What's Hot, What's Not: What Every CPA Should Know to Keep Pace with the Changing Investment Climate
2003; American Institute of Certified Public Accountants; Volume: 195; Issue: 1 Linguagem: Inglês
ISSN
0021-8448
Autores Tópico(s)Finance, Markets, and Regulation
ResumoTo be successful financial planners and investment advisers, CPAs must keep up with a wide range of changes in investment products, technology, economic conditions and client management techniques. While the body of required knowledge may at times seem overwhelming, much of it is in fact just common sense. Here are some of the buttons CPAs should take into account as they seek to develop and grow their financial planning practices. FAILURE TO CONTROL EMOTIONS Fear and greed are the two things that routinely guide people's attitudes toward money and investments. While a certain amount of these is healthy, too much of either can overpower an individual's judgment. CPAs need to help clients reduce fear so they can move forward and help them keep greed in check so they don't do anything foolish. Excessive stock market volatility and shattered trust in white-collar leadership have left clients fearful their survival is threatened. How fear operates varies within each individual--some people manage it creatively, others wreak havoc on themselves and those around them. Fear about money is a big deal because of the attachments we have to it. We often give money too much power in our lives--weakening ourselves in the process. Markets have no power to hurt or help anyone--they function impersonally and equally for all. It's how we interact with a market that has the potential to cause problems. Hype, greed and panic have always been the enemies of investment success. But if you, as a planner, are able to keep a cool head on behalf of your clients, you can do something tremendously valuable: create a safer, saner investment route to guide them through an unfolding economy. Planners can refuse to allow clients to be taken in by hype, keep them from being too greedy or stop them from giving in to panic. CPAs must help clients articulate their goals--because goals are the fuel that move client investments. Failure to set goals results in an inability to control fear and greed and has the potential to overcome even the soundest investment plan in the strongest financial market. How can CPAs help clients control greed and not panic? The best way is to advise them to continue following the recommended asset allocation--even during periods such as the boom of the 1990s or the more recent market down-turn. Advise them to resist the temptation to jump to a hot hedge fund or shift money into fixed income investments. Abandoning a well thought out strategy to reap windfall profits or sell into a falling market is the quickest way for clients to undo the benefits of a comprehensive investment strategy and miss out on future opportunities. AGGREGATION: A NEW WEALTH MANAGEMENT TOOLS? Are you using account aggregation? Have you heard of it but believe it to be another dot-com dream that will go bust? A few years ago some financial advisers viewed it as a cool new Internet tool, but in 2003 it still has few uses. In the first three months of last year just 1% of U.S. online households used such a service according to Forrester Research. Account aggregation lets you collect all kinds of information on one Web page. It lets you keep track of information as diverse as bank and credit-card balances, the value of investments, 401(k) accounts and frequent-flier miles without having to jump from site to site. The data are collected and displayed in a format you can use. Many banks offer aggregation on their Web sites. If your bank or credit union doesn't have a Web site, you can sign up directly for My Yodlee (www.yodlee.com), a company that provides aggregation technology to most banks. Aggregation for financial planning is in its early stages and will likely include a range of products. Clients might have insurance, annuities, ordinary equities, mutual funds, bonds and multicurrency ADRs. To handle this diversity of products, CPAs will need a full range of flexibility. …
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