Category: News

News

Reaching Agreement to Embrace Change

Post author By FFC
Post date December 7, 2015

Reaching Agreement to Embrace Change

As we near the end of 2015, the AICPA’s Examinations team is in wrapping up the development of the next version of the CPA Exam, and is confident in the depth and relevance of the final proposal we put forth in September. In the Exposure Draft, Maintaining the Relevance of the Uniform CPA Examination, we captured feedback from a multi-year research initiative that ensures the Exam remains truly aligned with what the profession needs from its next generation of CPAs. Responses were sought to the Exposure Draft during the AICPA’s public comment period that closed on November 30, with critical feedback received from key stakeholders, including firms, state CPA societies, academics and state boards.

The Exposure Draft, which was driven by the comprehensive practice analysis, focused on how newly licensed CPAs are now required to perform more advanced tasks and contribute to increasingly complex projects earlier in their accounting careers. Professional content knowledge remains fundamental to protecting the public interest, but newly licensed CPAs must also possess:

higher-order cognitive skills, including critical thinking, problem solving and analytical ability, as well as professional skepticism

a thorough understanding of professional and ethical responsibilities

a strong understanding of the business environment and processes

effective communication skills

Our proposal for the next version of the CPA Exam captures these elements, which are critical to the profession and the future of licensure. Initial feedback has been positive and many in the profession have supported the direction outlined in the Exposure Draft.

A recent article published last month by the Journal of Accountancy, CPA exam evolving to reflect shift in skills requirements, resonated with many of you as it was one of the more viewed articles on the site in 2015. This certainly reinforces the interest and importance in the evolution of the Exam, and how critical it is for the Exam to remain aligned with the profession. “You’re going to see an Exam that is more representative of what you will do when you get out and work for a CPA firm or work for a company,” said Rick Niswander, CPA, CGMA, Ph.D., Vice Chancellor for Administration and Finance at East Carolina University, AICPA Board of Directors member and immediate past chairman of the Board of Examiners. “I think that’s the biggest thing.”

Additionally, in a recent article published by PWC, The Evolution of Auditors: How Skillsets are Changing, the need for auditors to have more technology-driven skillsets is emphasized. The AICPA is credited for recognizing and addressing this early on in their efforts to develop the next Exam. The article notes the need for academic curriculums to incorporate more hands-on, real-world case studies that encourage students to apply analytics and other tools encountered on the job. It goes on to note that this is already happening on some campuses, and is also reflected in the AICPA’s recent proposal to incorporate testing of some of these skills in the CPA Exam—namely, critical thinking, problem solving, analytical ability and professional skepticism.

All feedback received during the comment period will be considered by the AICPA’s Examinations team and Board of Examiners as the details of the next version of the CPA Exam are finalized. Even as the current changes are in process, volunteers and AICPA staff are looking forward to the continued evolution of the Exam, particularly in the rapidly progressing area of digital technology. This integral and continued focus on advancing the Exam ensures the preservation of its relevance and role in protecting the public interest.

Michael A. Decker, Vice President-Examinations, American Institute of CPAs.

Thinking courtesy of Shutterstock.

Tax Extenders: Been There, Done That

Post author By FFC
Post date December 4, 2015

Tax Extenders: Been There, Done That

What has been will be again . . . There is nothing new under the sun.”

– Ecclesiastes

It seems like writing about expiring provisions is a regular rite of passage and frankly, it doesn’t feel like the religious experience alluded to in Ecclesiastes. The last time I spoke with you about tax extenders (Nov. 28, 2014), I asked: What’s the million dollar topic on members’ minds these days? The choices were the following:

The IRS

The congressional lame duck session

Extenders

Starting busy season

Government appropriations

The Keystone Pipeline

Immigration reform

Bipartisan cooperation in Washington

All of the above

Look familiar? The IRS, Congress, extenders, busy season, appropriations and cooperation haven’t left many people’s consciousness. Even the Keystone Pipeline and immigration have been in the news. I’d add a few other familiar priorities: the Highway Trust Fund and the debt ceiling.

By the way, several members have asked me if I ever get tired of blogging about tax extenders; how long will this continue? Good question. Well, as of today, the answer is 2023. At least that’s what the Joint Committee on Taxation indicates in its List of Expiring Federal Tax Provisions 2013 – 2023. Yes, that’s correct, 2023. And that’s before the extensions of the extensions of the extenders! Practice makes perfect.

So where are we and what’s going to happen? The divide in Washington is over the permanency of some of the extenders. S. 1946, the Tax Relief Extension Act of 2015, introduced this summer by Senate Finance Committee Chair Orrin Hatch (R-OR), would extend the expired provisions for two years and modify how some of them would work. The House, on the other hand, considered a series of bills that would have made some extenders permanent (H.R. 637; H.R. 640; H.R. 641; and H.R. 644). Earlier, tax reform was part of the extenders vernacular (i.e., let’s address extenders as part of a reform bill) but reform will not happen before 2017, after the presidential election cycle.

Permanency does make sense. The AICPA pushed for extenders to be resolved timely as we know that resolution is critical to leveraging a timely start to filing season. Also, from a tax policy perspective, transparency, certainty and simplification are critically important. The lack of certainty gives way to other consequences, such as the impact on companies’ financial accounting and reporting; the increase in complexity and administrative burden for taxpayers and the IRS; the possible adverse impact on small businesses; and the effect on economic decisions and tax payments. Absent other explicit goals for enacting temporary provisions, such as adding an economic stimulus, there is really no reason to put taxpayers and their advisers through this agony.

I’ve “gone out on a limb” regarding predictions for tax extenders before, so let’s do it again. First, the facts:

The congressional calendar is very compressed with only a few “must-pass” bills including highway funding that expires Dec. 4.

Congress recesses Dec. 18 and reconvenes in early January.

Congress set the overall spending limits for FY ’16 and FY ’17 in a budget deal on November 2. That deal sets Dec. 11 as the deadline to decide on the exact appropriated amounts that will be allocated to the federal agencies – in an omnibus spending bill. That’s the next important date.

Here’s what I think will happen – Congress will pass a two-year (2015 and 2016) extension of all the expired provisions on Dec. 11 as part of a government funding bill. One wild card is the Syrian refugee situation – a very emotional issue that could derail the appropriations process. Stay tuned.

“A time to weep and a time to laugh, a time to mourn and a time to dance.” Ecclesiastes wasn’t referring to Washington politics but, then again . . .

Edward Karl, Vice President-Taxation, American Institute of CPAs.

Hamster in a wheel courtesy of Shutterstock.

Not-for-Profit Board Service is a Meaningful Way to Give

Post author By FFC
Post date December 3, 2015

Not-for-Profit Board Service is a Meaningful Way to Give

We are in the midst of giving season— a time when many of us pause to be grateful for what we have and to help those who are less fortunate. This is the time of year when many CPAs and finance leaders are asked to serve on not-for-profit boards, an experience which can be an incredibly rewarding way to give back. However, volunteering on a nonprofit board requires a significant time investment and comes with serious legal, fiduciary and stewardship responsibilities.

Before saying “yes” to board service, ask yourself the following questions to help you determine if the board you are considering is the right choice for you.

Do board members serve as partners in shared leadership? Governance is a shared responsibility between a not-for-profit’s managers and its board of directors. The board is ultimately responsible for the organization and its ability to fulfill its mission. Before making a commitment to join a board, ask if you can observe a board meeting. Watch closely. Is the board actively engaged, or are they passively listening to routine reports? Board members should have an opportunity to weigh in on strategy, participate in candid discussion and contribute to decision-making. Does management present both sides of an issue and seek input before board members are asked to cast their votes? Lively dialogue and healthy debate in board meetings demonstrates a willingness to be responsible for the organization. An active and engaged board is a necessary ingredient for strong governance.

Is there an orientation for new board members? Board members have responsibility for the organization, and there are potential legal consequences for directors who fail to fulfill those responsibilities. Because of this, an orientation is crucial to get them up to speed. This could be an informal visit with key staff in smaller organizations or a formal training program. During this process board members should receive the information and tools they need to successfully understand and oversee the organization, including bylaws, financial statements, audit reports, budgets, tax forms, strategic plans, organizational policies and so on. Ask if the organization carries directors and officers insurance that provides protection against actual or alleged breach of duty by board members.

Are resources used responsibly? Not-for-profits have a fiduciary obligation to act as responsible stewards in managing resources. Such resources, -whether financial, human, organizational, informational or other – are critical for successful program service delivery and, ultimately, mission achievement. Ask whether there are governance policies regarding the management of conflicts of interest, protection of private and sensitive information, approval of executive compensation and a mechanism whereby individuals can report concerns without fear of retaliation. Inquire about how the budget gets approved and reviewed by the board. Board members should have an awareness of the organization’s current financial condition, forecasted revenue and information needed to make timely adjustments in expenditures to keep the organization healthy.

How does the organization ensure compliance with laws and regulations? As a best practice, a not-for-profit’s leadership team, including its governing board, should spend time diligently reviewing the IRS Form 990 prior to filing and have an opportunity to ask their tax return preparer if anything seems amiss. In addition, most states require annual reports to be filed to maintain good standing, and some require registration to conduct fundraising solicitation. Failure to remain in compliance can result in hefty fines and penalties. As a worst case scenario, it could also lead to administrative dissolution or revocation of federal tax-exempt status, which is necessary for continued eligibility for tax-deductible contributions.

Is the organization committed to transparency? Operational transparency is vital to maintaining the public’s faith, trust and support of organizations. A not-for-profit’s reputation is its greatest asset— even more so for organizations that rely heavily on contributions from donors or members of the public. Ask how the organization is responsive to the needs of its constituents. Ideally, an organization will make its information available to the public. For example, an organization can include information in its annual report or post financial information and operational policies on its website.

Board service is a wonderful way to support important causes and make a difference in our communities. However, it takes more than just good intentions to successfully govern a not-for-profit. CPAs and finance professionals have extraordinary talents to offer, and we can add value by contributing our analytical abilities and practical experience to inform strategies and advise on business practices, financial oversight and risk management. But before joining a board, make sure you are asking the right questions to be a responsible board member and to get the most out of your volunteer experience.

Coming up on December 8, from 1-2 pm EST, the AICPA Not-for-Profit Section will lead a free, interactive Facebook chat and answer questions on board responsibilities. Information is available here.

Sandi Matthews, CPA, CGMA, Technical Manager- Not-for-Profit Content Development, American Institute of CPAs. Before joining the AICPA staff, Sandi was Controller of North Carolina Community Foundation. She currently serves on two not-for-profit boards.

Reinventing the Way We Learn Accounting

Post author By FFC
Post date December 1, 2015

Reinventing the Way We Learn Accounting

We live in an age of short attention spans and demands for more productivity. In my role as an accounting professor, if I don’t grab my accounting students’ attention and immediately explain the relevancy of a topic, they tune out.

Today’s young people have a greater aptitude for learning new skills, especially when it comes to new technological applications. They enjoy experimenting, and they don’t mind failing – as long as failure is just a hurdle on the way to the reward at the finish line.

Short attention spans and the need to multi-task are not limited to college students. The nature of today’s business environment requires CPAs to be multitaskers. Thirty years ago when I was a CPA in public practice, we used to take CPE courses once or twice a year to catch up on new standards and guidance. Today, changes are taking place so quickly that we need to be learning new material daily. Our instructional methods and learning habits need to adapt accordingly.

Nano Learning: Breaking Instruction Into Small Pieces

Nano learning breaks instruction into self-contained modules that can last from two to 15 minutes. These small lessons focus on one or two specific learning objectives. Additionally, they’re typically available “on-demand” so students and professionals can learn at their own pace, in their own space, amid their other responsibilities.

Many educators and students feel the best way to learn, still, is face-to-face instruction in small group settings, assuming that time is available and the instructor is motivated and inspired. But what if in-person access is not easy, the class setting is not personal, or the instruction is mediocre? A great instructor from a distance who is available for live chats or video conferences might actually be the superior option.

Blended Learning: Stimulating Every Learning Style

Even with face-to-face instruction, technology now allows us to develop new ways to appeal to different learning styles.

At my university, for example, Principles of Financial Accounting is the first required course for business majors. To invigorate student engagement in a course dreaded by many, I adopted a blended learning approach known as a “flipped classroom.”

Students are required to watch short lecture videos before the first class meeting each week. In the second meeting, students are broken into four groups of 30, with each sub-group broken down into groups of three. The breakout sections are led by four mentors, who are outstanding senior accounting majors. Students do their “homework” during class time in their breakout groups. Hence, what formerly was homework becomes classwork; what was classwork now becomes homework.

Performance Measurement Challenges

One of the biggest challenges we face is changing the way we determine whether a student or professional has learned a topic or skill. Learning should be based on demonstration of competency, not seat time or merely memorizing facts and formulas.

In one course I teach, students can weight their grade according to their strengths and weaknesses (for example, more weight on projects; less weight on exams; more weight on personal journal, less weight on quizzes; more weight on video mastery, less weight on something else). Who can say that the student who performs poorly on tests, yet is able to clearly explain the materials in their journal entries or during oral presentations, doesn’t understand the material? Grasping concept is more important than the format in which they demonstrate their competency.

I believe the main goal of the first financial accounting course should be to help students appreciate the role of accounting in a larger societal context, and to help them become “literate” in business. Literacy includes demonstrating that they can create a cash budget, perform basic Excel spreadsheet tasks, and read financial statements for service, retail and manufacturing entities.

Likewise, as we consider the challenges of continuing professional education, we need to ensure the goals of each learning experience are relevant to professionals and the stakeholders that they serve. And most importantly, we need to look for creative ways for professionals to demonstrate competency in their areas of study.

To learn about the profession’s recommendations for working toward new approaches to learning, read Lighting the Fire: Strategies to fuel the future of learning. To develop your own professional learning plan and access hundreds of online learning tools and resources, go to the AICPA | CIMA Competency and Learning website.

Curtis L. DeBerg, professor of accounting at California State University and founder of Students for the Advancement of Global Entrepreneurship. SAGE operates in seven states and 25 countries.When traveling DeBerg delivers live “mini lectures” to his university students via Skype video conferencing.

Accounting classroom courtesy of Shutterstock.

Attracting, Engaging and Inspiring Future CPAs

Post author By FFC
Post date November 30, 2015

Attracting, Engaging and Inspiring Future CPAs

Our commitment to the CPA pipeline is stronger than ever. Efforts of the AICPA, firms, state societies and many others have led to the number of accounting college graduates growing in the past 12 years from 45,000 in 2001-2002 to 82,000 in 2013-2014. Additionally, while about 24,000 candidates successfully completed the CPA Exam in 2008, we have averaged slightly over 26,000 since then.

The profession’s focus on the CPA pipeline has long been a priority. That will continue, with new approaches to attracting, engaging and inspiring the future generation of CPAs. We are constantly creating, implementing and evaluating programs to build the pipeline.

Over the past year, we have launched or refined many AICPA programs to align better with our goals. Our initiatives are focused on three themes:

1) Increasing the recognition of the CPA on campus;

2) Expanding reach beyond 4-year colleges; and

3) Building relationships with academics.

Our programs are based on a research-backed strategy that calls for us to help develop a pro-CPA culture all along the pipeline, featuring continuous engagement with students and those who influence them.

Reaching college students. The College Initiatives team kicked off 2015 with enhancements to ThisWayToCPA.com. Because approximately 25% of our website traffic comes from a mobile device, the site is now fully responsive. Since the site’s launch five years ago, we’ve seen mobile traffic continue to increase and just this past year the number of new website visitors reached an all-time high at 325,820.

To engage college students with multiple touchpoints, we launched Need to Know News in August. The ThisWaytoCPA branded newsletter covers topics such as job searches, the CPA Exam and career pathways for accountants. It also keeps students up-to-date on AICPA news and scholarship and competition opportunities.

Additionally, this is the sixth year of the AICPA Accounting Competition. The three-round competition encourages students to use their skills to find a solution to an accounting-related issue. Participants are presented with a case and must first provide a short executive summary with their team’s action plan. If chosen as a semi-finalist the group must create a video presentation. The public is then allowed to vote on each video to ultimately help choose the top three finalists. The three finalists then present in front of a judging panel.

In December, this year’s three leading teams from the State University of New York at Brockport, University of Portland and University of Kansas will travel to the AICPA’s headquarters in Durham, N.C., to present their case to an impressive panel of CPAs. Each team will take home $10,000 and compete for additional cash for their schools in this year’s management accounting-themed competition.

Since inception, 2,724 students have participated – representing 843 teams and 420 schools. Seventy-six percent of past competitors have reported that participation in the competition influenced their decision to pursue the CPA.

Finally, we have developed a professional skills video series that will be used in Beta Alpha Psi Chapters around the country as the basis of a training session by local CPAs/CGMAs. The videos will help BAP chapters fulfill their essential skills requirement and provide the AICPA with an increased presence on campuses.

Our work in high schools. The award-winning Start Here, Go Places website is a hub for students and teachers. The site features tools and resources for students, including “Bank On It,” an online game that reinforces accounting concepts. The game, which now features financial literacy questions, has been played by more than 25,000 students so far. Research shows high school teachers play an important role as student influencers. As a result, The Start Here, Go Places website also features a new Educator Resource Library. This teacher section includes more than 60 classroom resources that help further engage students in the study of accounting. These activities highlight accounting principles, discuss career options and help prepare students for college – all vital to ensure their students’ success as potential future CPAs.

Additionally, the AICPA has partnered with National Academy Foundation’s Academy of Finance in high schools in an effort to educate and prepare a diverse workforce that is ready to enter the accounting profession. The AICPA/NAF Recognition Program will teach students both soft skills – such as communication, time management and leadership – and technical accounting and finance skills that will encourage and prepare students to pursue an accounting degree at a post-secondary institution.

Communication to accounting educators. To strengthen our relationship with academics, the Academic Initiatives team launched Extra Credit, a newsletter for accounting educators. This monthly newsletter includes articles on education and profession-related topics. To date, Extra Credit is one of the AICPA’s most valued newsletters, with an open rate averaging 45%– way above the industry average. The Academic Initiatives team also recently re-launched the new Accounting Education Center on AICPA.org. It features a more organized layout for educator content, videos on education-related issues and a new classroom materials section, which houses an innovative academic-submitted curriculum.

These programs are only a snapshot of how the AICPA protects, promotes and grows the CPA. This infographic paints a more holistic picture of the specific programs aimed at powering the CPA pipeline. You can also reference this recent Journal of Accountancy article to see what else we are doing to respond to the gap between the number of recent college graduates with accounting degrees and candidates sitting for the Uniform CPA Examination.

If you have any questions or comments about pipeline initiatives and programs, please share them in the comment section below.

Joanne Fiore, JD, Vice President of Professional Media, Pathways and Inclusion, American Institute of CPAs.

Students image courtesy of Shutterstock

Happy Thanksgiving from AICPA Insights

Post author By FFC
Post date November 26, 2015

Happy Thanksgiving from AICPA Insights

We’d like to wish you a happy, healthy Thanksgiving. We are grateful for your readership, comments and continued interest in AICPA Insights. Enjoy turkey (or Tofurky) and stuffing with family and friends—and we’ll be back with more food—for thought, that is—next week.

Happy Thanksgiving.

—AICPA Communications

Thanksgiving wishes courtesy of Shutterstock.

Source: AICPA

News

Shaping Our Future: Driving a Relevant Profession

Post author By FFC
Post date November 25, 2015

Shaping Our Future: Driving a Relevant Profession

I’m honored and excited to be taking on the role of chairman of the AICPA Board of Directors at such a pivotal time in our profession’s evolution. Although today we enjoy tremendous success and respect, we must acknowledge that transformative changes in the business environment pose many potential risks to our relevance. We work in an evolving marketplace, one that’s defined by new technologies, complexity, specialization, a changing workforce, globalization and other mega trends. We know that just because something worked in the past doesn’t mean it will continue to work in the future. Now it’s incumbent on us to forge solutions that will preserve our relevance going forward.

Fortunately, CPAs are starting from a position of strength. Let me share my own story with you.

Like many AICPA members, I’m a first generation professional. I grew up in the small farming town of Belmont, Wisconsin, about 65 miles from Madison. I’ve spent my entire career with Baker Tilly Virchow Krause, except for a two-year stint when I worked as a management accountant for one of our firm’s clients, an automobile dealership. The owner taught me something that’s critical to our profession: a sense of urgency. Emil’s dealerships measured productivity every day and frequently asked customers for candid feedback. I thought these were brilliant ideas and put them to work when I returned to Virchow Krause. We began questioning the established rules and implementing the lessons of urgency and action. We measured revenue in real time and solicited immediate feedback from our employees and clients. Our sense of urgency helped us grow from a small Wisconsin firm to the 13^th largest firm in America. We didn’t wait for the marketplace to determine our future for us.

I think that’s a good approach for our profession, as well. To sustain our vital role, we must always be moving toward the next opportunity, the next change, the next marketplace need. We have to recognize that “business as usual” won’t cut it. During my time as chairman, I plan to focus on four steps we can take to shape the future and maintain our relevance.

Modernize our services. People didn’t know they needed a new kind of portable music player or a tablet until the iPod and iPad were introduced. Likewise, our profession can be one step ahead with services people may not even know they need. For example, CPAs assuring that a business is meeting non-financial performance objectives. The need for non-financial assurance is all around us. We have the opportunity to identify emerging opportunities, craft effective solutions and serve as informed experts leading the way.

Increase our speed to market. The pace of business demands that we keep up or be left behind. As a result, we need to be faster in the delivery of our services and quicker in adapting to change. That’s why the AICPA has devoted so much energy toward services and initiatives that many of us could never have imagined when we got started in this profession. Services like cybersecurity, data standardization and analytics, Integrated Reporting and sustainability. Also, initiatives like the CGMA designation and the Future of Learning. Each of these examples addresses a critical market need, and our profession is stronger today because we are proactively addressing them.

Increase collaboration with others. Today CPAs and clients or employers and other stakeholders work together in a complex and fluid business ecosystem. Firms have become conveners of relevant talent, assembling the most accomplished teams from a range of disciplines. Never has the profession’s body of knowledge been greater, and the need for collaboration and specialization more critical. We can excel in this environment by studying business trends, adjusting our perspectives and developing new guidance and training that are available to all who need them. The onus is on our profession to develop the mindset and capabilities to get ahead of challenges and collaborate in more timely and meaningful ways.

Albert Einstein once said, “The measure of intelligence is the ability to change.” Let’s work together to become the change agents who will take the necessary steps to keep our profession on the path of progress. Our profession has the talent – we must take the initiative to step up and lead.

It’s an exciting challenge, and one that I’m enthusiastic to take on with your help. I look forward to meeting many of you throughout the coming year, hearing your thoughts about our future and working with you to ensure that future generations of CPAs will enjoy a profession that’s just as strong as the one that we inherited.

Holiday Shopping: A Cautionary Tale

Post author By FFC
Post date November 20, 2015

Holiday Shopping: A Cautionary Tale

Holiday Shopping: A Cautionary Tale

As a teenager, every year I knew where I would be the Saturday before Christmas: getting dragged from store to store by my father, who inevitably waited until then to go shopping for my mother’s gifts. This annual exercise in procrastination and family bonding was a recipe for arguing and, more importantly, left my dad no opportunity to shop around for the best deals.

Here’s how you can avoid these holiday shopping pitfalls and get good deals, stay on budget, and remember to factor in more than just gifts when you calculate your holiday spending goals.

Establish a budget. How much do you have to spend?

Make a list of everything you need to buy:

Gifts—get specific—family, friends, teachers, coworkers, pets, etc. Write it all down, even if you are just giving a $5 or $10 gift card.

Food and beverages—hosting the holiday or a party? Make a list.

Clothing for parties—do you need an outfit for a fancy holiday party? Your kids’ holiday card photos?

Decorations—buying a real tree? New Menorah? Lights to string up outside? You can lump wrapping paper in here too.

Travel—do you have to go over the river and through the woods to get to Grandma’s? Factor that in too.

Holiday cards—ordering personalized ones or filling in store bought? Put it on the list. Don’t forget postage (49 cents a stamp!)

Tipping—if you live in a large apartment building or park in a parking garage, don’t forget to factor in tipping doormen, porters, building staff and garage attendants. Others should consider babysitters and other regular service providers that are allowed to accept gratuities.

Now that your head is spinning and you wonder how you’re going to pull this off without taking out a second mortgage, analyze the list. Are there any places you can trim? Can you monitor sales? Wait for coupons? For example, many online photo printing websites offer big discounts in the weeks leading up to winter holidays. Or a nearby drug store may do photo card printing at a significant cost savings. Be sure to shop around.

Consider doing a gift exchange where you pull someone’s name out of a hat and purchase a gift of a pre-determined amount or doing a Yankee Swap.

Put a stop to unnecessary gift giving. You might suddenly find your list has morphed and you have your friends’ children, or well-meaning neighbors, or all of your coworkers on your list. Don’t hesitate to politely establish a no-gifts policy. Going into debt is not worth it.

Consider making your holiday party a potluck. Or at the very least, speak up honestly when people ask, “What can I bring?” You don’t want to end up with 17 desserts and one bottle of wine.

Holiday season can be stressful. Overspending will only exacerbate the stress. By following the steps outlined above, you’re ready to celebrate in a fiscally responsible manner. For additional resources about how to keep holiday spending in check, visit www.360financialliteracy.org.

Lauren J. Sternberg, Manager-Communications, American Institute of CPAs.

Holiday present courtesy of Shutterstock.

Women’s Initiatives Executive Committee CPA Firm Gender Survey

Post author By FFC
Post date November 17, 2015

Women’s Initiatives Executive Committee CPA Firm Gender Survey

Click here to download a PDF of this infographic.

Source: AICPA

News

How to Retain Retirement Planning Clients – For the Long Term

Post author By FFC
Post date November 16, 2015

How to Retain Retirement Planning Clients – For the Long Term

The 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.

What does this mean for your practice? Your clients’ trust in you makes a huge difference and in turn causes them to trust the investment strategies the two of you have come up with. Establishing and building that trusted relationship should include educating clients about market trends and patterns.

The survey reinforced expectations on the impact of age on confidence levels: primarily that ratings for clients approaching retirement (2.4) or newly retired (2.3) were most likely to be more fearful. Focusing your education on these groups in advance can minimize these fears during significant market fluctuations.

In addition to educating clients regarding market trends, CPAs should also educate their clients about how much money they will realistically need in retirement. Consider that clients typically underestimate their financial needs based on these three areas, significantly increasing the probability of unmet retirement expectations:

Life expectancies. According to the survey, 52% of individuals underestimate how long they will live, and 57% of couples underestimate their combined life expectancies. People are living longer and longer, with the likelihood of living into their 90s increasing; yet many people don’t recognize the impact of age trends when they plan for retirement.

Total funds to require. If clients are underestimating life expectancy, it’s no wonder that they underestimate the total funds required to retire. CPAs estimate that 54% of clients underestimate their total funds required to retire. You can play a key role in helping your clients envision what they want their retirement to look like and more realistically identify the funds needed to make it happen.

Spending habits change in retirement and the survey showed that 57% of clients typically underestimated these expenses. Whether traveling, gifting money to family members, or paying significant healthcare costs, guiding clients through realistic plans for unique and changing living expenses is important to helping them meet their goals throughout their retirement.

Motivating Client Change

When asked how they motivated their clients to make adjustments in their spending or retirement planning, CPA financial planners responded that motivating clients to make spending changes is challenging, but there are a variety of factors that can speed change along.

External factors forcing a change: Changes in health (96%) and a job loss (95%) ranked as the two highest motivators.

Important decisions facing the client: Pending planned retirement (83%) and helping family members financially (77%) are big decisions that often motivate clients.

Conversations with their advisor: At 78%, this was also a top five motivator. As their trusted advisor, focusing your conversations on these other factors can increase the probability they will embrace the necessary changes to meet their long-term goals.

For Your Practice

CPA financial planners can have a huge impact on ensuring their clients stay the course to meet retirement goals. Frequent conversations to build trust, ensuring they are on track, and educating clients on market trends and why adjustments are needed along the way can make a huge difference.

Be sure to visit our PFP Trend Survey website for more information, where you’ll find a summary of results, a survey video and other resources. We’ll add more survey results throughout the year, so check back for updates.

Additional resources on retirement planning with your clients can be found in The CPA’s Guide to Practical Retirement Planning located on the retirement resources page of the AICPA’s PFP Section website (aicpa.org/pfp).

What changes can you make to influence clients regarding their retirement planning?

Dan Snyder, CPA, Senior Technical Manager-American Institute of CPAs.

Retirement plan courtesy of Shutterstock.