Now That You Are A Financial Expert–What Next?

I wrote in a previous blog how as a CPA you are the default personal financial planning expert in your office.  Once you get comfortable answering the occasional question from your coworkers about why they should invest in the company 401(k) plan to get the company match or how, unless they are the CEO or CFO, they probably won’t have to pay any taxes when they sell their house, you may be ready to move to the next level.

The AICPA launched its 360 Degrees of Financial Literacy campaign over five years ago and it has provided the public great information to help educate them on a variety of financial topics from insurance to buying a house to paying for college education to planning for retirement.  The public website can be found at (or at with a Texas bent for my colleagues in the TSCPA).  This is a great website to share with your coworkers, but maybe you want to do even more.

One thing you could do is hold a lunch and learn, but, besides being scary presenting to that many people, it would be a lot of work to put together a presentation.  The AICPA is here to help.  We can’t make your nerves go away, but we can reduce the work load by supplying you with ready to go financial literacy presentations which can be found here. You have to be an AICPA member to access this site, but if you are, it will supply you with ready to go presentations set up by life stage just like the 360 Degrees of Financial Literacy website.  These presentations can be especially effective in smaller companies and locations that don’t have access to big corporate training programs. 

In addition to providing a valuable service to your fellow employees you can also use the presentation as an opportunity to enhance your skills.  And that is even easier to do when the audience is eager to learn which is always the case with financial literacy presentations; so check out the website and see if there is a presentation that might be especially relevant to your co-workers.  You might also want to check with the HR department (or whoever is in charge of such things) to make sure you do the right things to make it clear the company is not offering specific financial advice.  This really isn’t an issue with the AICPA presentations, but it’s better to make sure you clear the program with the right people up front.

Finally, there is one more site I want to mention to you that you can share with your co-workers. Total Tax Insights  is the most recent addition to the AICPA family to financial literacy tools.  It is a calculator that will show you the total tax – federal, state and local – that you pay in a year.  It goes way beyond income tax and includes things like property tax, tax on your phone bill, tax on the gas you purchase, even the tax on that glass of wine you will enjoy this evening.  The tool is customized to calculate the tax based on where you live across the more than 3,000 counties in the U.S.  The most important thing it does is peal back the layers of complexity and transparently show the facts.  What you or your co-workers do with those facts is up to you, but at least with the AICPA’s help, everyone can now get to the real facts as a place to start the debate.

Your Office’s Personal Financial Planning Expert

Just like everyone thinks being a CPA makes you an expert on income tax, CPAs in business are increasingly seen as the office personal financial planning expert. You get asked all sorts of questions.

Should I invest in the company 401(k)?
How much should I invest?
Which funds should I invest in?
Should I use the Roth 401(K) feature?

Saying you don’t know or aren’t qualified to give advice doesn’t work.  It either undermines your expertise which carries over to other aspects of your job, or it leaves your colleague thinking you know secrets you are unwilling to share which chips away at trust which is critically important to getting things done efficiently and effectively in business today.  This leads me to a few things I think every CPA in business should do.

First, understand your company’s 401(k) and other benefit plan options.  You should be doing this anyway for yourself, so there is no extra work here.  Second, take the 5 minutes to answer the questions.  My answers, which I will go through below, may seem obvious to all of the CPAs out there, but they aren’t to many of your co-workers.  And that is the point.  Even your basic level of knowledge is priceless to many of them.  Their expertise is not in numbers and financial information.  Yours is.  So here is how I answer the questions.

Should I invest in the company 401(k)?  If the company has a match the answer is almost always yes.  The only time it would be no is if the fee structure is truly awful and if that is the case maybe you need to be pointing out to the plan fiduciaries that they have work they need to do.

How much should I invest? At least enough to get the company match.  If you can’t get there in one step then start with anything and increase each year – especially if you get a pay raise.  You take a portion of that pay raise and put it to the 401(k) and you’ll never miss it because you never got used to having it in the first place. 

Which funds should I invest in?  This one gets tricky because this is where you start giving actual investment advice.  Depending on your position in the company, you may have legal hurdles on giving advice, but everyone else can usually be safe giving a couple of general statements.  First, do not invest in the company stock fund if one is available.  Almost everyone already has too much dependent on the company (can we say base salary and bonus).  Your retirement fund is not a place to increase that exposure.  The second piece of advice for most people is to invest in the lowest cost funds available which almost always are index funds.  I’m always amazed at how many funds purported managed by experts paid millions for their insight underperform the market.  I recommend not trying to outperform the market, but instead control the one thing you can control and that is the cost side. This also helps me get out of the conundrum of recommending a specific fund.

Finally, should I use the Roth 401(k) feature (if it is available)?  This one really gets complicated.  Assuming similar or increasing tax rates – under our same tax system – the answer for anyone under 55 is use the Roth feature, but that is just math so I go in a different direction.  I tell them that the Roth feature is great if you think we will have an income tax system like today’s for the rest of your life AND you can at least invest the minimum amount needed to get the full company match without the tax benefit today.  If they need the tax benefit today to get the full match, I say do that first and then if they want to use the Roth feature move future investments to the that feature instead of increasing the amount withheld.  I also warn them that the Roth is only as good as you think the Politicians will be in keeping their hands off your money.  If you worry about that, then maybe you should take the tax benefit today and deal with whatever taxes you end of having to pay in the future.  The point is that a Roth decision is more than just math – you are also making a bet on future tax policy and that needs to be part of the calculation.

Four questions, four answers.  And now you look like the expert you are. So go out there an help your fellow employees enjoy a brighter financial future.