Audit

I attended a breakfast meeting the other day with executives from The Money Management Institute, which is a national organization for the managed account solutions industry. The Institute represents portfolio manager firms and sponsors of investment consulting programs, and the leading advocate for the industry on regulatory and legislative issues. Its membership list reads like a Who’s Who of firms that offer financial consulting services to individual investors as well as related professional portfolio management companies, among others. Present at the meeting were Christopher Davis, its President, Kevin Hunt, Chairman of the Board of governors and Executive Vice President of Old Mutual U.S. Holdings, Len Reinhart, President of Lockwood, an affiliate of Pershing, and Mary Deatherage, Senior Vice President, Wealth Management, at Smith Barney. It was a fascinating group who discussed various aspects of financial planning for clients including certain case studies and how they were dealt with. I learned that as recently as five years ago, financial planning for clients was pretty much handled by wirehouses for the planning and CPAs for the taxes. That has now changed dramatically, they say. Because of the advent of the Baby Boomers and their needs toward retirement, and the fact that people are retiring at an earlier age (57) than ever before, not to mention the broker/dealer and SEC business going on, CPAs are now replacing wirehouses in dealing with financial planning and investments. In fact, it was mentioned that insurance agents as financial advisors have slid downward somewhat because people simply don’t want to get involved with advisors who take commissions. It looks like it’s a question of trust, and many CPAs who have substantial financial planning practices tell me that clients are rather edgy whenever the CPA raises the specter of an insurance policy or certain investments that appear to have commission-strings attached. So, the CPA who is doing fee-based or fee-only planning is rising rather rapidly, especially fee-only. It is also interesting to note that the managed account solutions market grew at a healthy 6.7 percent to reach $1.34 trillion in assets just in the first quarter of this year alone. According to figures furnished, it outpaced the S&P 500 index, which returned only .64 percent during the same quarter. What also came out of this meeting is the fact that those who use financial planners are more loyal to their advisor than individuals who use full-service brokers or investment advisors and that client loyalty is built on responsiveness and investment returns. According to the Spectrem Group in its Affluent Market Insights for 2007, once advisors have turned a prospect into a client, they must retain that client. “As important as investment returns, low fees and low expenses are, they are not the primary driver of loyalty among the affluent. Simply returning phone calls promptly is the best method for advisors to develop loyalty. It is also important to investors that advisors provide a contact if he or she is not available.” In addition, Spectrem says that “giving “gifts at holidays, remembering birthdays and providing free tickets to special events does not develop loyalty.” Hmmm. How about a box of imported, dark chocolate? Does the trick for me.

Roel Campos, one of the two Democrats on the five-member Securities and Exchange Commission, announced plans to return to the private sector next month, further tipping the balance on the panel as the SEC continues to issue and enforce regulations affecting accountants.

Accounting firm Bush, Ramlow & Shore is joining Firm Foundation, a recently established association for CPA firms that have approximately 10 to 30 full-time employees.

Trintech Group has updated its ReconNet reconciliation and account-balancing software with enhanced workflow features.

Large companies in the United States are getting better at managing potentially critical business risks, according to a new study.

The remaining five defendants in the KPMG tax shelter case are seeking a postponement in the trial until after October.

A majority of financial executives rank data quality and information integrity as the No. 1 priority, according to a new survey.

House lawmakers passed a $16 billion energy tax bill that does away with tax breaks for oil and gas companies and shifts the incentives to alternative energy, despite the threat of a veto from President Bush.

According to a recent press release, a nationwide telephone survey of 1,000 investors conducted for the Center for Audit Quality (CAQ) indicated that 79 percent of those surveyed felt changes brought about by the Sarbanes-Oxley Act bolstered their confidence in financial information presented.

In its second merger of the year, Pittsburgh-based CPA firm Malin, Bergquist and Co. LLP has combined with a firm based in nearby Erie, Pa.: Diefenbach Delio Kearney & DeDionisio.

Two New York firms are combining forces, with Tarrytown-based Platt, Barth, Elson & Steinman P.C. merging with New York City-based Marks Paneth & Shron LLP.

When the Institute of Internal Auditors reached out to the world in an effort to understand the nature of internal auditing, it hoped to get comments from 20 countries.It heard from 91.

CVB ENGAGES KPMGCVB Financial Corp., an Ontario, Calif.-based holding concern for Citizens Business Bank, has hired Big Four firm KPMG as its independent accountant, replacing McGladrey & Pullen.

The Financial Accounting Standards Board said it is looking for suggestions on whether it should pursue a project on accounting for insurance contracts, and whether it should team up with the International Accounting Standards Board, which has been working on a similar project.

The more we consider what the Financial Accounting Standards Board accomplished with SFAS 159, the more we're warming up to the sea change it represents. This standard, titled "The Fair Value Option for Financial Assets and Financial Liabilities," permits without requiring managers to account for financial assets and liabilities using their fair values, with unrealized gains and losses flowing through the income statement. Some have disparaged SFAS 159 for not mandating full fair-value reporting, while others have criticized its "optionality."We see it quite differently. For years we have endorsed the Quality Financial Reporting paradigm that calls managers to step out on their own and try to meet the needs of the capital markets for useful information. In effect, SFAS 159 provides a nudge in this direction by allowing, even encouraging, innovative managers to jump into QFR by applying fair value without waiting for everyone else to get into the pool. We've often said that the biggest rewards will go to those who start providing better financial statements, so we're gratified that FASB seems to have seen it our way.

The Certified Financial Planner Board of Standards has now bolstered its ethical standards for financial planners who can use its CFP certification designation. The intent is to get the American consumer to the point of trusting that their financial planners who have this particular mark will be placing the clients’ interests well ahead of their own. According to Karen Schaeffer, who chairs the CFP’s Board of Directors, the demand for financial planning is high and growing. “Each day millions of Americans must make important financial decisions, from Baby Boomers on the verge of retirement to the younger generations looking for ways to build their nest eggs.” She adds, “As company-sponsored pensions are being replaced by self-administered 401(k)s and IRAs, and as more responsibility for medical coverage shifts to individuals, Americans today are often required to make a broader range of fiduciary decisions than the decisions their parents made, and more people are finding professional financial planning assistance a necessity.” Interestingly-enough, in a recent survey commissioned by the CFP Board, 97 percent of the more than 1,100 participants identified trustworthiness a the most important factor they considered when looking for a professional financial advisor. That’s pretty much where that code of ethics and practice standards come in, and it also helps to explain the CFP Board’s dedication (and rightly so) in making ethical financial planning available to the public. By the way, some recent updates to these ethical standards, which take effect in July of next year, significantly strengthens the ethical requirements for the more than 55,000 CFP professionals. The CFP people even help the consumer by listing a series of questions that a consumer might want to consider when retaining a financial planner, such as: What experience do you have? What services do you offer? What is your approach to financial planning? Will you be the only person working with me? How will I pay for your services? How much do you typically charge? Could someone besides me benefit from your recommendations? Have you ever been publicly disciplined for any unlawful or unethical actions? Can I have it in writing? I love that last one! According to Schaeffer, “Integrity, competence, and the desire to create trusting relationships with consumers are the cornerstones of CPR certification.” The CFP people deserve a big ovation. They certainly are following through on that.

Scandal-tainted Japanese accounting firm Misuzu Audit, formerly known as ChuoAoyama PricewaterhouseCoopers, has disbanded after 39 years, according to Kyodo News.

Ray Schmidt, chief information officer of the Public Company Accounting Oversight Board, is stepping down after five years to take a job in the private sector.

A Securities and Exchange Commission advisory committee began meeting to consider ways to make financial reporting more understandable and relevant to investors.

Two CPA firms on California's central coast have announced a merger: Bianchi, Lorincz, Huey, Hudson & Co. and Kasavan & Pope.