Personal financial planning: incorporating the statement on responsibilities in personal financial planning into a tax practice.

• Author: Edwards, Dirk

As financial planners diligently work in their tax practices, putting maximum effort into providing the best possible tax advice and compliance for their clients, they may get questions such as:

* What should 1 be doing about college funding for my kids?

* How will I ever be able to retire? How much should I be saving?

* Should I have life insurance? How much? Where should the cash come from to pay the premiums? Who should own it? Should it be in a trust?

* How do I balance our family charitable giving goals with my retirement objectives?

* Beyond the potential tax cost of exercising my company stock options, how should I incorporate them into my long-term personal planning?

As a financial planner tries to determine how he or she can help clients address these questions, it may be helpful to know that the best and brightest minds in the CPA profession have already developed a framework to assist planners in developing processes for helping their clients with these personal financial planning questions.

This type of real-life practice guidance is the underlying goal of the Statement on Responsibilities (SOR) in Personal Financial Planning Practice issued by the AICPA's PFP Executive Committee. As outlined in the preface, the goals of the SOR are to "provide guidance to the CPA financial planner and to ensure that the highest levels of integrity, professionalism, objectivity, and competence are applied to the delivery of the personal financial planning services so that a CPA financial planner can serve the best interests of the public, regardless of the form of his or her practice" (http://tinyurl.com/ SORPFP20I0).

As a practice aid, the SOR is written in a format to provide a conceptual framework, outlining the CPA's primary professional responsibilities in providing personal financial planning services to clients. Because there is no single, specific practice model for the effective delivery of PFP services, the SOR does not delineate a "must do" list of steps for the CPA. Instead, it highlights various professional considerations in providing PFP services. These are not required practices but rather an understanding of what would be considered best practices. Since the PFP Executive Committee does not have standard-setting authority, this guidance is nonauthoritative. However, it is reflective of the cumulative expertise from decades of experience within the PFP Executive Committee and CPA community for use by CPA financial planners.

Background

Written to address the lack of formal professional materials summarizing best practices in the PFP area, the SORs were published between 1993 and 1996. These original SORs were issued after an extensive period of member and public discussion, formal exposure, and review. After approximately 15 years of use by the CPA community, the various SORs have been consolidated into a single document with the goal of assisting in their understanding and application in practice.

The SOR is not intended to apply to stand-alone services that are...