A Landmark Case: Zelinsky Appeals Commuter Tax Yet Again

This is big news for people who work in NYC and live in other places.. Connecticut is challenging NY's right to tax telelcommuters from other states, urging the US Supreme Court to take up the case of Edward Zelinsky, a professor at the Cardoro Law School of Yeshiva University.

Zelinksy often works from his home and travels into the city three days a week during the academic year. He believes that NY is entitled to collect income tax on no more tahn one-third of his salary.

Eliott Spitzer, the NY attorney general is staying out of the discussion. Richard Blumenthal, CT's attorney general, argues that NY tax policy unreasonably penalizes telecommuters in voliolation of the Constitution.

Govenor Pataki's administration disagrees and claims that Zelinsky and his wife must pay income taxes on what he earns writing articles and grading papers at home from CT -- even though he also pays CT income tax on that amount.

So far, Zelinsky has lost every level of appeal in NY's court system including the Court of Appeals. The last judge called his work, "inexplicably interwined" with his employment in NY and therefore taxable there.

Blumenthal argues that NY's tax policy violates the Constitution's commerce clause, by the taxpayer's icnome eanred anotehr state, and the due process clause, by subjecting telcommuters to double taxation.

The Supreme court is expected to decide whether it will hear Zelinsky's appeal sometime next month.

Investment Advice for March 2004--

Watch for these consolidations in 2004:

1. Hale Business Systems, Mary Kay Cosmetics, Fuller Brush, and W. R. Grace Co. will merge and become: Hale, Mary, Fuller, Grace.

2. Polygram Records, Warner Bros., and Zesta Crackers join forces and become: Poly, Warner-Cracker.

3. 3M will merge with Goodyear and issue forth as: MMMGood

4. Zippo Manufacturing, Audi Motors, Dofasco, and Dakota Mining will merge and become: ZipAudiDoDa.

5. Fairchild Electronics and Honeywell Computers will become: Fairwell Honeychild.

6. Grey Poupon and Docker Pants are expected to become: Poupon Pants.

7. Knotts Berry Farm and the National Organization of Women will become: Knott NOW!

That's all for now.....invest wisely!

Need to Keep Up? Link Up

This link contains links to "the best business and investment news and search sites" and is a must for keeping up on keeping up. You can find newspapers, links to investment information (all of the investor sites you could need) and all of Bob Martin's Web Info-Navigator.

What's Going to Happen to Stock Option Accounting?

The Financial Accounting Standards Board is getting ready to make a big move with profound consequences for companies' profits and executive compensation. The FASB tentatively decided recently to change accounting rules to force companies to treat stock options as an expense. Current rules give companies the choice of doing so or not: General Electric Co., General Motors and Coca-Cola Co. are among those that do. A decade ago, the board proposed the change it is now considering but backed away in the face of intense political pressure.

Some academics say that options are difficult to value for accounting purposes. Attempts to place a value on stock options, they say, could lead to a misrepresentation of company assets. That's an issue which the FASB plans to address as early as this month.

Now, the chairman of the Securities and Exchange Commission, William H. Donaldson, and Federal Reserve Chairman Alan Greenspan and multibillionaire investor Warren Buffett support mandatory expensing.

"Stock options are the 800-pound gorilla that has yet to be caged by corporate reform," said Sen. Carl Levin, Michigan Democrat. He and Sen. John McCain, Arizona Republican, have pushed legislation to require the expensing of options.

"FASB ought to act as quickly as possible to put an end to dishonest accounting of stock options," Mr. Levin said.

Congress is now weighing in over possible new restrictions on stock options. On Tuesday morning, the House Financial Services Capital Markets Subcommittee will hold a hearing on HR 1372, the Broad-Based Stock Option Plan Transparency Act. The bill, introduced by Reps. David Dreier (R-Calif.) and Anna G. Eshoo (D-Calif.) on March 20, requires greater disclosure of corporate stock options. The proposed legislation would also commission a three-year study of the effects of such disclosure. During that time, new accounting standards governing options would not be recognized. The Dreier-Eshoo bill would prevent expensing of stock options -- and derail FASB initiative.

The debate is fueled with the memories of the rank-and-file employees who lost out when the executives at Enron and other companies cashed out of millions of dollars worth of company stock before the companies collapsed - and the employees lost their jobs and savings and the investors got burned

Ned is right

From today's Boston Globe in a column about Fidelity Funds, Ned Johnson and the current crisis with mutual funds:

"Among the reforms: greater independence for fund trustees, including requiring that the chairman of the trustees have no ownership stake in the management company.

In theory, it makes perfect sense. How can someone like Johnson be both chairman of Fidelity, the nation's biggest mutual fund company, and chairman of Fidelity's fund trustees, who are charged with representing shareholders' interests, including negotiating fees?

In practice, it misses the point. Corporate governance is the most overdebated, most oversold concept in business. The idea that we can fix what ails business by fixing the structure -- by rearranging the boxes -- is naive. The problem isn't how we arrange the boxes, but who occupies those boxes. The real issue: Do the people at the top have the right values and have they created a culture that reflects those values day by day? That is true in every business."

Let's see. . . Ethics is about the values of the individuals and not some one's arbitrary set of guidelines? What a concept!

As an aside, some people tell me that they have decided we can't use the term "leaders" when talking about the people at the AICPA. They are not leaders. They are the people who work in an organization that we continue to belong to -- but, are we wasting money? Leaders are people who can see the future, the real one, not a contrived one that fits their schemes.

Dispensing justice
By Steven Syre, Globe Columnist, 3/25/2004

Someone told me that the Globe Is not like the Times, but I will see... the story is your links will break after a month, but we'll see. In case that happens, I have copied the story below.. I have been watching the fund scandles and this article provides an interesting look at the situation. No mention of ken lay, and the other enron folks...

Dispensing justice
By Steven Syre, Globe Columnist, 3/25/2004

Punishment, like everything else, is relative. Or at least it should be.

At the moment, there is a lot of punishment being meted out, or contemplated, in cases of business misconduct and crime. Virtually all of these stories involve rich people behaving badly, even scandalously, and not one of them deserves your sympathy.

But what do they deserve? The outrage factor and sheer volume of offenses on trial make it easy to lose sight of the fact that justice is punishment that fits the crime.

The fines paid or time served should make sense relative to the facts of individual cases and to the punishment handed out in other, comparable situations. The important factors should be actual damage done, the intent of the actors, and the degree of malevolence. Real contrition and cooperation are mitigating factors rarely in evidence. Consider how those points might affect two pairs of parallel cases in the news.

One involves the negotiation over how much Putnam Investments should cough up for its mutual-fund scandal and the combined $675 million Bank of America Corp. and FleetBoston Financial Corp. agreed to pay in fines, restitution, and reduced fees last week to make their problems with regulators go away.

Putnam is arguing with the Securities and Exchange Commission over how much the Boston fund company should be required to pay for civil fraud charges it has already settled in part. The Putnam charges focused on six money managers and their frequent personal trading of company funds.

The settlement negotiations are progressing while the ink dries on the gigantic Bank of America/Fleet pact with New York Attorney General Eliot Spitzer. The settlement, struck while the two banks were trying to close their merger, established Spitzer as one of the great bank holdup men of our time. Bank of America chief Ken "Higher Standards" Lewis must have swallowed hard, but he made the deal.

Spitzer had enormous leverage because of the pending merger, but evidence against both banks was piling up. At Fleet's investment subsidiary, trading activity in a few thousand customer accounts was scrutinized. Bank of America had offered hedge fund Canary Capital Partners LLC an opportunity to market-time funds or conduct more serious late trading.

The second pair of cases involves former Tyco International Ltd. chief executive L. Dennis Kozlowski, who began this morning with his future in the hands of a criminal jury, and convicted domestic diva Martha Stewart.

Kozlowski and Stewart were both marquee defendants demonized at trial beyond the specifics of the charges. Videotape evidence and underling testimony could lead jurors to conclude Kozlowski was a pig, Stewart a shrew. The prosecution message: Both were bad people who knew no bounds, and they were caught abusing their positions for money.

Equals? Hardly.

Stewart was convicted of lying about a stock tip that saved her about $50,000, and she will probably go to jail. Kozlowski, facing fraud and larceny counts, is charged along with another former Tyco executive of looting hundreds of millions of dollars from the company. He might do a lot of time. Or not.

Look at these four cases and decide how relative punishment should really work.

Putnam didn't cause as much damage and its offenses were bad, but not as bad, or as widespread, as those at Bank of America/Fleet. Putnam, which has already suffered a huge loss of business, shouldn't and won't face new fines on the scale of the bank settlement.

As for Stewart, there was plenty of evidence at trial that she did as the government charged. It was also abundantly clear that her conduct and financial gain paled in comparison to Tyco's compensation excesses, no matter what the verdict, and so should her punishment.

Steven Syre is a Globe columnist. He can be reached at syre@globe.com.

© Copyright 2004 Globe Newspaper Company.

A Different Kind of Return
Here's what you need to know before hiring your accountant to be your financial adviser
By Lynn O'Shaughnessy Bloomberg Personal Finance, March 2002

Entering this brave new world [of financial planning], CPAs enjoy a distinct advantage over other financial wannabes. As a profession, the members are praised for their stolid integrity and are trusted implicitly.

Lynn says, "CPAs are now boldly muscling their way into territory occupied by entrenched competitors. They're vying with stockbrokers, financial planners, insurance agents, and others by morphing into financial jacks-of-all-trades."

Lynn suggests asking the CPA: "What are you offering? This might seem like picky semantics, but there's a crucial difference between offering financial planning and investment advice. Some practitioners provide one-stop services, but many don't. The typical CPA who has embraced financial planning has been leery about taking the next step, according to Phyllis Bernstein, a CPA and consultant, who until recently was the American Institute of Certified Public Accountants' director of financial planning."

Lynn goes another step suggesting that you ask: "What are your credentials? To tell the truth, most CPAs aren't qualified to help their own mothers with their personal tax returns. Of the 336,081 who belong to the AICPA, the largest percentage are involved in corporate audit work. Not surprisingly, it's typically the CPAs specializing in tax preparation for individuals who are gravitating to the investments arena. About 90,000 AICPA members say they do some personal finance, which ranges from helping a neighbor to running a sophisticated investment advisory business. A mere 8,500 belong to the AICPA's personal finance planning membership section, which furnishes extra training in the field. Meanwhile, just 3,100 or so CPAs have bothered, so far, to obtain the personal financial specialist (PFS) designation,
though the numbers are beginning to appreciably accelerate."

Let me ask you this question: is the wiring diagram different in CPAs that move out of their comfort zone into financial advice? It least I have raised the question: to what extent is the wiring diagram different in those CPA advisers? Let me tell you right up front my view is they are unique.

Statement on responsibilities in personal financial planning practice....

(Please note that I am still looking for the article on risk management that I wrote for Accounting Today and cpa2biz but it does not seem to be out there any more. I have been looking on google but I'll have to look in my files, since this is the one that is worth thinking about.)

My google search resulted in this. I found an article written by Ted Sarenski when the AICPA had issued three statements of responsibilities in PFP to serve as guidance on how PFP assignments should best be completed. Statement No. 1, 'Basic Personal Financial Planning Engagement Functions and Responsibilities,' defines personal financial planning engagements and urges practitioners to comply with long-established accounting codes and standards. It stresses the importance of communication and documentation to the successful completion of assignments. Statement No. 2, 'Working with Other Advisers,' offers guidance for engagements requiring skills or services outside the CPA's area of expertise. Statement No.3, 'Implementation Engagement Functions and Responsibilities,' discusses the implementation of a personal financial planning engagement.

Now there are more statements ... so when I can I will post information on them. This should suffice right now.

CPAs Cannot Ignore Investment Services

I have said it before and I will say it again and again. This is an article from Jay Nisberg which makes the case and is worth repeat reading. If you read it a few years ago, then skip it. if you are still on the fense, here is more spin on the subject.

My thinking is... if you need help, get help -- but get there. If you have entered in the investment fray, but you are not successful yet, don't ignore success. I can help you figure out what you should do now.

Get fit for your future.... Regain Balance ... After 9/11, the American Institute of Certified Public Accountants (AICPA) wished to assist those affected by that tragedy. It asked its members to donate time and expertise to help victimized families and individuals understand the financial implications of the terrorist attacks. I did that by contributing information which ws used in a brochure that was distrbuted.

I also helped people get paid two weeks of lost compensation from Safe Horizons. I connected with Safe Horizons through the NYSSCPAs.

You will see some of my ideas in the AICPA brochure, R e g a i n i n g F i n a n c i a l B a l a n c e : AICPA Information and Resource Guide for Americans Impacted by September 11. I suspect that the informatiion is useful for other issues associated with personal financial planning.

Then I find this...The Electronic Intifada

Ashley Souther, (I think she is an American) working in Jenin, "occupied Palestine" as she calls it, writes the following:

"Ethnic cleansing has happened a lot in history, and is traditionally the preferred method of solving ethnic, political, and irredentist conflicts by military leaders. The climate is right: If the 'leader of the free world,' the United States, can attack and occupy a country as far away as Iraq, then surely a respectable democracy like Israel (the only democracy in the Middle East), should be able to drive out a million or so Palestinians, and imprison the rest. All they need are the right conditions, the right justification: A justification that is in the making as of the assassination this morning and that will continue shortly after with the events that are to follow."

This doesn't sound good to me. An email from Naomi Ragen arrives today and says, "The present of Sheik Yassin in little pieces on the morning of my return was cause for real celebration. As we near Passover, I can't help remember that it was this little Hitler that targeted my family at the Park Hotel on Seder night two years ago."

"I have always felt that our enemies will kill us as long as they can, and they'll stop when they can't. May all those who mourn the passing of Yassin soon follow in his footsteps. After all, didn't Yassin say that the day of his martyrdom would be the happiest day in his life? I wish all of his mourners many, many such happy days in their lives."

Ahmed Yassin, spiritual leader of Hamas-- What is a Spirtual Leader? someone who leads us in drinking spirits...

What follows are a few words about Yassin, the international reaction to his killing, and the likely result for Israel written by BRET STEPHENS, editor in chief of the Jerusalem Post.

It may be recalled that Israel released the good sheikh in 1997, after having sentenced him to life in prison, with the promise that he would never again promote terrorism. This was during the Oslo years, when serious people actually thought that such conciliatory gestures served the interests of peace. Today, that is beyond comprehension. At any rate, Yassin didn't keep his promise.

Meanwhile, assorted foreign ministers are in full throat against Israel. "All of us understand Israel's need to protect itself -- and it is fully entitled to do that -- against the terrorism that affects it, within international law," says British Foreign Minister Jack Straw. "But it is not entitled to go in for this kind of unlawful killing."

It would be interesting to know exactly what, according to Mr. Straw, Israel is lawfully allowed to do in self-defense. Perhaps it would be as well if the minister also reminded the Palestinian Authority of its obligations, under the Road Map, to "undertake visible efforts . . . to arrest, disrupt, and restrain individuals and groups conducting and planning attacks on Israelis." But if Mr. Straw and his colleagues do not do so, it is not from an excess of respect for the Palestinians, but rather its lack. They will, after all, be viewing them merely as weeds, not as humans capable of acting in their own best interests.

Auditing Arafat -- The Richest Of the Rich

Forbes: "The Palestinian leader has more than Israeli tanks to worry about. He may be brought to heel by, of all things, honest financial accounting."

According to Forbes, he is using standard accounting to take control of the PA's mysterious finances and open them up for all to see. Arafat's three main sources of cash: foreign aid, Israeli tax transfers and profits from PA-controlled companies. "He is always ready to pull money out of his pocket to buy people," Said Aburish, an Arafat biographer, told Forbes. An Israeli intelligence report pegs Arafat's personal holdings at $1.3 billion (a claim dubbed "ridiculous" by the Arafat camp), but Israeli officials say Arafat uses his largesse mainly to buy friendships.

Forbes says some signs indicate that Arafat has stashed other money offshore. An Israeli businessman, alarmed that he might be facilitating terrorism, claimed in December that he was hired by Arafat to funnel some $300 million into Swiss bank accounts that Arafat and Rachid control. The attorney general of Israel is investigating. At least $10 million of that sum was used to buy a stake in an Algerian telecom outfit. Fayyad has taken control of that equity; Rachid insists the rest was used by the PA for other investments.

Azmi Shuaibi, a Palestinian Legislative Council member: "We are afraid if something happens to Arafat, we will not know where all the money is."

That was in March 2003. Again, in 2004, he makes the Forbes Richest of the Rich List. It reports his wealth as $200 million. At 74 years old, he does have much time left to spend all of that money....

Let's tie the Middle East to our pocketbook. The Middle East is the key. You have already read about my views on oil.

Now, IMO the Israelis are not going to pack up and leave Israel. Since they have superior weapons (ie, nukes) they are not going to be pushed into the sea, and the Muslims are not going to calm down.

This is important because of the attitude the Muslims have towards us as the Israelis' sponsors/protectors... The Muslims do control the bulk of the exportable oil in the world.

Bigotry Outside Faneuil Hall

Why can't we just all get along? Dershowitz being compared to Hitler? This is Just Plain Stupid! What kind of world are we living in?

CPA2Biz - 15 Best Practices for Financial Planners

This article is a good one. It is worth reading and adopting as many best practices as possible. If you have adopted them or know of other ones, let me know what you think.

CNN.com - Thousands mourn Hamas founder - Mar 22, 2004

"In New York, the U.N. Security Council held private meetings Monday on a grievance filed by the Palestinian Authority."

"Britain's foreign minister called the attack "unlawful" and condemned it, as did other world leaders."

CNN reports that Ariel Sharon, Israeli prime minister, called Yassin the "mastermind of Palestinian terror" and a "mass murderer who was among Israel's greatest enemies."

Re: the international reaction-- Osama bin Laden --the leader of Al Qaeda-- is still on America’s hit list. Who will condem us when we strike him down? For each terrorist leader killed -- a new one emerges -- so tell me again how the world is a safer place? International terror must be stopped, but how?

This political cartoon appeared in the Birmingham News. Thought you might like to see it.

Back to the pocketbook-- For years, the U.S. had preferred oil to fighting against Osama....

Haaretz - Israel News - Oops, Sorry, We Meant to Kill Jewish Joggers

MSN Money - Take a fresh look at your retirement investing - Invest for retirement

This is the story for the week, month, year and even the decade.

The cover of this Saturday's issue of Barron's was on building a comfortable retirement. Individual responsibility plays a critical role. Your vigilance is key. Start saving, save more and save early. That is the only real strategy.

I have just written two articles for publication on retirement planning so when they appear I will try to make sure that they are linked here.

If your clients don't know how much money will be needed in retirement, help them. They need help. Be a financial adviser and make sure that they are planning for retirement.

Outsourcing Abroad Applies to Tax Returns, Too

Imagine all CPAs booking flights to India to check out the internal controls of the Indian tax-prep-shops before they put their signatures on India-prepared tax returns...

Our rules say everyone has to be honest, ethical and careful to protect the client. So if your unethical partner in another country takes the client's confidential information and distributes it to everyone else in the world, you just might be responsible. And by the way, good luck suing your former processing partner in the other country.

Take a long-term view so, when you do it, do it -- do it right!

Spam Poetry
This is why it takes so long to open and read email—
A sample of the subject lines for today
We must be so careful!
What can be done to stop the madness?

Blondie Big Dog
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Digit foul divorcee congratulations
Lose. Increase your bust line
Is what cricis said ture?
Refinance today—as low as 2.9%
Re: Billings
New drug 8X more effective than Viagra
We deliver to your door within 24 hours!
Get $100 worth of free software
Bess lowboy
Earn money quickly
Quit your day job
Newspaper diane freemen
Season of Love
Higher Ranking Increases Your Sales
Re:
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Re: HH. Very Nice!
Overnight Delivery—You get more for less!
Osseous aplomb
Wall Street NEWS—Med Stock on the Frontline
Massive ebay profits are easy
Obstacle
Congestive sinistral
Re: Order #1453
Make your phone ring
Become the man that women desire

AAA Reports Record-High Gasoline Prices

WASHINGTON (AP)--The retail price of gasoline hit an all-time high Tuesday--nearly $1.74 per gallon nationwide--reflecting strong demand, tight supplies and the high cost of oil.

Not a good thing.

Stocks & Bonds: Stock Indexes Fall to Lows for the Year

Getting your investment advice from The Times means that you are making timing decisions. Here is some of what the article says:

"In 12 weeks of trading so far this year, 9 of them have been negative on the Nasdaq," said Brian Belski, market strategist at Piper Jaffray in Minneapolis. "What do you have leading the way? The best-performing sector is utilities and energy."

"Economic fundamentals are too strong," Mr. Belski said. "I think we're going to get a rally." He said he expected the S.& P. 500 to gain 11 percent to 15 percent in the next 12 months, with much of that coming in the next few weeks, as investors react to strong earnings reports.

"In addition, Israel's killing on Sunday of Sheik Ahmed Yassin, the founder of the militant Palestinian group Hamas, has left investors worried that the risk of terrorist attacks is rising. Recent high oil prices also have Wall Street worried. The price of crude oil has risen 38 percent in the last year, though it dipped a bit yesterday to $37.05 a barrel. Since the United States imports almost 10 million barrels of oil a day, that increase would translate into an additional $40 billion in spending on imported oil if it lasted for a year."

People: I don't know whether we are worried about terror attacks or not, but we are certainly worried or should be about the price of oil!

To me Jack Ablin, chief investment officer at the Harris Private Bank in Chicago, which oversees about $40 billion got it right when he told the Times that "oil and higher gas prices are like a tax," and "This is a pretty strong headwind."

Yes. Oil and energy prices impact the entire market. The higher the price of oil, the more a negative factor it can be not just on the obvious groups such as automotive, airlines, transportation and utilities, but on almost all industries. Higher oil prices mean that any industry that uses energy has to pay more for it and they often pass those price hikes on to their customers, who pass them on to the consumer, which adversely affects the economy. On a smaller scale, if we go to the gas station to fill up the car or SUV and it costs us much more than we expected, it will zap our discretionary income. We won’t have the extra money to buy that Plasma Screen TV, that new computer or that new recliner, or new dining room table and chairs -- big ticket items have importance on economic growth. If it costs more for all of us, there is a big risk that consumers will stop spending on other things similar to corporations also slowing down spending, so as I said before oil is a very important component of economic growth.

Add this to your reading list--Our Coming Generational Storm

Our perfect storm is the subject of a new book...
In 2030, when 77 million baby boomers stagger into old age, and walkers will outnumber strollers; there will be twice as many retirees as there are today but only 18 percent more workers. The questions that result from this coming generational storm are addressed in the book, Our Coming Generational Storm by Laurence Kotlikkoff and Scott Burns. They attempt to address: How will America handle this demographic overload? How will Social Security and Medicare function with fewer working taxpayers to support these programs? The authors contend that if our government continues on the course it has set, we'll see skyrocketing tax rates, drastically lower retirement and health benefits, high inflation, a rapidly depreciating dollar, unemployment, and political instability. They say that our government has lost its compass and the current administration is heading straight into the coming generational storm.

How can we react? We need to understand the generational imbalance, and see the future when baby boomers have long retirement years and “fiscal child abuse" that will double the taxes paid by the next generation. There's also the "deficit delusion" of the under-reported national debt. And none of this, they say, will be solved by any of the popularly touted remedies: cutting taxes, technological progress, immigration, foreign investment, or the elimination of wasteful government spending.

So how can the United States avoid this demographic/fiscal collision? Bold new policies, including meaningful reforms of Social Security, and Medicare are recommended and simple, straightforward, policies that are geared to attract support from both political parties. But just in case politicians won't take the political risk to chart a new direction, the book offers a "life jacket"—or guidelines for individuals to protect their financial health and retirement.

If you don’t want to read the book, you can get a good look at some of the analysis and conclusions in the research report with the same name.

We can’t trust our Administration to fix the Social Security system so it will work right when the baby boomers retire, we must make sure that we demand that they do this. We need for them to tell the truth. We must make sure that they tell the truth. We must demand the truth – again and again. I know so many people are working two jobs to make their rent and have little energy or inclination left to question what they hear. But people need to wake up. If we don’t, we won’t have a safe comfortable retirement and what we do have will be paid for by our children and our children’s children. We have to be vigilant and not buy what they are telling us just because they say it again and again.

AMT Update

Right now over 6 million (almost 7 million Americans) are subject to AMT according to Tax Analysis. That is not good.

Income Tax: Capital punishment.

More Reverse Mortgages Being Sold Via Advisers

In a typical reverse mortgage, a homeowner who is 62 or older removes equity in monthly scheduled draws, a line of credit, or a lump sum. Unless the home ceases to be the borrower's primary residence, the loan does not have to repaid until a borrower dies.

A few years ago your clients could not find them, but today many companies are offering them and some are doing it through advisers.

Financial Planning magazine quotes: Robert M. Clements, Everbank's chairman and chief executive, said reverse mortgages are "one of the most attractive tools we have to offer through the financial adviser channel."

Everbank got into the business in 1998 through its joint venture with Bank of New York Co. Inc. It also offers other private-label or cobranded products to the clients of more than 10,000 advisers through 65 formal partnerships, including joint ventures and joint marketing agreements.

Advisers are careful about whom they rely on. The risk of losing their core investment account is the greatest when their clients deal with outside parties...

SEC And NASD Are Examining 529s --UPDATE

Financial Planning magazine says: The current investigations are complicated by the fact that neither the SEC nor the NASD have much regulatory authority over 529 plans, because state securities like the 529s are exempt from existing securities laws. Still, the SEC does have authority under the anti-fraud provisions of federal securities laws, as well as laws regulating brokers, dealers and municipal securities dealers. This means they can prohibit broker-dealers from selling 529 plans unless certain conditions are met, the SEC notes in its letter. They also have jurisdiction over any private-sector investment advisers than advise states on their 529 plans, and on the underlying mutual funds that are selected by 529 plans. "They can hang their hat on that to extent they want to set forth any kind of rule making requirements," said Hurley.

To me, it is important for us watch the investigations and keep tabs on the study. With a great majority of 529 Plans being sold by brokers today, rather than direct-sold, the NASD and the SEC can make sure that the products recommended are suitable. As I said before: Knowing how to navigate the different provisions and timing aspects can be nerve racking.

Some Real Planning Opportunities in 2003 Tax Legislation

Tax planning is full-time thinking for CPAs. Especially when the law changes. Tax planning has never been more important because the law created many new opportunities to save taxes for many years. Review this article. Once I find a link to my Tax Adviser magazine article on 25 tax saving ideas, you should have a good idea of what to do, how to think and plan to minimize taxes.

Don't Need More History Then Skip This...

I just found an article that I did for the California CPA, entitled Are you chasing the right solution? (Financial Services).

More on the bold idea in the face of an onslaught of accounting reform and attempts to limit what CPAs do: expanding your role. Most CPAs realize that they must reassess their traditional roles to meet clients' expectations and demands--including offering more comprehensive financial services. While this "brave new world" represents great challenges, it also holds the promise of great rewards.

Fair weather awaits CPAs seeking the right path to investment management

I just found a link to Insight magazine, which is the publication of the Illinois State CPA Society. The article Taking A New Direction presents issues and good information about changing business models to become a registered investment adviser. It was written by a regional director for Schwab Institutional and contains a few quotes from me.

I tell him that CPAs who don’t offer financial advice and planning are worried that their clients will go elsewhere. I say that more CPAs are taking a "fee-only" approach (but wonder if that statement is still true). CPAs say that the fee-only helps them deliver independent and unbiased advice.

There also is evidence suggesting that many investors prefer a fee-based method. A survey by Dalbar Inc., a financial services consulting firm, showed that 24 percent of investors do not trust their financial advisor—and of those, eight in ten said it was because their advisor accepted commissions.

Plenty of CPAs either don’t want to build an investment advisory practice from the ground up and manage it themselves or simply want to get their RIA practices up and running as quickly as possible.

That’s why CPAs who establish RIAs often look to turnkey providers—companies that help practitioners set up and manage their investment management arms. CPAs who use turnkeys can get into the business without having to do all the work themselves.

Choosing an appropriate business model and finding the help you need to get your practice going will help smooth the path to investment management. It’s not necessary to reinvent the wheel when entering this niche—help is available. You can find some good information in the 1998 Journal of Accoutancy article, Entering the Realm of Investment Services. This article quotes me and contains lists of providers. While the providers have changed, the choices have increased, the ideas are still appropriate.

Investment management was a big deal for CPAs when I got involved in 1985, and it’s just getting bigger each year. The truly explosive growth is still to come. What’s the big pay-off for all your hard work? Your business could boom in the years ahead.

Please Note: CPAs who are considering expanding their practice to include investment advisory services will need to contact the states in which they intend to have clients and/or a place of business to determine the necessary requirements.

Personal Finance Info

My goal for this blog is to discuss all topics related to personal finances and personal financial plans. I will weigh in on topics of interest to CPAs and others on some important business matters as well. Smile.

This is a comprehensive subject and being an authority on the topics means you have to read my blog daily. I will cover subjects of cash management, taxes, insurance, investments, goal funding, retirement planning, estate planning, business succession planning and other topics of special interest so you can see the big picture and get some bright new ideas.

If you think of something helpful for me to cover, just let me know. If you publish something or see something useful online for me to link to just let me know. Contact me so this becomes a collection tool for issues of importance for planning matters.

If you are specifically interested in something I have not covered give a shout. Thinking about personal finances should put a smile on your face. I am right here to help.

If you are ready to sit down and talk with me about these issues or ways that I can help you make more money or keep more of the money you have-- I invite you to contact me. My plan is to make this site useful for you and for me.

Put a smile on your face and keep your eyes on this blog. This is my invitation. Want to play ball?

Thinking About Mutual Funds?

Plenty of information is available about mutual funds. A few years ago I put together an article in the Journal of Accountancy, with Rob Clarfeld, called Understanding Risk in Mutual Fund Selection to give CPAs a better understanding of how mutual fund risk is measured. The article will not enable you to pick next month’s darling in the mutual fund performance derby.

And while no amount of research can guarantee future fund performance, it certainly can reduce the likelihood of unintended risk by carefully analyzing and interpreting risk statistics. Careful research will enable CPAs and their clients to better understand a mutual fund’s range of likely outcomes over various time horizons. In a declining market, sometimes this understanding just may provide the marginal comfort that separates those who ride out storms from those who do not.

I contributed to the 1999 Journal of Accountancy article, 10 COMMANDMENTS OF Mutual Fund Investing. My contribution was the sidebar, Fund Expenses Really Do Matter. Mutual fund costs take a big chunk out of investor returns. You can use a mutual fund cost calculator on the SEC's website. It is an interactive tool for estimating and comparing the costs of owning mutual funds (including sales charges and annual operating expenses) and assessing the long-term impact on investment returns. Use it to think about which is better, a no-load fund with yearly expenses of 1.75% or a fund with a 3.5% front-end sales charge and yearly expenses of 0.90%?

The most important consideration in selecting a mutual fund is its potential to perform well. Even so, CPAs need to keep an eye on sales charges and expenses, which can seriously erode client returns. As the exhibit shows, a slight difference in expenses can make a big difference in the amount that accumulates long-term. Lower cost funds put more money to work. That's why CPAs should study mutual fund expenses carefully and find the most cost-effective funds to recommend to their clients.

Peter Fleming quoted me a few times in his 1998 Journal of Accountancy article, Managing Client Assets. I told him that CPAs who are serious about financial planning—and who see investment advice as the core of what they do—should get serious and register. Trying to squeeze through on an exclusion or exception can make a CPA look like a marginal player. Similarly, trying to back away from giving investment advice to avoid registration also can be a mistake.

Put some salt on your popcorn, skip the butter and enjoy the movie!

what's still in store?

I was reading a forum and found a little fun stuff that you might enjoy. Larry Elkin, CPA, CFP, who I met years ago, put together the piece Intelligence From Presidential Tax Returns. The downside of the article: it makes no mention of the Kerry taxes.

But it talks about Mrs. Bush (that is the first Mrs. Bush) and the book royalties received while she was in the White House - nearly $900,000 from the best-selling Millie's Book, the story of a day in and around the Oval Office as dictated to Barbara Bush by the First Pooch. This is one of my all time favorite presidential books.

Taxes. Wonder why they don't have a clue.

Top 100 Most Influential in the Profession

Each year there are new lists. Lists are a good thing. Especially when you are on them. CPA Magazine complied a list of the 100 most influential people in the profession and I made the list. The list is for Tax Season 2004.

In the section on Financial Planning my friends and colleagues are listed: Tony Batman, Bob Doyle, Marshall Gunn, Jeffrey Rattiner, and Jim Shambo.

To be fair, I must tell you some of the other luminaries are folks like Barry Melancon, Stuart Kessler, Richard Walker, Gary Boomer, Susan Bradley, Joseph Wells, Robert Keebler, Sidney Kess, Andy Blackman, Mitch Freedman, Jay Nisberg and Gary Shamis.

Being a list with these people creates a synergy that leverages effectiveness and multiples the results. Yeh, Right!

My, My.. CPAs no longer the wallflowers of the financial industry...

I did not say that...

But I am quoted and I agree. The Elzweig Report on retail broker recruitment talks about the changes taking place in the CPA world and how brokers need to build a relationship (with CPAs). Referrals from CPAs do not happen just because you’re paying them for it.

Wirehouse programs to pay for referrals from CPAs were launched with much fanfare. Cerulli consultant
Dennis Gallant says the current buzz on the programs has been less than spectacular. The wirehouses aren’t saying much about how the programs are performing compared to expectations. My comment was that the wirehouse programs at best as transitional. Accountants may join the programs for short periods, I speculated. Tomorrow they may decide, ‘You know, I can do it (myself).’ It’s a step. Not a final result..."

If you are trying to enter into a relationship with a CPA firm or if you are CPA firm that wants to make your relationship with brokers or turn-key providers work better. I can advise you on which firms are best for your current business and the business you would like to build.

Your business changes and evolves but some things remain the same: my interest in helping you determine the best strategy for boosting your business.

Are Accountants at the Door?
Hello to a New Business Model

I was looking into adding new tool bar for my browser and found an article in Financial Planning magazine from 2001. That was when I started my own consulting firm and when the future of the Personal Financial Specialist (PFS) designation at the AICPA and CPAs rightful place in financial planning field was questioned, debated and I am happy to say preserved.

In 1993 the AICPA asked its PFS designation holders a question: Should we retain the designation? The AICPA's proposal was to drop the PFS designation, but the members said, "NO." You know what happened? The AICPA talked to other groups about taking over the designation. The press covered the story, read what appeared in Financial Planning magazine, PFS Designation Faces Unclear Future.

There is still much work to do, and I am ready in my own way to go and do it. But the good news is a story was told at the AICPA's Personal Financial Planning Conference this January. The PFS designation will live another year. If you don't believe me, because you think I have told you that for too many years, read the story in Webcpa about the AICPA's plans for boosting the PFS designation.

Let's hope that they are successful!

New to the Advisor Business -- You Need an Advisory Contract

When I was working for the AICPA, I spent a good deal of time on issues related to CPAs becoming Investment Advisers. This became my special area of knowledge and it is how I am different from most consultants. Exciting, huh?

Yes. I wrote many articles and publications offering guidance on the topic, I lectured extensively on the topic including at a Roundtable on Investment Advisors at the Securities and Exchange Commission and visited many CPA advisory firms to see first hand what they were doing and thinking. I worked with some of the best of the best.

In the posting on the AICPA's web site, I wrote guidance on the the basic contents for an Advisory Contract.

Also, I spent too much time working on the AICPA White Paper on Compensation and Disclosure Issues in Personal Financial Planning. The paper discusses the various compensation methods and explores which might best serve the interests of the public. It is worth reading.

I have helped many financial advisors create new Advisory Contracts, revise old ones and improve them. Can I help You?

The Nest Egg: Mine is Real Estate

For many people, the home is not only their home-it is the single biggest source of itemized deductions. Over the next few months we will talk more about that. And you will have questions and comments.

My experience has been that many baby boomers are counting on our homes to fund our retirement too. Some people own real estate for investment purposes and we will also talk about that someday.

Maureen Duffy talked to a few CPA advisors and to me in the Journal of Accountancy article Real Estate Is Hot…Don’t Get Burned and shares with us how CPAs have opportunity to advise clients buying homes on a wide range of issues including financing and price negotiations.

Instead of having consumer loans, interest paid on home equity loans and lines of credit is generally deductible. This is a good thing. But remember these loans are secured by a home -- so clients could lose it if they default.

Make sure your clients who are refinancing existing mortgages make the right decisions while interest rates hover at historic lows. The fees they pay to refinance can be a killer so make sure they shop around to compare them with what other lenders offer.

For many Americans the home of their dreams is just around the corner. CPAs can help those dreams become a reality by advising clients to use caution in shopping for a home, staying within their budget and selecting the right loan and lender.

Use common sense, but make sure you are giving clients advice about strategies for their home. Enjoy!

Tax Tips on AMT

Here's a tip. If you may be subject to AMT this year, don't invest in tax-exempt bonds that genarate interest income subject to AMT.

Be careful when exercizing incentive stock options (ISOs). You can create an AMT adjustment by exercising an ISO without generating cash to pay the resulting AMT. Good planners can help identify tax-saving strategies for solving the problem.

Be aware that AMT can substantially diminish tax credits.

Don't forget about the AMT

With lower tax rates and special dividend and long-term capitial gains rates, it may actually be easier to qualify for alternative minimum tax (AMT). NOT a good thing. AMT is catching many taxpapers off guard. It was created to make sure that the wealthest people were paying income tax. The AMT catches may middle-income people since it has built in a broader base of income than the regular tax, and many deductions are not allowed under AMT.

If you have too many deductions, exemptions and credits your regular tax may drop below the AMT amount and you pay the higher of the two amounts.

Planning could help. Monitor your situation throughout the year and take action as necessary to either avoid the AMT or make its lower rate work to your advantage. AMT could bite when you claim numerous deductions, pay a high state income tax and real estate tax, have substantial medical expenses, and large capitial gains...Look over the article Top Ten Things that Cause AMT Liability for an overview of some of the things that may cause you to pay AMT.

For 2003 and 2004, the AMT exemption increases from $49,000 to $58,000 for joint filers, from $35,750 to $40,250 for single filers and from $24,500 to $29,000 for married persons who file separately. These amounts expire after 2004, returning the exemptions to pre-2001 levels of $45,000, $33,750 and $22,500 respectively.

Bottom line-- Congress has tried to fix the AMT problem, but if the system isn't revised, it could have a major impact. And this is bad news.

This Just In: Women Receptive To Planning Advice

Financial advisors seeking affluent clients may be courting the wrong gender.

Rich women are more receptive to financial advice than wealthy men, they prefer independent financial advice and they tend to be more loyal to their advisors, according to a new study to be released today by the Spectrem Group, a Chicago consulting firm.

Roughly 70% of women heads-of-household with more than $500,000 in investable assets said they use a professional advisor, compared with 62% of men in similar circumstances, according to the study. Plus, about 42% of the women surveyed said they rely solely on their advisor to help them with their investment decisions, compared with 33% of men. And if it ever came time for the advisor to switch firms? More women, 54%, said they would follow their advisor out the door, while only 47% of men said the same.

"In some cases they're better customers, even though they're harder to get," says Catherine S. McBreen, a managing director at Spectrem. Women clients also tend to be more satisfied with their advisors because they're "more selective at the front end," she says.

Financial advisors who want to target women clients should be aware of some key differences between rich women and their male counterparts. Women heads-of-household tend to have a lower net worth than men who run their family's finances ($2.8 million for women compared to $3.4 million for men). Also, they're more likely to be widowed or divorced than male heads-of-household, which can introduce whole new sets of financial planning needs.

—Dow Jones Newswires

New Supply of Financial Planning Clients

Howard W. Wolosky, editor of the Practical Accountant, talked to me and others about why financial planning referrals don’t work the same way that tax and accounting referrals work. Reputation is important, clients are sophisticated, and competition in this field is not just CPAs, so cross-selling alone won’t suffice to build a successful practice. That’s why the smart CPAs in financial planning are working at perfecting their techniques for obtaining totally new clients.

I know this is happening since I see many CPAs, who limit their practice to financial planning, and some get 50 percent of their new business from other accountants’ referrals. CPAs use a number of methods to encourage referrals from other professionals.

If you are interested in learning more about this let me Know. I can help you. When entering an alliance, you need to have a clear understanding about whose client it is even to the point of putting it in writing. Also, state or federal regulations come into play if you are paid for a referral.

Email me!

Managing Client Expectations in an Uncertain Market

The book is hot. My co-author, Bob Doyle, is great. Got my second royality check today and it is not enough to fund my coffee habit for a month. Did not write the book for the money. Did enjoy the experience. Hoped to educate more CPAs about the services. This will happen in time. I have patience.

Selling investment advisory services and successfully marketing a financial planning practice is dependent upon the adviser’s ability to teach clients key planning and investment concepts. This book gives you the in-depth information you need to help foster an effective adviser/client relationship.

An article Peering into the Mind Of the Millionaire Client contains material adapted from the book. Hope you like it. Let me know.

Survey: Tax Professionals Gain From Financial Planning

Tax professionals stand to gain tens to thousands of dollars in additional revenue by adding a financial planning component to their practice, according to a new survey.

The survey by Tiburon Strategic Advisors found that the average tax professional involved in financial planning generates about $242,000 in annual revenues. The survey found that tax professionals without financial planning services brought in an average of $180,000.

The survey, which was received from 1,210 participants through Tiburon’s benchmarking Web site, found that the largest tax firms are increasing their investments in the financial planning side of their businesses. The largest firms, the survey says, devote about 41% of their time to financial planning, compared to 18% for the average tax services firm. "In short, the largest firms have grown because of financial planning revenues and are devoting even more time to further this trend," the survey states.

Although results will depend on firm size, Tiburon says its data indicates that a tax professional with $180,000 in current annual revenues stands to gain between $50,000 and $100,000 in additional revenues by offering financial planning services. —Dow Jones Newswires

College saving plans
More information to know about 529 plans.

529 plans allow families to save for college in accounts in which earnings and withdrawals are exempt from federal taxes if they are spent on bona-fide higher education expenses. That is good news. For many people, this may be the best tax break for education.

When it comes to 529 plans, there is a good source of on-line information with useful, in-depth, and current information.

My web cast on cpa2biz contained a number of good questions. Look at the questions and answers to learn more about this important area. My viewpoint article also contains helpful information.

With a wide variety of plans available -- both prepaid tuition plans and college savings plans -- you no longer have to face a concern about saving for college. Knowing how to navigate the different provisions and timing aspects can be nerve racking. Sounds complicated? It is. But you don't need to have a college degree to start saving and comparing plans.

Good Question: How Much Can You Withdraw From Your Retirement Nest Egg?

Financial plans emphasize the necessity of saving, and saving early. But millions who have dutifully done so are now at retirement age, and as life spans lengthen, a new concern is taking on growing importance: How much can you withdraw from that nest egg so that it lasts as long as you do?
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Getting a grip on an amount is no simple task. Monthly withdrawals could go on for 20, 30 or 40 years, depending on how old you are when you start, your health and your luck. Then, there is your risk tolerance, and the unpredictable performance of the markets, not to mention other sources of income. It is no surprise that many people just save and hope for the best.
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Spending no more than 4 to 5 percent of your nest egg annually should keep you from running out of money. For example, if you want to withdraw $1,000 a month, you would need a nest egg of $240,000 to $300,000 invested in a typical portfolio of 60 percent in stocks and 40 percent bonds. If the market rises, so will the amount you can take out each month. If your portfolio grew from $250,000 to $350,000, a 4 percent withdrawal would jump from $833 a month to $1,167.
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But if the market slumps, you could be in serious trouble. Suppose you had decided to withdraw 9 percent of your retirement savings a year and started just as a bear market set in, costing nearly half your savings - if they were all in stocks. You would have run out of money in just 10 years. But if you were only withdrawing 5 percent, your savings would have lasted 20 years, and at 4 percent, they would probably outlast you.

It has been suggested that with a 4% withdrawal rate, almost any combination of stocks and bonds should enable the portfolio to last 25 years. However, if you want to have money left over when you die-to fund a legacy for your kids or a charitable organization-or if you anticipate a retirement of 30 years or longer, you'll want to consider placing more of your assets in stocks.

What is increasingly coming into play is what is happening in the financial markets just as you start to withdraw. In the past, a lot of cash-flow projections used an average rate of return, like 8 percent. You got an average, but you might get only a 2 percent return for a couple of years, and the timing and pattern of those returns has a major significance on how long your assets will last.

A special report in the WSJ looks at the biggest mistakes investors make with their retirement money. Let's make sure our clients are thinking about the situation and making the right moves.

Taxes and the Deficit Pigeons

My suggestion.

Why can’t they realize that the AMT is so totally out of wack that average taxpayers are getting caught in its ugly web (it's the high state income taxes and real estate taxes). Or that the college tuition credit should be available to ALL taxpayers. Another idea would be to expand the SIMPLE plans to ALL employers. Let's fix the fixes.

I have seen it said that Bush’s tax cuts reduce taxes on the wealthiest by 15 percent. For the remaining 99 percent, the tax cuts average only 5 percent. More tellingly, by 2010, the very rich will see their taxes fall by 5.7 percent of their income. For the remaining 99 percent, the average tax cut is only 1.2 percent of income.

That's what I call "voodoo economics."

“Don’t let the lights go out—let it shine through all of the years."
The story is done... File Under: Old News.

Kudos and all that jazz. It was nice to see the final result of the poll done by the Webcpa on Melancon’s contract extension. Reporting the news is done. As Melissa says: "Thanks to the efforts of our Web team, who scrutinized the results and took out every last duplicate vote, we have the pared-down results. Among those who responded to the poll -- which asked whether people were happy or unhappy with Barry Melancon as AICPA President and CEO thru 2010 – 83 were happy, 80 were unhappy and 13 had no reaction. For those of you who haven't already calculated it mentally, it's roughly 47 percent happy, 46 percent unhappy and 7 percent indifferent."

Now we have the whole story, and we can file this under the heading of old news.

Out of no where
The story is told

This is really a pivotal moment. I think Bill Carlino talking proactively as editor of Accounting Today about the accounting profession and his fear of the future for the AICPA and the accounting profession was well placed.

Bill got it right when he said that the future of the profession depends on its ability to face the “challenge of not only dealing with change but, in contrast to the past several years, being proactive, not reactive.”

Comments about personal finance?

I'd love to know what you think are the hot personal financial issues and what you are doing to address your future.

Everyone has dreams-- but are you working to make them come true? Let me know. I'd love to hear from you.
Email me!

AICPA Inside AICPA

Staff Member Wins PFP Award

This is copy from 1997 when I won the AICPA's PFP distinguished service award.

President Barry Melancon praised the PFP executive committee’s decision, saying, "I think this is a wonderful statement about the quality of work that Phyllis does and the respect she has earned from our members."

Financial Planners Take Stock
AICPA members say... 68% advise clients to hold the course to their strategic allocation of assets to minimize the risk when the market is rising.

Dealing with "pushy" agents was clients’ single largest complaint about purchasing life insurance.

Another problem is that financial advisers who sell a product may be only interested in advising people to buy it.

NEWS

Study Illuminates Opportunity for Practitioners

A recent study based on U.S. census data indicates that, despite the economy’s dramatic expansion, the typical American family has modest net worth and less than $1,000 in savings.“Plenty of families in this group have enough income to hire a CPA, but don’t look for help in accumulating financial assets. They might be a target audience for CPAs” says Joseph M. Anderson of Capital Research Associates.

We should be front and center screaming about the under-funding of retirement savings. Despite the fact that Americans are not saving, and those that save are saving blindly, most feel they will be fine when retirement comes. It's a crisis.

MSN Encarta - Everything You Need to Know About Saint Patrick's Day

Wearing green and feeling lucky. Today my Lucky Leprechaun and Shamrocks (my lucky charms) should help us find that pot of gold! No matter where we go, we all need some luck! I have been thinking about blogging for a few years, but today, I got lucky and it happened. Let's see where the journey goes.

My plan is to cover every issue of personal finance. Study after study shows that many American workers don't have the means to afford the retirement they envision. Right now, according to AARP, half of those 62 and up depend on the Social Security program for more than half of their incomes.

Think about this: if the savings rate in this country is 2 to 3% and social security will cover about 50% of what we need for retirement, where will the rest of the money come from? It is naive to think that pensions will do it. That means the balance needed to pay for retirement must come from personal savings and investments. The best way to ensure a comfortable retirement is to save.

This is the first time I am posting to the blog. Besides feeling pretty, I also feel lucky.

I will need to figure it out as I go, but...

My green shirt is making me feel like a Lucky Leprechaun and with shamrocks (lucky charms) in my pocket we should find that pot of gold! The journey begins...