Letters

In the Client’s Best Interest
CPAs who consider financial planning a viable and honorable service, and have devoted resources to it, have been rewarded for their vision and hard work. As a practitioner of comprehensive fee-only financial planning since 1982, I consider myself in that category.

As such, I feel compelled to respond to the assumptions and conclusions promulgated by a survey in a recent JofA advertiser insert on the benefits of CPAs’ partnering with outside providers of financial services and products. The thrust of the message was that financial services are a profitable niche for CPAs and using outside financial service providers makes it even more profitable. The insert states: “Without the direct costs and overhead associated with employees, nearly all (emphasis added) their (CPA firms) financial services revenue will end up on the bottom line.”

The business model being promoted allows allied financial service and product providers to tap the wealthy client list of a CPA firm. In return the CPA firm receives a stream of significant income without having to dedicate any, or minimal, employees or resources. This is a sweet deal for everyone except the person most affected by the arrangement—the client.

The client’s assets and income stream must absorb the impact of expenses from the allied financial service and product sellers in addition to the fees “earned” by the CPA. Isn’t it reasonable, if not probable, that this extra layer of fees will unnecessarily handicap the client’s ability to reach his or her financial goals? Expense management by clients has become even more important in this era of diminished return expectations.

CPAs seriously considering entering into such alliances should question their ability to do so while still adding value and acting in the best interest of the client. Our position as a trusted adviser took years to establish. Carefully consider the risks of losing that trust if partnering with sellers of financial products results in wealth erosion instead of wealth enhancement.

Vincent A. Schiavi, CPA/PFS, CFP
Schiavi + Company
Wilmington, Delaware

The Right Foot
The article, “Jump-Start Success” (JofA, Feb.05, page 34), discussing the difficulties and challenges facing a new internal audit director, was right on the money. Having faced these challenges as a new director for a Fortune 50 company, I offer one caution and one strategy to consider as part of the need to “create value” noted in the article.

The most difficult audience to sell on the value-added benefit of internal audit is operating management. This audience takes great pride in the accomplishments of their departments and fears that auditors, who usually have limited experience in operations, will try to write up suggestions without a full appreciation for their operational feasibility. Ill-conceived recommendations put operating management on the defensive with their bosses. I would caution the new director to give operational audits a low priority in the start-up plan until the function is well established.

An effective strategy to build that early acceptance of internal audit is to promote internal audit as a profit center for the company. In other words, concentrate the early efforts on auditing third parties such as contractors, customers and taxing authorities. A well-designed program can recover enough hard-dollar savings to pay the entire operating expenses of the internal audit department. The result is that the less tangible savings in areas such as internal controls, financial reporting and compliance tests of company policies would then be free services.

Jimmie Wayne Knowles, CPA
Spicewood, Texas

From a Neighbor to the North
My heartiest congratulations on your centennial countdown. I have been a subscriber to the JofA for many, many years and read with interest topics applicable to auditing and accounting matters.

As a sole practitioner, Canadian chartered accountant and certified financial planner for small- and medium-sized businesses and individuals, I have, over the years, on several occasions had the opportunity to lift good ideas in the preparation of specific assignments.

I read most articles and refer quite often to published practice tips and the executive summary when topics are beyond my professional needs.

Again, my best wishes for the JofA’s continued publication of interesting issues.

Albert L. Stal, CA
Toronto, Ontario, Canada