PFP BRIEFS

April 21, 2002, 11:00 p.m. EDT 3 Min Read

PLANNERS FORECAST IRD AS LOOMING ISSUE: As more than $1 trillion in inheritance money is estimated to change hands over the next decade, some 94 percent of financial planners participating in a survey indicated that income with respect to decedent estate-depletion problems will become a major issue over the next 10 years.
The poll, conducted by Cogent Solutions, a provider of interactive tools for financial planners also showed that, due to the uncertainty of tax laws, many clients are inhibited from making a decision.
Cogent Solutions conducted the survey of 426 planners in conjunction with Financial Planning Interactive, a Web site for independent financial advisors, between Nov. 7 and Dec. 21, 2001.
"This survey shows that many advisors feel stymied by clients who have taken a wait-and-see attitude toward incorporating life insurance as part of their estate plans," said Dwight Davenport, founder and chief executive of Cogent Solutions.
TIAA-CREF URGES CONGRESSIONAL REFORM: Peter Clapman, senior vice president and chief counsel for corporate governance of pension and financial services provider TIAA-CREF, recently urged Congress to consider a wide range of changes in the management, oversight and regulation of companies.
Appearing before the House Financial Services Committee Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, Clapman highlighted five major areas that the company maintains need reform. They are:
1. Conflicts of professionals. Many times accountants and lawyers, ostensibly representing the company, wind up representing only its senior management, such as at Enron. Professional organizations must do a better job through education and discipline to minimize these abuses.
2. Regulation of accounting profession. Clapman reaffirmed TIAA-CREF’s proposal that an independent board oversee the accounting profession with its own funding source and with the legal authority to enforce rules and impose sanctions for wrongdoing.
3. Executive compensation. Stock options are overused and abused with the accounting rules largely to blame. The true costs of fixed-price options escape the earning statement and obscure, rather than provide, full financial statement disclosure.
4. Role of stock exchanges. The New York Stock Exchange and NASDAQ must be important engines for change. The exchanges need to impose stronger standards for director independence and education, shareholder approval for all material equity plans.
5. Education of directors. Audit committee directors must meet a standard of financial literacy - literally, the ability to understand a financial statement. Compensation committee directors often do not take a pro-active role on behalf of the company because they lack an understanding of issues and do not hire independent consultants when needed.
LAWMAKERS NEED TO ENACT MORE PROTECTION FOR INVESTORS: Congress should do more to protect individual investors and ensure fair competition, while approaching accounting reform with long-term solutions instead of quick-fix proposals. That is according to 73 percent of 800 registered voters who participated in a survey conducted by Peter D. Hart Research Associates and Public Opinion Strategies.
The survey, commissioned by Big Five firm Deloitte & Touche, gauged the investing public’s opinion on strategies that are needed to mend the American financial system and restore public confidence in it.
Just 21 percent of those polled believed that Congress should act as quickly as possible to reform accounting regulations.
At the same time, some 52 percent said that the government needs to step in to do more to protect investors and consumers, while 37 percent think that government should interfere less in the marketplace.
In the wake of the Enron scandal, roughly 40 percent of the survey respondents said that Congress needs to fix the rules on 401(k) accounts to prevent companies from locking employees into sinking investments.
Additional issues that ranked high in importance include investment banks advising the public to buy stock even as it declines (29 percent), corporations making political contributions (28 percent, excessive executive compensation packages (26 percent) and corporations buying consulting services from their auditors (20 percent).