Accounting education

Did you know that today most investment advice zeroes in on the development of portfolios that are on the “efficient frontier,” which is one where no added diversification can lower a portfolio’s risk for a given return expectation? At least, that’s according to my friend Larry Swedroe who is the principal and director of research for both Buckingham Asset Management and BAM Advisor Services in St. Louis. He’s also the author of the recently released Wise Investing Made Simple plus a half dozen other best sellers. His words are deemed golden. In any event, working with this efficient frontier, Swedroe says that investment advisors can then tailor portfolios to the individual investor’s unique situation but unfortunately far too many investors and their advisors focus only on the risks of the investments themselves. Swedroe believes that when developing the overall financial plan, there are other risks that are important to consider and that not integrating the management of these risks can cause the best investment plans to fail. These other risks are human capital (which means wage earning), mortality, and longevity. Taking these one at a time, Swedroe notes that as we age and accumulate financial assets and the time we have remaining in the labor force decreases, the percentage of human capital to financial assets shrink. “This shift over time should be considered in terms of the asset allocation decision.” He also considers that with all else being equal, people with a high earning capability have a greater ability to take more financial risk because ether can moiore easily recover from losses. “However, they also have a lower need to take risk.” As to mortality, he believes that protecting the capital via the purchase of life insurance should be part of the overall financial plan. “Life insurance is the perfect hedge for mortality risk as its return is 100 percent negatively correlated with the human capital asset.” Looking at longevity risk, which he defines as the risk that you will outlive the ability of your portfolio to support your desired lifestyle, he suggests that investors might consider purchasing annuities at around 65 years of age and certainly buying them before reaching 85. All in all, in general younger investors with more labor capital should invest more in stocks than older investors and that individuals with safer human capital have a greater ability to invest more in risky assets. Of course, those whose human capital more highly correlates with equity risks should allocate more to safer fixed income investments. Swedroe also believes that individuals should diversify their human capital, minimizing investments in assets that correlate with their labor income and should hedge their human capital risks through the use of insurance contracts such as disability, life and long-term health care. Finally, individuals should consider hedging their longevity risk through the use of payout annuities.

Accountants Mike Karlins and Glea Ramey have purchased the Woodlands, Texas office of UHY Advisors TX and opened an independent firm, Karlins & Ramey LLC, CPAs.

Small companies have been copying a method to control insurance costs and reduce taxes that used to be the domain of large businesses: setting up their own insurance companies to provide coverage when they think that outside insurers are charging too much.Often, they are starting what is called “a captive insurance company” — an insurer founded to write coverage for the company, companies or people who founded it.

65 RETIRING AS RETIREMENT AGEAmericans age 50 and over are increasingly disregarding age 65 as the time to stop working, according to a poll conducted by Penn, Schoen & Berland Associates and commissioned by Experience Wave, a project that advances federal and state policies to keep older adults engaged in work and community life.

So, let me ask you something. Do you believe that a person's approach to financial planning should be based on the future well-being of the family or on meeting a set of financial objectives? By the same token, do you really want to reach financial independence? Although these two questions appear relatively simple on the surface, the answers you may give can vary greatly depending on your sex. At least, that is what the results of a survey by the Desjardins Group, Canada's largest integrated cooperative financial group uncovered. This was a survey taken in the fall of 2007 among a group of 1,400 respondents that included an equal number of women and men. It was designed to measure the differences between the two groups’ concerns and attitudes on financial planning. The survey had 40 questions that covered ease of discussing financial planning with an advisor, the importance given to the various aspects of financial planning, and the understanding of financial planning vocabulary. "Even if the average spread between men's and women's answers is relatively narrow (seven points), the trend that emerges from our study shows a significant difference in terms of the approach,” says Eric Lemieux, vice-president, Wealth Management at Desjardins. “Women see financial planning as a whole that involves the well-being of the family, while men have a more compartmentalized approach, based on fixed objectives. This observation confirms the accuracy of our orientation, which is based on personalized, value-added service,” According to the survey, women appear more concerned about the well-being of others and more worried than men about the idea of being a burden on the family. In effect, they are more concerned than men by such things as financing the children's education, the importance of having a budget, and increasing the value of investments in the short term. They are also more aware than men about the importance of having a notarized will and a health mandate in case of inability. Desjardins notes that men's targeted approach comes across mainly in their greater concern for reaching financial objectives, for the tax consequences of their financial decisions, and for their retirement planning strategy. In fact, there are also more men than women who say they are solely responsible for their decisions and are consequently less inclined to ask for advice. As to the language of financial planning, this also seems more familiar to men. They were more likely to understand expressions such as "investor profile," "investment horizon,” and "net worth.” However, keep the following in mind: the more general concept of "financial independence" is understood equally well by women as by men, while women are more likely than men to desire such independence. "This survey is a tool that can help Desjardins Financial Planning Advisors to better understand members, both men and women, and to better accompany them on the path to financial security for themselves and their families," adds Lemieux, speaking for an organization with overall assets of $147 billion, as at September 30, 2007. They must know what they are talking about, eh?

The Federal Reserve cut its benchmark rate 75 basis points to 3.5 percent in response to a worldwide sell-off in stock exchanges as fears of a recession widened.

The stimulus package that President Bush and Congress are hammering out could be enough to jumpstart the economy, but don't count on it.

It’s the East vs. the West again, no doubt about it. If you look at Baby Boomers today, they seem to have a lot in common but a recent nationwide survey by Bell Investment Advisors shows that those Boomers living in the Western part of the country have a markedly different outlook on their life and that includes health and money. Jim Bell, who is president of Bell Investment, says that people who get the greatest enjoyment from their lives are also the people who are the most proactive about planning for their future. “People’s physical condition, their family, career, and finances are all integral parts of their retirement well being.” He points out that these are the key areas where he finds the major differences between the West and the rest of the country. Now, I’m an Easterner, born, bred, and educated, and have questions about my Western brethren but according to Bell the survey of 500 high-net-worth 60-year olds uncovers the fact that Western boomer investors are less likely to get conservative in their investments and plan to continue reaching for higher investment returns over the next five years. Then too, the survey seems to indicate that Western boomers exhibit more optimism than Boomers living elsewhere and that they are more likely to pursue personal passions or alternative careers during retirement. So, what does this all mean? According to Bell, Westerners are taking a much more proactive approach to shaping the future of their retirement. “Whether it’s due to social atmosphere or political environment, Boomers in the West seem to be more open in discussing finances with their families and more committed to earning higher investment returns.” Bell points out that Boomers in the Northeast seem to show the most dissatisfaction with their lives and most expressed the need to improve their community, finances, career, and their relationships with family and friends. In fact, Bell notes that Northeasterners have the lowest rate in the country when it comes to discussing finances with their parents or children. As to the Midwest and South, Bell says they are squarely in the middle, showing enough confidence in their financial well being and ample interest in having a good life. But is there any common ground here? Yup! According to Bell, all the regions share in common a positive outlook on their future as they continue to redefine the meaning of retirement.

The Supreme Court has handed down a unanimous decision in a case involving the deductibility of investment advisory fees by trusts, ruling that the expenses are deductible only to the extent that they exceed 2 percent of the adjusted gross income.

KPMG has created a Web portal with accounting and business resources for university professors.

New York University's School of Continuing and Professional Education plans to begin offering a new certificate in not-for-profit accounting and governmental reporting.

Ernst & Young has been holding a conference in New York this week to attract ethnically diverse college students to the tax profession.

Payroll processor Paychex has introduced a debit card that offers a way for a business client's employees to access their flexible spending account funds.

Tax practitioners who take the plunge into financial planning find that it's a natural step to go from preparing a tax return and answering a client's questions, to tax planning and full-scale financial services."Financial planning has been a nice blend of what I'm already doing for my clients," explained Matawan, N.J.-based CPA Salim Omar.

In gearing up for a new season of continuing professional education, providers are offering more of the same popular courses - updates in ethics, risk assessment standards and internal control - but are also responding to growing demand for diversity in delivery formats."We found that many of our members are favoring four-hour programs, contrasted with eight-hour programs," said Alan Schmelkin, managing director of operations for the New York State Society of CPAs, adding that he plans to offer upwards of 15 new titles at the shorter length. "Some people aren't able to commit for a full day. It's a much more acceptable kind of education timing for some of our audience."

By now, the excitement of receiving college acceptance letters is likely to have been long ago replaced by the shock of the tuition bills that follow enrollment. Or the joy of a child's graduating from college - and no longer incurring tuition - is eclipsed by the obligation to repay student loans. As families scramble to get the largest grants and lowest interest rates available, they should not overlook the tax implications of the arrangements they make.The tax breaks fall into two categories: ones for paying the education costs themselves, and deductions for paying interest on loans used to pay the bills. Most of the tax provisions are restricted to those with incomes below specified amounts, and those amounts vary from one tax provision to another. This creates additional confusion for families attempting tax planning and increases their need for professional guidance.

FIXED-INCOME ANNUITY HELPS RETIREMENT INCOMEMixing a fixed-income annuity into a retirement income account provides greater long-term wealth for investors than a portfolio of equity and bond investments alone, according to a study by MassMutual Financial.

A new wealth management firm is launching as a result of a merger between Yampolsky Mandeloff Silver Ryan and Citrin Cooperman & Co. LLP.

Is weather more important than healthcare costs? According to a new national research from Longevity Alliance and conducted by Harris Interactive, U.S. adults aged 40+ who plan on relocating after they retire may overlook how their healthcare costs could change from one location to another. Actually, about three in four (76 percent) of adults planning to relocate after retirement say that they consider the cost of healthcare as important or very important in their decision. But, the cost of healthcare is ranked number three of five behind the overall cost of living, and climate, and just ahead of ease of transportation and proximity to friends and family. What this means is that overlooking the cost of healthcare and health insurance can have real consequences for retirees. Costs vary from one part of the country to another and insurance premiums, Medicare health plans, Medicaid, and long-term care rates can also change exponentially. As an example, consider that the average annual premium for a Medicare Supplement insurance policy in New York could be around $3,700; yet that same policy holder moving to Phoenix will find the premium to be as low as $1,200. Quite a difference. According to Longevity Alliance president Steve Zaleznick, too may times, people considering retirement and relocation don’t give any thought to how it could affect their healthcare and insurance costs. “As retirees grow older, those costs grow larger, so choosing a region that makes those costs affordable is a key component of a sound retirement strategy.” Zaleznick offers five specific tips before anyone moves:

Banking giant HSBC USA has said it would sell its Wealth and Tax Advisory Services USA business to some of its managing directors for up to $65.9 million as part of a management buyout.