrinceWith songs like “Purple Rain” and “Little Red Corvette,” Prince wrote the soundtrack of a generation.

However, his failure to write a will could spell trouble for his $250 million fortune. Last week, people around the world mourned the death of this gifted singer and songwriter, and many were shocked to hear that Prince didn’t have a will or an estate plan in place. Even though he was a notoriously hands-on negotiator who meticulously controlled the intellectual property rights of his song collection, this unfortunate lack of planning has left uncertainty for Prince’s heirs. The future inheritance process could cost tens of millions of dollars in legal fees, and state and federal estate taxes. Surprisingly, he’s not the first famous person who left this world without a plan.

Not yet famous with a quarter billion dollar estate to leave loved ones? It’s still important to draft a will and keep it up-to-date based on changing personal and financial situations. Here are a few tips to make sure you have an effective will:

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Elder Planning: Life’s Transitions After Retirement

Elder planningClients often fantasize about retirement; it becomes a sort of finish line for them. Get to retirement and you’ve made it. What they might not consider are the ways life may change once they’ve retired, and the financial, health care and other planning needs that go into preparing for the future.

Enter the knowledgeable CPA/PFS, who can go beyond retirement planning and assist with elder planning. There is a fine line between retirement planning and elder planning: While all financial planners help ensure their clients have enough savings to last until the end of their lives, elder planning also involves helping clients plan for life’s transitions after retirement.

You’re probably thinking, “Isn’t that the same as retirement planning?” Not really. Elder planning goes beyond financial independence and retirement to touch all areas of financial planning, including investment strategy, health care, estate planning, risk management (insurance) and end-of-life care.

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The Insanity of Inheritance: How to Keep Your Clients Civil and Practical

InheritanceWhen you handle inheritance issues for bereaved clients, stop and put yourself in their shoes. Try to understand their emotions…loneliness, sadness, fear and possibly anger.

As a CPA financial planner, your role is to support your clients throughout their lives, including during the loss of a loved one. When it comes to inheritance, people’s judgment can become clouded. Even if dealing with an inheritance brings out the worst in your clients, you are helping them prepare for a secure retirement. Take a deep dive into their lives and look for an understanding of what they’re going through.

When clients lose a parent, they also lose their security blanket, leading them to cling to possessions that remind them of their loved one, such as a silver set, a gun collection or a folded veteran flag from military service. While these are all reminders of loved ones, lasting security really comes down to financial stability. Consider these three factors:

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Social Security File and Suspend: Important Deadline and Changes

DeadlineUp until now, if a married couple had one spouse at full retirement age (66 or older), file and suspend allowed the other spouse and/or a dependent to enjoy short-and long-term benefits.  But after April 29, 2016, this will no longer be the case. After this date, if a spouse suspends his or her benefits, benefits for everyone involved – including the other spouse or qualifying dependent – will be suspended, too. Thus, a filer must take benefits and abstain from delayed retirement credits for the other person to also receive benefits.

With the file and suspend strategy, a married person – typically the one who makes the most money – can file for his or her own Social Security benefits at age 66 or older, and then immediately suspend those benefits, while their spouse can still file for spousal benefits. As a result, the couple collects an ongoing Social Security check, and, at the same time, the spouse earning the most money sees his or her benefits grow by 8% each year, allowing for a potentially higher benefit for the surviving spouse.

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Two Lies & One Truth about Personal Financial Planning

Personal Financial PlanningFriends and colleagues ask me all the time, “Why do you specialize in personal financial planning (PFP)?” That’s easy to answer, but let’s see if you can figure it out based on a game you’ve probably heard of: two truths and a lie, or in this case, two lies and one truth.

Lie #1: PFP is only about product sales and investments.

Clients are looking for more than tax advice and tax planning. Based on my experience of working with clients, as well as networking with leading CPAs who offer financial planning and those who hold the CPA-exclusive Personal Financial Specialist credential, what clients really want is integrated advice on all of their financial affairs. This includes tax, estate, retirement, investment and risk management/insurance planning.

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Estate Planning for the 99 Percent

Estate planningThe CPA financial planner has a new challenge: the majority of our clients’ estates will not be subject to the federal estate tax when death occurs. If this is true, then how do we help them plan for the future, as well as convince them that planning is still important and necessary?

I call this the “new reality” in financial and estate planning. In 2015, the applicable exclusion from the federal gift and estate tax was $5.43 million, indexed annually for inflation, and the 2015 applicable exclusion from the generation-skipping transfer tax (GST) was also $5.43 million. These numbers are now adjusted to $5.45 million for 2016. Clients whose estates fall below this threshold make up 99 percent of the clients we work with in our practices.

However, we can no longer say, “I will plan your estate and save you taxes.” With estate tax savings almost a non-issue, we must adjust, motivating the client to focus on non-transfer tax and income tax aspects of planning that have a large impact on their lives.

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4 Steps to Creating a Social Media Policy for Your Firm

Social media strategyOne way to deepen existing client relationships and connect with more prospects is to use social media. While LinkedIn, Twitter, Facebook and other applications will help your practice evolve, social media also presents several compelling challenges, especially when it comes to compliance.

If your firm is planning to use social media, you’ll want to create and maintain a social media policy. Keep in mind that this policy is not meant to restrict activity for tweeting and posting, but instead to establish parameters to meet these challenges and satisfy compliance requirements.

Four Steps to Your Policy

Your social media policy should outline what outcome you hope to achieve from social media and how you will achieve it. Here are four areas to consider:

  1. Vision. Your vision will detail how you and your team perceive social media, respond to engagement and think creatively for ongoing communications and initiatives. Consider it the extension of the culture of your business – the reason why you come to work and why clients stay with you.
  2. Planning. Having conceptualized and defined how you want to use social media, your plan should identify the platforms you will participate in, such as a blog, Twitter, LinkedIn, Facebook and others. During this stage, you should also determine who will manage these platforms. Will it be comprised of internal staff, external parties or both
  3. Purpose. Financial planners choose to use social media in different ways. How will you define your experience? Consider the following when determining how to engage:  
  • Do you want to use social media as a customer service channel?
  • Do you want to share educational tips, often delivered in client letters, conference calls and meetings, via social media?
  • Are you interested in leveraging the business development nature of social media? If so, you might focus on expanding your network of connections on LinkedIn.
  • Do you want to be known as a thought leader in your area of expertise? If so, developing credible content such as articles, videos and podcasts might be a good way to get your name out.

Certainly, it would sound natural to respond with, “I’d imagine we’d do all of those things at some point.” That is a safe assumption; however, in getting started, opting for a focused starting point helps you shape that voice and cultivate a rhythm to your use of social media.

  1. Goals. By the time you are ready to set goals, your social media vision has taken on a clear shape for you and your team. Like that financial plan, you can now start to envision mile markers and longer term goals you would like to achieve. Don’t neglect to consider how you could measure your progress of these goals, ensuring you factor analytics into your strategy.

Final Checklist

Social media policy is the ticket to entry to the use of social media. Start there and you will be more prepared to move ahead. In the meantime, here are a few areas to address:

  • When selecting a compliance solution for social media – think about ease of use. Choose a provider who can accommodate this with simplicity and meet your needs.
  • Recognize that content that gets shared widely and publicly may fall into the advertising and marketing materials classification. Understand who regulates you – FINRA, SEC, states – and know how advertising content is treated.
  • Keep in mind that testimonials are prohibited. We may not like it – and we know they are very valuable for word of mouth referrals, but when they are written, they are like ads. Just steer clear until the regulatory bodies change their minds.
  • If in doubt about what part of social media is static content (blog posts, articles, profile backgrounds and bios) versus interactive (tweets, status updates), have your content compliance-reviewed before you use it.

And, speaking of compliance, you’ll want to get some very clear direction from your compliance provider for social media. Some are stricter than others, so check to make sure you are following the rules. And, above all, have fun!

PFP members and PFS credential holders can listen to a podcast on this topic. 

Blane Warrene, MobileGuard. Recognized as an industry leader in financial services marketing, compliance and technology, Blane has worked in progressive roles for broker dealers, investment advisors and asset managers. 

Social media strategy image courtesy of Shutterstock

Dreaming of the Jackpot: 8 Tips to Help You Manage Your Money If You Win Big


JackpotYour own private island. A villa in Tuscany. A sprawling mansion in Malibu. A ticket around the world. Oh, the things you could do with $1.3 billion in lottery winnings. But before you get carried away, consider those past lottery winners who mismanaged vast fortunes, losing everything. Don’t fall victim to the same fate. 

Live life as usual, until you develop a plan for how you will handle your winnings. You’re excited. Who wouldn’t be? But it would not be financially wise to buy a house, boat or luxury car the day after winning big. You will want to consult both a CPA and a tax attorney who have experience dealing with unexpected windfalls. These professionals can help you determine if you should take the lump-sum or annuity payment option, and help you develop a plan for how to use your new-found fortune.

How much money will you actually walk away with? Just because the jackpot is now advertised as about $1.3 billion does not mean that is the amount that will wind up in your bank account. Winnings of more than $5,000 are subject to a 25% federal withholding tax. The actual federal tax rate is likely to be higher — possibly as much as 39.6%, depending upon other factors such as income, deductions and residence. Additionally, depending upon where you live, your winnings may be subject to state and local income taxes. Of course, if the jackpot sum is enormous, this likely will not make a huge difference. However, it is important to keep in mind.

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Life Planning: The Conversation of a Lifetime

Life planningIt’s just not enough to give your clients the tools they need for long-term financial planning; to really connect with them, it is good practice to humanize your approach by integrating life goals with financial goals. This is “Life Planning.”

When I started my practice, about 50% of my clients were psychologists, psychiatrists and other mental health professionals. After I began attending their workshops and learned more about human psychology, I started thinking about my own business relationships. To truly be a benefit to my clients, I needed to find a way to develop an authentic relationship they would value.

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How to Retain Retirement Planning Clients – For the Long Term

Retirement planThe latest AICPA PFP Trends Survey, a quarterly poll of CPA financial planners, yielded interesting insights into the impact of strong client relationships.

This year’s market fluctuations could have really thrown clients into a tailspin of concern about their retirement savings and resulted in them making impulsive decisions about leaving the market. Despite the market volatility, a majority of CPA financial planners’ clients exhibited resolve, with only 16% of their clients contacting their CPA with concerns about getting out of the market. The survey quantified the impact of specific reasons for this tenacity, including client education, age and their relationship with their CPA financial planner.

You can have an impact on your clients’ anxiety, or lack thereof, about market fluctuation and long-term financial planning. According to the survey:

Exposure to a CPA financial planner positively impacted their clients’ response to market swings. Clients who have a long-term, more established relationship with their CPA were more confident than new clients. The scale of 1 (fearful) to 5 (confident) has more established clients rating a 3.6, with newer clients feeling slightly fearful at 2.5

Furthermore, clients who were educated about the market rated their confidence level at 3.4 versus 2.4 for those with little interest or knowledge.

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How to Help Your Clients Get Ready for Retirement

Retirement pigClients approaching retirement may be eager to make lifestyle changes, find a second profession or hobby, or even punch out their bucket list. Before they retire, they should consider income tax planning, healthcare coverage, long-term recordkeeping and housing options as part of their preparation plans.

Minimizing Taxes and Healthcare Costs

Clients want to know how much retirement is going to cost and how you can help them minimize those costs. Here are four strategies to consider with your pre-retiree clients:

Before collecting Social Security: Help your clients lessen their tax brackets in retirement by timing ROTH IRA conversions or traditional IRA withdrawals to fully use lower tax brackets each year from ages 60 to 71.

When transitioning from employer-sponsored health coverage to retirement health coverage: Your clients must consider COBRA along with Medicare and Medicare supplemental policies so they can avoid gaps in coverage. Help them do this by offering them education and guidance. Also understand that Medicare supplemental policies do not consider COBRA as creditable coverage, so make sure you consult with a qualified professional that specializes in Medicare and Medicare supplemental policies whenever your clients have COBRA or are continuing work with employer or union coverage after age 65.

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Post-Mortem Planning: Helping Clients Make Decisions About Their Money

End of the financial rainbowWhat happens to your money when you die? While it’s never too early to sit down with your clients to discuss their plans for how their money should be disbursed upon their death, it can certainly be too late. Meeting with them sooner rather than later can generate more income beyond their lives for their family and beneficiaries.

The best plan is to meet with your clients to determine their goals on this topic. This isn’t an easy conversation for anyone, let alone someone who is very much with us now and, hopefully, for years to come. When I’ve met with my clients on this topic, I’ve been surprised by some of the issues. For example, the client may have concerns about a spouse spending too much money too quickly, a child mishandling a large amount of money, a situation regarding a handicapped or special needs child or asset allocation worries.

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4 Ways to Help Clients Plan for Unexpected Medical Expenses

Medical expensesHealthcare costs are rising faster than inflation, so it is no wonder that a recent AICPA survey of CPA financial planners found that clients were most concerned about running out of money, partially due to unpredictable healthcare costs, as well as market fluctuations and lifestyle expenses. One unexpected costly illness could cause significant financial distress for many Americans. Here are four ways you can help your clients avoid this particular fate and better secure their future.

1: Medical expenses toward the end of life can create significant tax deductions. The moment you hear that a client or a client’s spouse is having a healthcare crisis, moving into a nursing home or incurring significant healthcare expenses, you should start thinking about the best approach to fully utilize healthcare deductions. For example, the client may benefit from taking money out of an annuity, doing a Roth conversion or simply taking more money out of an IRA than the Required Minimum Distribution calls for. Rather than reacting to the need for immediate cash, you can help your clients plan for “seemingly” unexpected expenses. I say “seemingly” because all of us can expect to incur end-of-life expenses; we just don’t know when they will occur, of course.

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Does More Money Make You Happier When You Retire? Not Always

Hapy retirementMany of us imagine a future in retirement when we leave the obligations and stresses of our work life behind; but few of us take the time to create a plan for what we will actually do when we retire and who will share that life with us.

CPA financial planners help clients achieve their financial retirement goals, but there’s more to retirement planning than making sure there’s enough money in the bank. The biggest challenge is ensuring there’s financial stability along with investing in developing a meaningful social network that will create a fulfilling retirement.

Here are some things you can share with your clients so they can create a well-rounded plan.

1. For those of us who are savers, the good news is that data from a nationwide Health and Retirement Study states that financial wealth does make us happier, and the effect is generally linear—higher wealth groups are significantly happier, but there’s a limit. At about $3.5 million of savings, retirees actually become less satisfied. This may be because they have more money than they could ever spend in retirement, and essentially feel burdened with the additional stress of managing it.

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Digital Estate Planning: More Than a Lifeline

Digital willWhether you think of our connected world as a benefit or as a time waster, there’s no escaping the complex red tape associated with providing access to our digital assets after we pass away. What lives online is neither easy to access nor is it clear cut as to who can get to it.

This is an important focus for all of us, our families and our companies, but it also provides an opportunity for CPA planners to understand digital estate planning in order to help their clients plan for their future.

Not having a digital estate plan as part of your clients’ wills is the same as not having a will at all. In other words, if there is no specific direction given to provide designees access to files, email and even social media accounts, the clients’ wishes may not be able to be carried out. Although there have been small strides made by some states in this digital space, a digital estate plan is absolutely necessary to avoid any questions or ambiguities. Idaho, Indiana and Oklahoma addressed legislation providing access to social media and blogging accounts, while Connecticut and Rhode Island have dealt with access rights to email.

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