Many individuals are vague or unrealistic about their goals and how to achieve them. CPAs can use their “database” of knowledge of their clients and their experience with them to help flush out their thoughts and long-term plans. Once this is determined, investment management experts can be brought in.

The Hardest Question to Answer

“What are you trying to accomplish?” This is the first thing a CPA financial planner should ask clients they meet with for financial planning. Financial planning cannot be done in abstract or absolute terms—it must be done in an environment that encompasses the entire financial structure of an individual and their family. Working in a vacuum will not accomplish goals.

The next question is actually quite easy: “What are your goals?” Once they are crystal clear, goals are established and articulated in simple language, and advisors have a direction to work toward. Too many people invest and make asset transfers without a plan, and invariably they make the wrong decisions and reduce their financial security, taking on more risk than they need to and sowing the seeds for later regrets.

An individual’s answer to the first questions should be the starting point of every decision, with every move measured against whether it brings the client closer to their goals.

A Dozen Essential Steps

CPAs should explain to clients that the plan should be put in place assuming that it is permanent but can be changed if circumstances dictate. In the authors’ experience, those who plan are much better off than those who do not. The following are 12 key steps to keep in mind when determining investment goals:

  • Purpose of planning. Decide on the purpose of the plan. Review it to see if it is realistic and addresses big picture concerns
  • Spending needs. Determine how much is currently being spent, and how much will be spent at later intervals in life.
  • Income and cash flow. Determine annual income and cash flow, and what it is expected to be at various stages later in their life.
  • Short-term goals. Write down what is to be accomplished over the next few years.
  • Long-term goals. Write down longer-term goals. Based on an individual’s age and situation, this could mean 5 years from now, or 25 years from now.
  • Risk profile. Describe the risks involved and how stocks, bonds, commodities, real estate, and any businesses affect the goals set. Be sure to consider life expectancy when calculating the effect of inflation and long-term spending. Determining clients’ feelings toward risk is essential to decisions that need to be made with regard to the investment plan.
  • Net worth. Tally up assets and debt and arrive at a total net worth and a financial net worth. If there is debt, determine if there is a sensible way to pay it down. Consider the likelihood of growing net worth.
  • Asset allocation. Depending on goals and risk tolerance, determine how much of an investor’s net liquid and investible assets should be allocated to rainy day funds, stocks, fixed income, and other broad investment categories. Check that rainy day funds reflect immediate and possible emergency needs.
  • Number crunching. Work out potential cash flow from the asset allocation. Estimate expected interest, dividend, and appreciation rates. Include income from the individual’s job or business, Social Security and pensions. Be realistic and conservative. If the income estimate is too low, the client won’t get hurt; if it is too high, they could. Overestimate expenses for the same reason.
  • Whether goals are attainable. Match the cash flow against how much is being spent and is planned to be spent. If there is a shortfall, consider adjusting spending, increasing risk, working longer, or even getting another or a part-time job; alternatively, goals may need to be amended. What many people do not realize is that financial goals are behavioral. Spending can be controlled or curtailed to accumulate funds that will enable future goals to be attained.
  • How to attain goals. Write out a clear plan based on everything done in the earlier steps that show how goals will be attained. This can now be used as a set of guidelines.
  • Plans are road maps. Road maps point people in the direction they want to travel, but there are often detours along the way. The plan and goals will help the client better maneuver those bumps in the road.

Committing everything to writing encourages more focused thinking and leads to better end results.

Additional Issues

Market swings will occur and need to be monitored, but should not be acted upon unless there is a flaw in the original plan or a major change in an individual’s goals or portfolio. The client should never lose sight of their original confidence in the plan to achieve their goals.

Investment policy statement.

In helping clients manage their financial affairs and determine their goals, an investment policy statement (IPS) serves the same purpose as a contract with an investment manager would. The IPS sets forth a method of implementing a plan based upon clients’ goals. Many plans fail, not because they are not good, but because of the inability to implement them, or even because of a failure to get started. The role of the CPA financial planner is to help clients get started and then move forward on the implementation.

The IPS puts in writing clients’ goals, approach to investing, and the amount or type of risk they feel comfortable with. The purpose of the IPS is to get all of the clients’ advisors and participants to agree upon a methodology that will lead toward the written goals.

The IPS identifies the type of investments needed to attain clients’ goals, the expected returns from each investment category, the asset allocation strategy needed to achieve the goals, and the role taxes will play. The IPS also sets forth monitoring, reporting, call and meeting intervals, rebalancing periods, and methods to meet the original allocation, and circumstances under which the strategy and goals might have to change. Also included will be the basis for the advisors’ compensation.

Preparing an IPS will take serious thought and some time, but the effort is minimal when measured against the benefits clients are seeking.

Preparing an IPS will take serious thought and some time, but the effort is minimal when measured against the benefits clients are seeking. The time spent developing the 12 steps above will be recaptured in less time utilized in preparing the IPS. It also gives clients a second look at their decisions and permits them to affirm their thoughts. The online version of the article will include an IPS template that can be used to get started.

Once a plan is decided upon and implementation starts, a meeting should be scheduled with the investment manager and other advisors to ascertain that the securities purchased and their expected performance meets clients’ stated needs as expressed in the IPS. Thereafter, annual meetings can be held.


The above process may seem involved, but it isn’t that difficult and shouldn’t take more than a two- to three-hour meeting with the client. This is a serious process that, if carefully and diligently done, can ensure the financial security for an individual for the rest of one’s life. As such, it is a worthwhile investment of time and effort.

Sidney Kess, JD, LLM, CPA is of counsel to Kostelanetz & Fink. He is a member of the NYSSCPA Hall of Fame and was awarded the Society’s Outstanding CPA in Education Award in May 2015. He is also a member of The CPA Journal Editorial Board.
Edward Mendlowitz, CPA/PFS, ABV is partner at WithumSmith+Brown, PC. He is also the author of a twice-weekly blog posted at