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.

The Internal Revenue Service warned taxpayers to beware of several current e-mail and telephone scams that use the IRS name as a lure.The goal of the scams is to trick people into revealing personal and financial information, such as Social Security, bank account or credit card numbers, which the scammers can use to commit identity theft. Typically, identity thieves use a victim's personal and financial data to empty the victim's financial accounts, run up charges on the victim's existing credit cards, apply for new loans, credit cards, services or benefits in the victim's name, file fraudulent tax returns or even commit crimes. Most of these fraudulent activities can be committed electronically from a remote location, including overseas. Committing these activities in cyberspace allows scammers to act quickly and cover their tracks before the victim becomes aware of the theft. The most recent scams brought to IRS attention are the rebate phone call, in which a bogus IRS employee tells the consumer he is eligible for a sizable rebate for filing his taxes early; a link for a refund that is e-mailed to tax-exempt organizations bearing the supposed signature of the IRS Exempt Organizations business division; and an e-mail inviting recipients to click on a series of links to download information on changes in the tax law, but which downloads malware onto the recipient's computer. A new scam, not seen before by the IRS, notifies the recipient by e-mail that his or her tax return will be audited. The e-mail instructs the recipient to click on links to complete forms with personal and account information that the scammers will use to commit identity theft.

David B. Duncan, former global engagement partner for Enron at the defunct audit firm Arthur Andersen, agreed to an injunction by the Securities and Exchange Commission to settle charges that he broke securities laws when he signed false and misleading audit reports.

The Public Company Accounting Oversight Board has voted to adopt Auditing Standard No. 6, "Evaluating Consistency of Financial Statements," and an accompanying set of amendments to its interim auditing standards.

MIAMI NAMES MCGLADREY

Since 1939, when the Tax Code's treatment of inventory was modified to permit LIFO, managers and accountants have faced a tri-lemma in that they have to choose among FIFO, LIFO and average flow assumptions. The Committee on Accounting Procedure issued Accounting Research Bulletin 29 in 1947 to provide guidance for this choice, but said two things that have hampered financial reporting ever since. (These provisions were subsequently integrated into ARB 43 in 1953, and remain in force 60 years later.)

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.

The Securities and Exchange Commission said it has issued settled administrative orders against eight auditors who improperly issued audit reports on the financial statements of public companies while the audit firms were not registered with the Public Company Accounting Oversight Board.

The Public Company Accounting Oversight Board plans to consider adopting an auditing standard on evaluating the consistency of financial statements at a meeting on Tuesday.

The Securities and EXchange Commission has issued a final rule on accepting financial statements prepared by foreign companies in accordance with International Financial Reporting Standards without reconciling them with U.S. GAAP.The SEC noted that it was accepting statements prepared in accordance with IFRS as issued by the International Accounting Standards Board, leaving out regional variations such as those approved by the European Union.

Securities and Exchange Commission Chairman Christopher Cox plans to propose another year’s delay in imposing Sarbanes-Oxley Section 404 requirements for small public companies.In testimony before the House Small Business Committee in mid-December, Cox said that he thought the additional delay would allow regulators to assimilate the results of a study now underway on the costs of 404 compliance. “I intend to propose to the commission that we authorize a further one-year delay in implementation for small businesses in order to base our decision on final implementation of Section 404(b) on the best available cost data,” he said.

Completing their first major joint project, the Financial Accounting Standards Board and the International Accounting Standards Board have agreed on two new standards on accounting for business combinations.FASB member G. Michael Crooch termed the new guidance “a significant convergence milestone [that] improves reporting while eliminating differences” between the standards that were previously promulgated by the two boards.

There may be 2-D bar codes in the future of paper-filed returns, if recommendations from the Government Accountability Office are followed.In its end-of-year report on last year’s tax season, the GAO said that the Internal Revenue Service exceeded the previous year’s performance by most measures. However, it noted a number of opportunities to realize additional savings and increase tax compliance, with the barcoding of paper returns among them.

In the last few days before Congress adjourned for 2007, a number of tax law changes finally made it through the two chambers and on to President Bush. The president has either already signed or indicated his willingness to sign each piece of legislation. Several of the provisions enacted will have an impact on 2007 tax returns.Even with this flurry of activity, a number of pieces of legislation, including most of the energy-related tax proposals, an agriculture bill with tax provisions, military tax relief, and the extension of expiring provisions, as well as a fairly extensive list of offsetting revenue raisers, got left off the table and will be addressed again in 2008. The following is a summary of each of the tax laws enacted, the principal provisions, and the impact, if any, on 2007 tax returns.

On my first visit to Washington, D.C., I almost missed the Jefferson Memorial because there were so many other memorials to look at. The same can be said of Financial Accounting Standards Board projects, because several projects are currently in progress. However, one project, referred to as the FASB Codification, is a "must see" because it is sure to create significant changes for anyone who researches accounting or financial reporting issues.The FASB Codification project is designed to present all of the relevant U.S. accounting and financial reporting literature in a single, authoritative, integrated offering in an online, real-time database. That is, the goal is to provide all generally accepted accounting principles in one location for financial professionals to access and use.

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 Financial Accounting Standards Board has agreed to defer the effective date of Interpretation No. 48, "Accounting for Uncertainty in Income Taxes," for nonpublic entities to years beginning after Dec. 15, 2007.

Experts discussed how to share strategies on driving firm profitability and growth at this month's New York Metro Roundtable at the Friars Club in Manhattan.