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Your go-to source for expert insights, industry updates, and exclusive CalCPA content. Stay ahead with practical guidance, pro tips, and must-know trends—all designed to fuel your success.

Stay ahead with essential CPA resources

Life Insurance in the Wild

There are many myths and hyperbole around life insurance. It is also correct that not enough attention is paid to the nuances of protection for life insurance as a value proposition for your client's financial plan.

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 

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

Filling in the Blanks on Global Staffing: Part 2

In this second part of his series, CalCPA member Ben Towne dispells some of the myths when it comes to outsourcing.

Filling the Blanks: Part 2

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Rise & Stride Podcast

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From wildfires to earthquakes, disasters can upend your finances. Get expert tips and resources to prepare, recover, and rebuild with confidence.

Disaster Recovery Resources

CPAs: Making Sense of What Comes Next campaign

In today’s rapidly evolving accounting landscape, alternative practice structures—especially those involving private equity—are reshaping how CPA firms operate. With this shift comes the critical need for updated ethical standards to ensure auditor independence and maintain public trust. That’s why 

CalCPA recently submitted formal comments

 to the AICPA’s Professional Ethics Executive Committee (PEEC), voicing strong support for 

 to the AICPA Code of Professional Conduct.

While the AICPA Code has long addressed outside investment in CPA firms, private equity’s growing footprint has introduced fresh challenges. Who ultimately holds influence? What’s the impact on independence? As firm structures grow more complex, CPAs need clear, actionable guidance they can rely on.

The PEEC’s APS Task Force has developed two proposed approaches to address these issues. After a thorough review, CalCPA endorsed 

, which calls for a dedicated APS interpretation within the independence rules, complete with illustrative diagrams, real-world examples, and practical tables.

CalCPA applauds the Task Force’s proactive, well-researched efforts:

While CalCPA is on board with the current proposals, it also recommends expanding future guidance to address:

With ownership structures changing fast and audit quality under the spotlight, CalCPA encourages the PEEC to move quickly toward releasing an exposure draft. Timely, practical guidance is essential to uphold independence—and confidence—in the profession.

As always, CalCPA remains committed to supporting the profession with clarity, foresight, and integrity. We look forward to continuing this important dialogue with the AICPA and other stakeholders.

CalCPA’s Support for Clearer Ethics Guidance in Alternative Practice Structures

CalCPA recently submitted formal comments to the AICPA’s Professional Ethics Executive Committee (PEEC), voicing strong support for proposed revisions to the AICPA Code of Professional Conduct.

CPAs create clarity and peace of mind in a sea of noise for our clients. After nearly three decades of delivering professional advice, experience has revealed opportunities to help shield clients from risk and bumps in the road. Clarity in turbulent times, like the market volatility we are experiencing today, are driven by fidelity to the financial planning standards that are prescribed by the Statement on Standards in Personal Financial Planning Services (SSPFPS) at the AICPA.

The AICPA financial planning standards are under revision for the first time in 10 years to continue modernizing and consider changes that add clarity, concise language and evolution to reflect changes and updates that include artificial intelligence. Among other professionals on that team working on the revisions is Brooke Salvini, a member of the CalCPA Personal Financial Planning Committee. The 

 impacts all CPAs who provide personal financial planning services, from answers from an individual client planning question to the delivery of financial planning services. Risk management, of which life insurance is a component, is an essential element of planning.

Many clients have the impression that their investment account embodies their financial plan. While some may have engaged in financial planning and put it on the shelf as a testament to having engaged in a planning experience at a point in time, very few make the financial plan a part of a guidepost to their future.

Integrating a financial plan in each portfolio review meeting is a fundamental transformation of a client relationship that adds peace of mind, clarity and purpose to a client's life. Engaging in the same process for risk management planning adds a key dimension that provides security during the inevitable bumps in the road we all face during our lifetimes.

Accountancy is unique as a profession and a natural complement to the application potential of financial planning. Our strength and expertise in tax compliance touches every aspect of financial planning. Insurance planning is similar. It impacts estate planning, retirement income planning, education planning, investment planning and spending plans, each with a key element of tax planning representing the integration of different aspects of a financial plan to enhance the client experience.

Closing a client meeting by matching the relationships between different aspects of the client plan indicates that you listened, understood what your client or prospective client shared, and, in a meaningful way, demonstrated the value proposition in planning that you will deliver in their best interest.

Getting the Most out of Life Insurance Planning

The benefits of life insurance are essential. Since most CPAs and CPA financial planners work with other professionals to manage their clients' risk, two housekeeping items are important to be aware of: compensation disclosure and due diligence.

 The standards of compensation disclosure are more rigid for CPA financial planners than other financial services professionals. Standard 23 of the SSPFPS states, "

If compensation alternatives are offered, the member should disclose the differences in these alternatives in writing

A reflection of the importance of disclosure of compensation methods for investment professionals was an SEC action in 2024, which indicated that a broker-dealer violated its Regulation Best Interest obligation by not disclosing different pricing platforms in securities in writing. CPAs delivering insurance planning services should disclose the compensation layers to their best abilities.

Due to the complexities of compensation in the insurance industry, it may not be possible to disclose all compensation fully. However, disclosures should be materially correct. Compensation should be disclosed not only, but in the case of life insurance, if alternatives through 

, alternative compensation should also be disclosed. If a CPA is working with an outside professional, it is a good idea to request similar disclosures from the insurance professional. Such disclosures may benefit the client.

 If you are working with other advisers regarding the placement of insurance, there are some due diligence steps you can take to help evaluate insurance professionals. Broker 

 is a securities industry sight that requires registered persons to report various issues. Licensing with FINRA is necessary for those who place variable life insurance and variable annuity solutions. Some insurance professionals are not licensed with FINRA. Equity-indexed or fixed-income solutions for life insurance and annuities do not currently require FINRA or SEC registration. The 

National Association of Insurance Commissioners

In California, you can check licensing online.

 To determine who your insurance agent is appointed by, refer to The California State Department of Insurance (CDI). You will usually want to see a broad selection of insurance companies appointed in a person's record. 

A common myth is that you can compare life insurance outcomes through illustrations provided by carriers. An illustration is merely an estimate of assumptions at a point in time that does not accurately reflect long-term outcomes. Mortality experience, company expenses, investment returns and many other factors determine outcomes. Resources that compare long-term performance of life insurance cash values and face values over 20- and 30-year time periods no longer exist. Other resources that should be considered for any insurance referral relationship are 

An example of life insurance hyperbole on returns comes with some equity-indexed policies. Equity indexed policies generally have three clauses that may impose limitations on index returns.

One clause limitation is “participation rates, which can generally be adjusted annually by the insurance company. Initial participation rates may be as high as 120 percent of the index return. I have recently seen some participation rates revised to 8 percent, meaning a 20 percent S&P return will yield 1.6 percent. Other factors can reduce the return.

A waiver of premium rider on a policy generally waives the premium when a total disability occurs. There are important nuances in contractual language to be aware of, such as how long the waiver applies if the person is no longer totally disabled, what the definition of total disability is, the definition of presumptive disability and other contractual language.

For instance, the loss of a hand is different than the loss of the use of a hand. Generally, a waiver of premium is a benefit for those who have misfortune and live. In total permanent disability, the waiver of premium can pay the policy premiums. Care must be exercised as many waivers of premium riders will pay the premium for term insurance, or the term insurance cost of a universal life policy. There are term insurance policies that convert to whole life upon a permanent total disability, and whole life policies state that the waiver of the premium pays the entire premium upon total disability.

Examples of young and totally disabled are a 32-year-old business owner t-boned by someone running a red light. A 19-year-old with an aneurysm, a 48-year-old with scoliosis and requires a walker. In these cases, life insurance with the proper riders and the company with the most favorable contract results in significant cash value accumulated over time.

Additional purchase benefit—young adult/kiddie policies: 

Despite longer lifespans we’re seeing today, medical issues still pop up, and insurability issues can be highly limiting when applying for life insurance.

For instance, an autism diagnosis and the aneurism mentioned in the Waiver of Premium section above can render one uninsurable. The Merk manual is thick with very thin pages of most that ails us. It isn't just the inability to obtain approval for life insurance; it’s also the insurance rating due to some event.

Becoming uninsurable or having a health issue results in an expensive, highly rated policy that can be protected through an additional purchase benefit rider added to a whole-life policy. Think of the additional purchase benefit rider as an option to exercise the right to obtain a whole-life policy at the best rates. Combined with a waiver of premium, the additional purchase benefit rider is a powerful combination of protection when bad things happen.

For a small premium, a modest $150,000 whole-life policy, can provide well over $1 million of additional whole life protections for the insured that would not otherwise be available at favorable rates regardless of insurability, subject to the terms of the contract.

1035 exchange for long-term care premiums and complementary asset:

Those old life insurance policies may contain a gold mine of opportunity. Recently, due to stubbornly persistent low interest rates, the regulations were changed to allow insurance policies to pay a minimum 1 percent crediting rate. Old policies may come with greater guaranteed rates. While a transfer of assets to life insurance cash values results in an income reduction for advisers who bill for assets under management and can be a reason to find a way to frame the discussion away from life insurance, the policies that have high interest or dividend rates may be a good complement to fixed income assets when interest rates are lower. Certainly, 5 percent interest or dividend or so rates were a beneficial asset accumulation complement when bond interest rates were 0-2 percent. Because many who retire under current tax laws may not file a Schedule A, the value of a 1035 exchange to pay for a long-term care premium combined with the tax-deferred returns on cash values may be worth consideration. Client advice and decisions should be framed in the context of a financial plan. Care should be taken not to allocate too much to any singular type of asset. Diversification of assets can reduce risk and result in different tax outcomes.

By focusing on the client's best interest, unexpected planning opportunities can be created. For instance, over the years, I have developed significant expertise regarding the placement of cash balance plans to complement the retirement plan cake. It is my passion to serve America's underprivileged and business owners simultaneously (see 

 in the June 2022 issue of California CPA and 

Small-business Owners Misunderstand Retirement Planning

When speaking with a potential client about the cash balance plan opportunities and a $600,000 tax deduction for the potential client's high-income business, it came to my attention that the potential client's net worth was over $30 million. While the tax deduction may be a beneficial solution, the distribution of the assets in a cash balance plan most likely would be subject to income tax rates at or close to the highest level of the tax law at the time of distribution, in addition to estate taxes at 40 percent under current law.

, most of the commissions can be eliminated in a life insurance policy, and depending on underwriting, it is possible that over time, the total costs of insurance and separate account management is about 1 percent, or comparable to the all in costs for a managed portfolio. For individual accounts, considerations on tax savings should include asset types, stocks held long term, which are subject to a step-up in basis.

If assets are in an irrevocable trust, there is no escape of income taxation through a step-up in basis. While tax factors can be mitigated based on planning, there is no escape of either estate or income taxation, and typically a client is impacted by both when accounts are held in the estate. It may be in the client’s best interest to set up an ILIT and fund the ILIT with a life insurance policy consistent with the client's risk tolerance. If a client has a balanced risk tolerance, the client could fund both a whole life policy for the bond portion of the allocation and a variable life policy for the stock portion of the portfolio. In addition, depending on the premiums, the client may prefer to have more than one company to further diversify insurance company risk. 

Life insurance policies are unique because the agent can vary compensation. There are usually three forms of compensation in a life insurance policy: additional premiums that are paid commissions between 3 percent and 5 percent per payment; term insurance that is paid commission at 35 percent to 50 percent and whole life base that can be paid commission between 35 percent to 125 percent depending on age and company.

One trick to create value is to structure the policy to eliminate insurance compensation to the maximum amount possible and pay up the policy as quickly as possible, perhaps over seven years. When a policy is properly blended, the all-in cost over time may be as low as about 1 percent per year (costs are much more in the first few years but greatly reduced by blending).

While advisers are paid considerably less with a blended life insurance solution over time than assets under management in an advisory account, the compensation for services is still reasonable on larger policies and the client benefits.

One last point is that a joint life insurance policy with your spouse or significant other will lower the insurance cost, 

potentially increasing the policy's value

There are quite a few elements to implement life insurance properly. Life insurance is not an investment, but it can be valuable in helping pay for estate taxes and providing long-term multi-generational value for families. Life insurance can be an asset that can partially or fully convert to an annuity with increasing income streams to help pay for a graduated care living facility. Minimizing the face value relative to premiums and reducing commissions through blending has the potential to create significant additional value over time. Life insurance is almost always subject to underwriting considerations that can impact the costs within the policy and long-term insurance values.  

Temporary resources when natural disasters or capital market disruptions occur

: Natural disasters that hit highly populated areas have devastating impacts on local communities. It may take some time before the 

. Besides your retirement plan at work, another place to secure resources is cash value in whole life insurance. A whole life insurance policy can be a resource during capital market disruptions.

A key concern in the first few years of retirement is sequencing risk. Portfolios can recover from market disruptions during the accumulation years. During retirement years, distributions will not recover. A significant investment drop in the first few years of retirement can adversely impact retirement income. During such market disruptions, the distributions typically made from a stock market account can be loaned or distributed from a whole life insurance policy and, if loaned, replenished when the market drops in value.

How to get life insurance when you are not insurable or have health considerations: 

For most, every time your client switches jobs, they should consider notifying their human resources department 

 that they wish to take their life insurance and disability insurance policies with them. One reason group insurance tends to be more expensive than applying for insurance personally is that company group insurance is “come one, come all,” regardless of insurability.

While it is not guaranteed that your clients can take insurance with them as they leave, with many group plans, your clients can request to continue to pay premiums and take their policy with them when they leave their current jobs. Some of the life insurance policies offer accelerated death benefits for terminally ill insureds.

Proper planning could result in a tax-free distribution of $100,000 for those with a life expectancy of less than two years, with a policy that carries an accelerated death benefit rider, subject to contractual provisions.

For clients who are executives, policies can be guaranteed issue in companies. Be aware that insureds must sign a form acknowledging the purchase of life insurance, and companies must both retain that form and file the IRS form 8925 each year. Failure to do so will subject life insurance proceeds to taxation. Insurance companies have differing standards on issuance amount and the required number of executives to be insured for guaranteed issue programs.

: Insurance has many nuances, with the underwriting process being one of them. I have had a health condition result, with one company issuing a policy as premier, best in class, and another declining the same condition. What happens when an underwriting issue results in a decline or rating? The insurance company may report the findings to a national database called the Medical Information Bureau (MIB) for other insurance companies to see.

If there is an insurability risk, it may be best to take the extra step of an “informal inquiry” to see which company views the case most favorably. Often, an agent may take shortcuts to get in submission and get paid while discounting the potential impact of health conditions on the insured's application and the related premiums. Certain companies have resources dedicated to special risks that can benefit clients through informal inquiry. While not guaranteed, the extra step of an informal inquiry may result in a more favorable outcome for the insured.

There is much more to consider about insurance opportunities as it applies to life insurance. While not discussed, disability insurance, long-term care insurance and annuities have their own nuances while providing protection. With the best interest of clients in mind and matched to the client's financial plan, decisions around risk management strategies can be optimized.

CPAs represent the most capable profession in delivering a wide range of financial planning services that are a natural extension of tax compliance work. Clients look for professionals who look forward and help them make sense of a wild world.

If you perform tax compliance work, you have the potential to deliver value-added services that clients increasingly need in a complex world. You represent clarity in a world full of noise.

 we discussed the staffing shortage that has been leading to blank spaces in your org chart—as well as the blanks in knowledge about global staffing, which leads to that uncomfortable feeling of uncertainty. Now that we have a little knowledge that there are options out there means you might have to do something about it. And that blank expression in the mirror isn't just confusion but maybe some anxiety too.

For centuries cartographers drew maps only of their local areas. Beyond those known realms, maps contained gruesome figures famously captioned “here there be monsters.” This indicated that no one knew what was there and no one should venture beyond to find out. It wasn't until 1507 when Amerigo Vespucci drew a world map including the soon to be eponymous American continent that the world saw blank spaces at the edges of the world. No monsters or warnings. Just places to be explored and filled in. 

So, let's fill in the rest of the outsourcing world and dispel some myths with facts.

: Clients will leave if I use “foreign” talent

: I've never lost a client because of outsourcing. I have lost them because I was too expensive or didn't have the capacity to address the client fast enough. But based on discussions with dozens of practitioners who use global talent, none have had anything but immaterial push back on using global staffing. Clients are smarter than we sometimes give them credit for being. If a client is sophisticated enough to need a CPA, they probably understand the fact that you may need international talent to support them. Not only that, how often are they already supported by international teams (IT MSA's and web design come to mind), or the client businesses and lives already have international connections?

: Communication is hard with time zone differences

: Communication is certainly not impossible, but it is true that there are special challenges. Time zone differences require careful planning. I recommend rescheduling periodic (at least weekly) meetings to connect. Agree on what tools, platforms and workflows process you are going to use. Will you trade emails or Teams messages? Do all notes go in individual client files? These processes reduce the need for real time communication. Depending on the location of the team, there may not even be time zone differences. “Near shoring,” including to Mexico, Canada and South America reduce these issues.

: There's a small amount of truth here, but it's pretty much false. Written and spoken English skills among the educated workforce you'd be needing is high. Professionals in other countries looking to be outsourced solutions absolutely speak English. Flexibility will make things run smoother, though. 

First, differences in grammar, syntax and terminology. In Indian vernacular “raise an invoice” doesn't mean increase fees, it means create the invoice. These differences are usually no big deal and just require a bit of patience to mutually bridge the gap (unlike I did the first time I heard this!) It’s the equivalent to a New Englander calling a carbonated beverage “pop” while we Californians call it “soda.” 

Second, the accent. This one is real but think about how often you already encounter this every day. Do you really mind? The way I've handled an accent depends on who I'm dealing with. Mostly I try to speak and write extra clearly (not more loudly). I also tend to emphasize written communication as much or more than verbal communication, which mitigates the accent issue (though possibly not the first issue). Additionally, for my own firm, I have an accent coach working with our lead people at our Indian subsidiary. 

: Info security is bad, and your client's info is at risk in another country

: Your client/s info is already at risk. It's possibly more at risk in your current security environment than it would be at an outsource firm that is grilled about their data security constantly. To ensure they are up to snuff you can ask for their written data security policy, DRP or AI usage policy if they have one. Frankly most of us don't ask about this enough of our vendors or even ourselves! And this is relevant whether the vendor is in another city, state or country.

: Foreigners couldn't possibly have the skills or judgement to do work on U.S. clients

: This one is purely false. Primarily because of the Big 4 firms, many countries have a long history of outsourcing professional services to the U.S. India is considered the outsource capital of the world for good reason. The Philippines, Mexico and Columbia aren't far behind. There are whole generations of professionals that know primarily U.S. GAAP and the IRC rules and guidance. And because they have been trained in not just U.S. methods but in U.S. business culture, the skill set, experience and judgement most often are aligned with what you'd expect out of U.S. trained staff.

The facts and fictions surrounding outsourcing are less intimidating when laid bare. No monsters here, just the blanks in your organization chart to fill. Understanding the facts and real challenges enables you to expand into previously uncharted territory and bring the strength of the world to your team.

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.

Stay ahead with essential CPA resources

California CPA magazine

Life Insurance in the Wild

Fostering Calm in the Digital Age

Filling in the Blanks on Global Staffing: Part 1

Filling in the Blanks on Global Staffing: Part 2

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