Essentials of Personal Financial Planning | The CPA Journal

201712.02
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Many CPAs and most tax specialists perform personal financial planning (PFP) services; the AICPA estimates that more than 100,000 of its members perform some form of PFP for clients. The AICPA tried to unify and formalize PFP services with a credential—the Personal Finance Specialist (PFS)—but it doesn’t seem to have gained the wide acceptance it should have, based on the importance of these services. Essentials of Personal Financial Planning is a textbook aimed at reaching graduate students with an organized protocol of how to perform PFP services. More than that, it has excellent coverage of the entire range of these services and is an effective guide for all practitioners.

Currently, the financial planning industry is facing an upheaval because of the Department of Labor’s insistence that people offering PFP services act in the best interests of their clients. This seems like a given, but experience has shown that it is not. This book was written to challenge the status quo by promoting PFP services as a profession practiced with integrity and objectivity, and not as a sales tool for those seeking assets to manage or individuals to sell policies and annuities to.

The book has a comprehensive description of every area of PFP services and can be valuable to active practitioners as a complete reference source. It describes all services under the PFP umbrella; while it does not present planning tools, it offers thorough descriptions that can be quickly read, understood, and used, and is written in a way that can easily be explained to clients.

PFP is a very broad field, which covers helping clients develop their financial goals and planning for cash flow, budgeting, charitable giving, education funding, estate matters, gift and wealth transfers, investment management, retirement, employee benefits and executive compensation, risk management, insurance, and taxes. Chapters cover full explanations of each area and also their practical application. Also included are the time value of money, licensing and regulatory requirements, and business models.

The authors indicate that they do not sell products or manage money, but solely perform PFP services for a fee. They started their careers in the more conventional areas of product sales and investment management, but they abandoned these areas to restrict their practice to fee-for-service engagements. I spoke to one of the authors to determine the validity of that model, and it appears they are quite successful, having lasted more than 10 years.

Some of the specifics covered in the book are guides to PFP assumptions, the importance of a statement of financial position and how to prepare it, specific details of each area of PFP, and important explanations of many esoteric but essential areas, such as powers of attorney, net unrealized appreciation of employer stock distributed from a retirement account, reverse mortgages, elder care services, bond ladders, HMOs and PPOs, educational funding, and all facets of estate planning. Also included are a comprehensive sample investment policy statement that can be used as a template, explanatory flow charts and tables, practical examples and illustrations, ways to avoid violating professional standards, and many best practices.

The book is well written with little excess wordage, and because of the thorough table of contents and index, it is very user friendly. It does have one shortcoming: it includes no planning tips, so readers seeking this kind of guidance will need to turn to another source. Nevertheless, this book belongs in the library of every accountant who performs PFP services and should be used as a constant reference source. It is the reviewer’s opinion that even a single use will yield an excellent return on investment.

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