A discussion with Mitchell Freedman, CPA, PFS, about the purpose of the guide ( Disaster Recovery: A Guide to Financial Issues), how it will help victims of disaster and the role CPAs can play in the process. Mitchell Freedman is the president of Mitchell Freedman Accountancy Corporation (MFAC) and MFAC Financial Advisors, Inc., a registered investment advisory firm. Mr. Freedman is also a former chair of the California Society of CPAs Personal Financial Planning Committee, and a former member of the AICPA PFP Executive Committee and the AICPA Member Services Subcommittee. He is currently a member of the AICPA ElderCare Task Force.
Question: Why was the disaster recovery guide developed?
Mitchell Freedman: It was developed because a need was seen for a guide to help individuals and families during a time when they were most in need and often vulnerable to financial challenges following a disaster, particularly in light of the events of September 11. Previously, there were no comprehensive, authoritative, easy-to-use resources for victims of disaster. When people experience a disaster, their lives are often in disarray. And they have to deal with certain things sometimes very quickly—they have to make certain decisions right then, and other decisions require time to digest and evaluate. Many times people affected by disasters feel lost and don't know whom to turn to for help. Oftentimes, they have to go to numerous resources spread over a wide range which is a struggle at best. This comprehensive guide was prepared to bring order to the process and put everything in one place. It gives people a roadmap so that they can sit back, take stock and make decisions as to how they should proceed.
Question: What organizations were involved in creating the guide?
Mitchell Freedman: The National Endowment for Financial Education (NEFE) and the AICPA worked together to develop the guide. The guide is offered as a public service of the AICPA, AICPA Foundation, American Red Cross and NEFE. I was part of the team of volunteers from the AICPA that contributed content to the guide. Since we had a lot of experience in financial planning and responding to disaster, it was a good fit with the team from NEFE. The American Red Cross is distributing the guide through its participating local chapters to people affected by a disaster and their families. The guide will also be available for local CPA firms.
Question: Why did the AICPA partner with NEFE and the American Red Cross?
Mitchell Freedman: Denver-based NEFE became involved because they saw their role as providing a public service in educating individuals about personal finance and empowering them to make positive and sound decisions to reach financial goals, particularly in time of disaster. The American Red Cross became involved to help fulfill its mission of providing relief and assistance to victims of disaster. Through its nationwide network of local chapters, the American Red Cross is able to get this valuable resource to a broad community of those who may need it. The AICPA became involved because in its role to help protect the public interest, thousands of its CPA members provide personal financial planning services as an adjunct to their accounting and tax expertise. As such, CPAs are uniquely qualified to work with people affected by a disaster to help them solve financial issues in times of crisis. This was a perfect match for all three organizations.
Question: What are the most important points outlined in the disaster recovery guide?
Mitchell Freedman: One is to not act rashly—there are going to be a lot of people and organizations that are going to try to get victims to commit to decisions that in many cases require further thought and careful analysis. Some of these decisions should not be made immediately after suffering a disaster.
Second is that even though this guide is geared towards post-disaster reactions, it does emphasize proactive pre-planning for steps to take as preparation for a possible future disaster. There are things that individuals can do to protect themselves now so that the financial impact of a future disaster can be somewhat mitigated.
Question: What role do you see CPAs playing when disaster strikes?
Mitchell Freedman: This is something I can speak about personally. I experienced substantial damage to my home in Los Angeles after the Northridge Earthquake and saw my children suffer as victims of the Berkeley Hills brush fires up in the San Francisco Bay area. I have also helped many clients deal with financial and personal issues after earthquakes, brush fires, floods, and mudslides. CPAs—particularly CPA financial planners and PFS credential holders—can help clients by helping them plan for disaster ahead of time. CPAs often help individuals and families plan for all kinds of contingencies, but rarely do we help them plan for the consequences of disaster.
I help my clients plan for disaster and provide consulting services based on this activity. This includes giving them a checklist of various things that they should do to be physically and financially able to withstand the after-effects a disaster. Following a disaster, CPAs also can be of tremendous help to clients in dealing with a huge load of administrative nightmares—for example, personal property and casualty insurance, life insurance, disability insurance, and other kinds of insurance matters. In addition, in handling financial issues such as significant property damage or loss of a job, CPAs can assist clients with budgeting and finding financing alternatives.
Often there is a mountain of paperwork to complete and CPAs have the knowledge and experience to understand complex issues related to the forms and understand the impact of these processes. CPAs can help their clients sift though this quagmire so that they are not further overwhelmed. CPAs can also help clients analyze alternative solutions. Things like whether to take this settlement from the insurance company or fight for more…get additional financing or walk away from a property…accept the insurance company's first offer of settlement on something or attempt to work out a better settlement. CPAs are trusted advisors and can offer sound unbiased advice to victims to help them get to the right people and understand what the various organizations are telling them.
Question: Will this disaster recovery guide alter the public's view of the role CPAs play in protecting the public interest?
Mitchell Freedman: With this guide, CPAs will help the public realize that no one knows more about their financial lives and the impact of financial decisions on their future and well-being than a CPA.
Question: Should people affected by a disaster be comfortable going to a CPA at a time crisis?
Mitchell Freedman: CPAs, particularly CPA financial planners, are known to be unbiased individuals and extremely knowledgeable about financial matters. So many disaster planning and recovery issues deal with financial matters that there is no doubt that people affected by disaster should feel comfortable going to a CPA for guidance. The key is getting the public to think of CPAs for help when they think of disaster planning or recovery. Organizations like the American Red Cross can also emphasize to victims that CPAs are useful resources for assistance, particularly in matters that are financial in nature. Through more than 1,000 local chapters, the American Red Cross can help victims understand the role that CPAs play in disaster recovery and that they can be a trusted advisor.
Question: Is disaster planning a natural area in which CPAs work?
Mitchell Freedman: CPAs view disaster recovery as one of the contingencies their clients may face. At some point during their relationship, CPAs are going to help those clients plan for disaster and the possible financial impact of a disaster, as well as the physical recovery issues related to a disaster—this can go a long way towards building and maintaining solid relationships between CPAs and their clients. Clients are going to feel much more connected and protected if they feel that their CPA—their financial advisor—is attuned to issues that they should be concerned about and that might affect them in the future. CPAs are very proactive when it comes to life insurance, disability insurance and long-term care insurance, but there are a lot of other ways to minimize the post-disaster financial consequences by pre-planning. CPAs in California in particular have been doing this for a long time because the service has been needed by our clients.
Question: Where can interested CPAs go for more information?
They can also contact the AICPA to obtain a hard copy of the guide for a minimal cost by calling 888-777-7077, or fax 1-800-362-5066, and reference product number 017231 or order the guide online