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Stay ahead with essential CPA resources

Fostering Calm in the Digital Age

Technology like finance apps can help clients see real-time market updates—and see them become obsessed with checking their portfolios. So how do you help clients manage their fears and ignore the noise that’s being amplified today more than ever before?

Fostering Calm in the Digital Age 

AI is Rewriting the Rules of Accounting

Neil Sahota works to inspire clients and business partners to foster innovation and develop next-gen products/solutions powered by AI. He'll be at CalCPA's Members Club Summit, where he'll share his insights on what happening with AI in the CPA profession—and why you can't sit idly by.

Neil Sahota Member Summit Article

Anticipating the Future

Rohit Bhargava is on a mission to inspire more non-obvious thinking in the world—and he'll be bringing his insights to CalCPA's Members Club Summit on July 31 as keynote speaker, where he’ll share strategies on how being a non-obvious thinker can help you and your firm or business thrive. 

Rohit Bhargava Members Summit Q&A

Filling in the Blanks on Global Staffing: Part 1

How do we fill in the blanks on that org chart of ours? Do we leave these spaces unfilled? The world is an unknown, the unknown is risky and we all know how CPAs feel about risk. Let's reduce some of this risk of outsourcing by turning the unknown into known.

Filling the Blanks: Part 1

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Human nature helps guide our investment decisions. Here, we’ll explore a few examples of common thought over time, the value of a financial plan as a central theme in a client relationship and how investment philosophy can help shape the elements of a diversified investment portfolio.

Two conversations with a friend over the last year came full circle. He was a high-risk investment kind of guy and when diversification as a strategy was implemented, he said, “Leonard, it's not diversification; it's diworsification! I could be making more money!”

Flash forward to this year: "You have to go through a crisis to understand the value of what you do."

While everyone's results vary over time and depend upon the adviser or team's investment strategy, many characteristics today are like those in 2000 in terms of market behavior. High-tech stocks were hit hard initially, sector rotation into value and international stocks, and a softening of the interest rates increased the value of bond funds. The outcome: Portfolios with adequate diversification could have been higher than at the start of the year. Again, results vary, and many, as we know, were down.

Investment Management First Step: The Financial Plan

CPAs make the financial plan a central theme of the client experience. Because of the financial planning experience, the reactions to the outcomes around the investment portfolios were fundamentally different than what our client's friends who have other advisers experience when the capital markets shift. Their clients may panic and lose sleep at night. An investment portfolio rooted in risk tolerance and part of the financial planning “experience” becomes a practical foundation in distress.

With the financial plan as the central theme, the quarterly review process is simple:

Focus on two pictures of a client's projected retirement life:

Clients' lives change quarterly based on meetings with other family members. There may be health issues that occur with parents and other family members, new hobbies and many other new or reduced expenses. The more captured and quantified in the next meeting, the more engaged the client becomes in consistent participation in the financial plan. The planning can be instrumental in exploring the impact of strategies like micro-Roth conversions, 1035 exchanges of life insurance for long-term care premiums, evaluation of taking pension income, or a lump sum rollover, to name a few.

Step 2: Review the hypothetical of the client portfolio. 

The review of a hypothetical does not convey expected return. Past performance is not indicative of future performance, as well as know. It creates an expectation for volatility and a conversation to ensure that the client's risk tolerance matches the investment portfolio's risk level. When there is a long-term focus on how much can be lost in a market adjustment that is discussed and shared, an expectation is created. When a market crisis occurs, usually, though not always, portfolios move consistent with the risk tolerance discussed. 

Because there are statistics involved, we typically speak of 95 percent confidence levels (two standard deviations) that the trading range will fall between two sets of numbers. Sometimes, like in 2008, it is a three-standard-deviation event.

Step 3: Review the portfolio for the period, year to date, and over 1, 3, 5, and cumulatively.

It is human nature to zoom in and look closely. By tying the portfolio to the financial plan and reviewing the risk tolerance with the hypothetical, confidence is established regarding potential outcomes. The portfolio results will usually confirm the risk range in the hypothetical, translating to greater client confidence and peace of mind.

It is important to follow the three key steps because what we hear in the media each day can often drive us to greater fear, concern or stories that may not be entirely accurate.

Like The Beatles' George Harrison's mom wrote to a fan in 1964, "P.S. The US Press only prints rumours to sell the Papers."

Fear drives action, which is why we see so many advertisements for gold for certain types of programs. Gold is a great fear trade, but not where a significant portion of a client's assets should be invested. One key problem I have seen with personally owned gold over the years is that the asset tends to disappear when held in safekeeping or at a client's home. Valuables at home are an invitation to the uninvited. While it may or may not be a good part of a diversified portfolio, it is never good to concentrate too much of a portfolio on one asset. Especially in a home where uninvited guests could take the asset.

American markets can have long periods of bold growth and long periods of no increases. Regarding sector concentration, we saw a more extreme example of what is happening today with the E-Trade tow truck driver who bought a tropical paradise island with his stock market prowess in the 1990s. What happened to the tow truck driver and his island? It was wiped off the map by the hurricane of 2000-2002 and never seen again. Nearly 20 years later, the NASDAQ recovered. The S&P 500 averaged about -1.1 percent before fees and performance through 2009. 

A good percentage of mutual funds underperform the index, and people paid for underperforming wisdom. So, it was common to see portfolios down 30 percent during the decade. However, a diversified portfolio with healthy heaps of international and value positions doubled. Something similar happened from 1968 to 1982. The Dow Jones went up 0 percent during that period, whereas a diversified portfolio increased in value.

Another reason to diversify is that over the past few years, we have seen very smart minds miss the boat—a huge miss with respect to interest rates.

In 2021, my clients shared price increases in their businesses that I had never heard of in America. Considerable increases in the cost of shipping containers for fluid, lumber costs skyrocketed, catching those I know in construction without clauses in contracts that could pass on the cost to those contracting for buildings (always have clauses, even when life is certain, it's never certain). 

I shared my experiences with those who managed bond funds, uniformly were rebuffed that the Federal Reserve and central banks around the world would implement measures that would smooth the tide and keep rates low. 

Another surprise market collapse just months before was the curve ball out of left field, the pandemic, a once-in-a-100-year event, was about to occur again, with interest rates. While anecdotal data is often disparaged, it helps with reading the tea leaves. As a result of groupthink, Silicon Valley Bank and other storied financial institutions failed (it was certain interest rates would not rise, the auditors let down their guard), and still today, many financial institutions are still recovering, and the future risks are significant.

 may not be communicated as much as it should be. It may be good to be aware of investment philosophy, which can drive diversification principles. A 

 discusses expense ratios, Jensen's Alpha, risk levels, international investing, investing in entrepreneurial companies and much more. Some may include a strategy to mitigate distribution risk in retirement through laddered debt equities that mature corresponding to the year of distribution. There is much to be aware of regarding the professional management of assets.

While we may want specifics of investments and where to turn in difficult times, those specifics need to be delivered by the investment professionals and measured on a fiduciary basis against the related benchmarks and tied to the portfolio's risk tolerance. Different portfolios can have different risk tolerances depending on the job description of the portfolio. 

For instance, a 70-year-old still working may have an aggressive stance because the view of the 70-year-old is that the Roth 401(k) being contributed toward will be used for their child's inheritance, hence the aggressive portfolio allocation. In comparison, the 70-year-old's personal assets may be managed to a moderate risk tolerance, as the assets will be spent down during retirement. What is most important is a process that clients can wrap their heads around. The three simple steps to follow to protect the lifetime savings of those we serve in times of trouble with the bedrock of the steps being the financial plan, tying the risk tolerance to the client and re-examining that risk tolerance at every review, and concluding with the performance of the assets relative to the due diligence performed. 

And if all three steps are carried out diligently, clients may call and thank you in the middle of a financial hurricane and realize that the benefits of diversification are clearly not “diworsification.”

‘Diworsification’ 

Human nature helps guide our investment decisions. This article explores a few examples of common thoughts over time, the value of a financial plan as a central theme in a client relationship and how investment philosophy can help shape the elements of a diversified investment portfolio.

'Diworsification'

The tech revolution has provided a lot of positives. It’s allowed us to streamline mundane tasks, video chat with clients around the world and watch a playoff game while riding in the back of a car that’s driving itself. But there’s a price to be paid for having everything available to us, everywhere, all at once. Overwhelm. Depression. Shortened attention spans. And most pertinent for us, financial fear.

Our algorithms are incredibly adept at knowing what we want to consume so we can be fed a steady diet of it. This would be fine if it was for our benefit, but unfortunately, that’s not always the case. Our dopamine is being supplied by our devices. In essence, we’re being hacked.

Our news and social feeds are alarmist by design. The scarier the headline, the more likely we are to click on it (consider how many times you have read the word “tariffs” in the last two months). The more controversial the topic, the longer we engage with it. We come for the cooking video but stay for the controversy.

Even things as innocuous as finance apps can have unintended consequences. Clients appreciate real-time market updates but become obsessed with checking their portfolios. In a recent online conversation, one Reddit user posted, “If the market is having a really good day I check 50 times a day, if the market is having a really bad day I check 50 times a day.”

Additionally, there are other loud voices competing for our clients’ attention. The dependence on devices has exposed our clients to these voices more than ever before. Many of these “experts” try to convince our clients that they can do for themselves what we should be doing for them, while creating unrealistic expectations. “Subscribe to my channel, read my book, join my Discord and you too can drive a Lambo.”

So how do we help clients manage their fears and ignore the noise that’s being amplified today more than ever before?

Our role is not to be an authority figure, suggesting they limit screen time and monitor what they consume. Nor should we be their “money psychiatrist.”

However, we do have a dual fiduciary duty to protect both our clients’ financial and mental wellbeing. We need to be more engaged and proactive with our clients given that their money anxieties have been amplified.

Let’s get something straight: The biggest threat to your accounting firm isn’t AI.

It’s your competition using AI better and faster than you.

AI has moved far beyond fringe innovation. It’s a full-blown strategic weapon being deployed across the accounting profession right now, by firms large and small. And I don’t mean “someday” tools. I mean real, off-the-shelf solutions that deliver competitive advantages. Today. Yet many CPAs I meet are still under the illusion that AI is only for tech companies or global conglomerates. Or that it’s a long-term risk they’ll deal with in five years. 

This illusion is dangerous and possibly fatal to your firm. Let me show you what’s really happening out there. Because if these stories don’t set off alarm bells, nothing will.

Case No. 1: Moss Adams Quietly Crushes Audit Costs with AI

In 2023, Moss Adams LLP, one of the 15 largest public accounting firms in the U.S., deployed MindBridge AI to assist in auditing work. This platform automates basic checks. More importantly, it uses machine learning to detect high-risk transactions with a level of pattern recognition that no human can match.

The result? Audit planning and testing processes that used to take weeks now get done in days. In addition, the firm flags anomalies faster, increases the quality of its risk assessments and reduces costly review cycles. One manager even quipped that AI “sniffs out trouble faster than any junior staffer ever could.”

While other firms are staffing up for busy season, Moss Adams is scaling smart and eating into competitor’s portfolio of business. If your audit department still relies on sampling and spreadsheets, you’re not just inefficient. You’re obsolete.

Case No. 2: A Mid-Size Firm in Ohio Becomes an AI Advisory Powerhouse

Last year, an Ohio firm with fewer than 50 employees partnered with Vic.ai, a platform that automates invoice processing, classification and approval routing. However, they didn’t stop with simply automation. They used the time savings to pivot into AI advisory services. Using predictive analytics and natural language processing, they offered client insights on cash flow trends, AR risk factors and even M&A preparedness.

The result? Their revenue from advisory services shot up by 42 percent in under 12 months. Their clients now view them as strategic partners rather than just financial hygiene technicians. What’s critical here? It’s not a story about fancy tech. It’s mindset. This firm saw AI not as a threat to their services, but as a springboard to offer higher-value work. While the competition is still selling rear-view mirror reports, they’re selling the GPS system for business growth.

Case No. 3: Big Four Firms Are Training AI to Replace Your Best People

Want the brutal truth? The Big Four aren’t just experimenting with AI. They’re weaponizing it. KPMG recently announced a global collaboration with Microsoft to roll out AI copilots across audit, tax and advisory services. These copilots assist with documentation, automate narrative generation and analyze complex datasets faster than a senior associate.

Similarly, Deloitte’s AI “Greenhouse” platform predicts client churn, employee attrition and potential compliance risks, all with minimal human input. And PwC? They’re investing over $1 billion in generative AI to build tools to create client deliverables, summarize regulatory changes and recommend strategy based on real-time data.

You might think: “Well, I don’t compete with the Big Four.” Well, here’s the kicker: these capabilities don’t stay exclusive for long. As cloud-based platforms spread, the same tools that empower Deloitte’s 300,000 employees will become available to your next-door rival with 30 people. When that happens, your value proposition of low cost, personal touch and years of experience won’t cut it. Especially if the other guy is offering instant insights and predictive analytics on day one.

Case No. 4: Forensic Accounting Gets a Digital Partner

Even in forensic accounting, a field long thought too nuanced for automation, AI makes waves. One California firm uses a specialized tool that ingests thousands of transactions and builds a fraud likelihood model, surfacing red flags in minutes. What took weeks of manual review now takes less than an hour of guided analysis.

Surprisingly, their team didn’t shrink. Smartly, they scaled their services. By offloading routine investigative tasks to AI, their specialists now spend more time advising legal counsel, testifying in court and offering strategic prevention services. In other words: more revenue, higher margins, better outcomes.

The CPA of the Future: Strategic, Analytical, Augmented

Here’s what all these cases have in common: They aren’t about replacing CPAs. They’re about amplifying them.

AI transforms the profession from a compliance-driven model to a value-creation model. In the near future, successful CPAs will be AI enabled advisers who deliver real-time insights, risk foresight and strategic clarity. However, this change doesn’t happen by default. It requires action… taken today.

The firms winning with AI didn’t wait for perfect conditions or total buy-in. They started with small experiments, educated their teams and focused on pain points. More importantly, they realized that getting started was more important than getting it perfect. And they understood something critical: It’s not just about tools. It’s about transformation.

This isn’t about scaring you. It’s about preparing you. AI is moving the accounting profession from task execution to strategic enablement. That means the firms that thrive won’t be the ones who work harder. They’ll be the ones who think smarter and align their people, processes, and tools to AI powered performance.

Right now, the gap is growing between “AI adopters” and “AI avoiders.” Once that gap becomes a chasm, there’s no catching up. However, the good news is that it’s not too late to adapt. AI isn’t replacing CPAs. It’s replacing traditional thinking.

, where I’ll be delivering a the keynote and diving deeper into AI for CPAs who are ready to lead, not lag, into the future. From fraud detection to smart audit planning to intelligent assistants and client insight generators, you’ll learn real ways AI is transforming the profession, unlocking new revenue streams, and what skills and roles will thrive in an AI powered practice.

CalCPA is working with the AICPA and other state CPA societies to encourage action opposing the targeting of pass-throughs, such as those of accountants, dentists, doctors, lawyers and pharmacists, through the elimination of the Pass-through Entity Tax (PTET) SALT deduction. This would increase taxes on the partners/owners of many service-based businesses, such as accounting firms, discourage the creation and growth of such businesses, and further expand the disparity between C corporations and pass-through entities.

CalCPA and the AICPA are encouraging members to 

. To help with the efforts, the AICPA has provided a 

—will unfairly increase taxes for many regional accountants, pharmacists, dentists, and others, but retain deductions for large corporations. The legislative package would eliminate state and local taxes (SALT) for many pass-through entities.

Under this legislation, accounting firms will be worse off than they were after the application of the SALT cap under the Tax Cuts and Jobs Act (TCJA) and before the IRS-approved deductions were authorized. Specifically, the proposal newly subjects local entity level taxes to the individual SALT cap.

The proposed tax legislation unfairly subjects specified service trades or businesses (SSTBs), such as accountants, doctors, lawyers, dentists, veterinarians, etc., to the individual cap on state and local income tax deductions at the federal level, regardless of partners’/owners’ income level or the state in which they live.

When comparing the tax treatment of state and local taxes for pass-through entities between the TCJA and this proposed bill, the sole change is the targeting of pass-through service providers, who were already substantially limited under the qualified business income (QBI) deduction for SSTBs.

CalCPA and the AICPA believe that this bill further increases the lack of parity between pass-through entities and corporations; we strongly oppose the targeting of certain pass-throughs from deducting state and local entity taxes at the federal level. We urge you to 

, to express your opposition to this unfair limitation of pass-through entities and ask them to support service trades and businesses.

I urge you to oppose provisions included in the House Ways and Means Committee’s tax reform legislation that unfairly target the ability of service businesses structured as pass-through entities to deduct their state and local taxes (SALT) from their federal tax liability while providing no such limit to other businesses. This legislation effectively discriminates against particular pass-through businesses by indirectly raising taxes on those entities that are considered the backbone of the American economy. These provisions greatly widen the disparity in treatment between pass-through entities and other kinds of businesses, and I strongly urge you to oppose these provisions of the bill. 

CalCPA will continue to follow this issue and provide any further updates.

Call to Action: Preserve the PTET SALT Deduction

CalCPA is working with the AICPA and other state CPA societies to encourage action opposing the targeting of pass-throughs, such as those of accountants, dentists, doctors, lawyers and pharmacists, through the elimination of the Pass-through Entity Tax (PTET) SALT deduction.

Sitting down to write this article I start by facing the blank page, not quite sure how to fill it. The blankness is intimidating, and it gives no guidance on what should be there—which is totally appropriate for the topic. 

When we look at the blank spaces on our team rosters, we are often just as rudderless, just as apprehensive. Demand for our CPA and advisory services is crushing you and your team as much as ever. But the talent pipeline is reduced to a trickle. And those blanks are not filling themselves. 

(By the way, it’s not lost on me that using physical paper, just like back when I took the CPA Exam, is maybe excessively old school.)

Back to the topic at hand, fewer experienced professionals are coming from fewer staff staying in the profession, backing all the way up to fewer students going into the accounting major. There’s even generational narrowing, making fewer young people available from the very start! Every profession, industry and job classification are going to continue to vie for the same talent. And guess what, we have sort of a reputational problem—somehow the public we serve thinks we are all overworked and unfun! True or not, it’s a hard sell for a young person mapping their career.

So how do we fill in those blanks on that org chart of yours? Do you leave these spaces unfilled? Or is your face looking a little blank too?

The world is an unknown, the unknown is risky and we all know how we CPAs feel about risk. Let's reduce some of this risk by turning the unknown into known. We have known that the big CPA firms have been using staffing around the world since long before there were just four of them. They did it sometimes to access new markets and sometimes to access new labor pools. 

These early adopters paved the way, investing capital—both human and monetary—and created areas of the world that had tons of well-trained staff and whole ecosystems around their global offices. This absolutely improved the economies of where they invested. Though right along with excellent training and experience, the profession exported its nose to the grindstone, production-oriented work ethic (who said CPAs aren’t a good time?).

Where do you look? Some of the top contenders are India, Philippines, Mexico and South Africa, though there are many places that are up and coming. Some of the commonalities are high levels of education for portions of the population, large English-speaking populations, and direct experience with accounting. Time zones differ and the relative cost differs. But whether the resource is a thousand miles away or 12,000, smaller firms often do not have the resources to set up their own entities with employees (or a JV with a foreign firm). Since this capability is often cost and resource prohibitive for small firms, they are exploring options in different structures such as-through finding individual contractors, hiring through employers of record (like an international PEO) and outsourcing.

Each method has its own plusses and minuses, and the right mix will likely be different for each firm.

Individual contractors are not always available. For example, they are common in Philippines but less common in India. They can be hard to find since you're looking for a single individual who wants to devote their time to your firm. Managing one or a few people can be difficult if you have no boots on the ground locally where they are and because of that, it can be hard to scale up this as necessary. If you do happen to find the right person or two, it can be an immediate shot in the arm however, as you will have a resource that you can integrate into your team at a lower price point.

Right alongside individual contractors is the possibility of hiring through Employers of Record (EOR) where the employees truly become part of the firm's team but are employed by a professional employment organization, a third party, in that foreign country. This allows for a bit more control without having to learn foreign employment law or most other compliance. However, this worry-free option isn't free, and you will get charged hundreds or thousands of dollars per employee per month for this service. It also doesn't obviate the need to find staff members in the country in the first place (you have to do that), nor does it help manage for performance, etc. Using EORs can be a solution if you have small numbers of highly qualified (i.e., harder to find) staff in a number of foreign jurisdictions.

The last structure, and the one near and dear to my heart, is outsourcing. This solution puts all the hiring, management and training of staff onto someone else. Very often you're able to get a breadth of skill sets instead of the skill set confined to one person. But you pay for what you get since you have to then pay that vendor's profit margin on the staff. You probably have already been approached by multitudinous would-be vendors hawking their miracle solution to your staffing problems. They can make the issues vanish with the flick of a wire transfer button. Annoying, isn't it? I hate being sold to and I'm sure you do too. But at the same time, we small firms need to explore ways to get the work done!

So how to find out more about these options? Do some research yes, but you should not need to become the expert on global labor. Ask questions, get referrals. Be clear about what parts of your processes need to be filled, what blank spaces on your org chart are missing. From there find out whether the various offerings meet your needs and budget. Like with any business deal, it comes down to what you have to give up compared to what you receive. The more specific your ask, the more likely you are to find a successful global staffing solution. The chart below will help give you a framework for navigating what each solution provides.

Hopefully, this has shed a little light on a subject largely kept in the shadows. But I don't expect this article to fill you with courage all by itself. In the next installment we will tackle some of the common concerns around using global labor—some are real, some are phantoms, and all can be put to rest. 

Stay ahead with essential CPA resources

California CPA magazine

Fostering Calm in the Digital Age

AI is Rewriting the Rules of Accounting

Anticipating the Future

Filling in the Blanks on Global Staffing: Part 1

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CPAs: Making Sense of What Comes Next campaign