Idea Transcript
National news July 21, 2017 News provided by:
Building a Data-Driven Culture Starts with the Team (Information Week) By Leon Tchikindas, July 13, 2017 – Being a data-driven organization is an ongoing process -- you need to invest in the right team, infrastructure, software, and processes that can promote lasting change. More and more companies are describing themselves as “data-driven,” but are they really? When we talk about being data-driven, we mean more than just passively collecting data and reporting on end-of-month financials. Data-driven organizations inform their decision making with key insights drawn from multiple data sources and nuanced analytics.
Visa Considers Extending 'War on Cash' Business Incentives Outside U.S. (CNBC) July 14, 2017 – Visa is hoping to extend its "war on cash" agenda to businesses in the U.K. after announcing new incentives for U.S. businesses to go cashless. The payment technology company revealed on July 12 that it was launching a "cashless challenge" which would see 50 U.S. businesses receive $10,000 each to help them convert to a cashless payment model. It is now aiming to roll the model out to the U.K., though is yet to set a timeframe for the launch.
Disruption Hits the Professional Services Sector (CFO) By Brian Peccarelli, July 5, 2017 – America’s CPA firms reached a quiet, but important inflection point last year. For the first time ever, the number of partners over age 50 declined from the prior year. The total number of partners also decreased. Why should CFOs care? The shift has exposed a clear rift in the professional services space between firms that are positioning themselves for growth and those that are allowing themselves to go gentle into that good night. While these data points may not feel like Earth-shattering news outside of the accounting industry, they will have a huge impact on the way businesses of all types are run in the coming decade and will dramatically shape the future of professional services.
Bitcoin Seeks Recognition from U.S. GAAP (Thomson Reuters) July 11, 2017 – The FASB is conducting early stage research about developing an accounting standard for digital currency and the technology that underpins it. With the use of digital currency increasing, proponents say inconsistent accounting practices are becoming a problem. As the digital currency Bitcoin becomes more of a household name, the FASB is considering whether it needs to develop accounting guidance for digital currencies. The standard-setter for U.S. GAAP plans to discuss whether to add a project to its agenda at a public meeting, a FASB spokesperson said. The timing of the meeting has not been set.
Form What? CAQ Offers Help for Audit Committees in Understanding and Using Form AP (JDSupra) By Cydney Posner, July 10, 2017 – Remember Form AP? That’s the form that the PCAOB is now requiring audit firms to use to name individual audit engagement partners. The form will also disclose the names and Firm IDs, locations and extent of participation of any other accounting firms, outside of the principal auditor, that participated in the audit, if their work constituted 5% or more of the total audit hours. Should companies care? Yes, says the Center for Audit Quality: the disclosures made in Form AP can help audit committee members in satisfying their responsibilities to oversee the engagement audit firm as well as other audit participants.
5 Ways to Help Your Team Achieve Work-Life Balance (AccountingWEB) July 13, 2017 – A recent survey by Robert Half Management Resources reveals that a majority of professionals, including those in accounting and finance, have a better work-life balance now than a few years ago – and they have their managers to thank. According to the survey, 52 percent of professionals said their work-life balance has either improved significantly or somewhat in the past three years.
6 Traits of Leading Finance Functions (CGMA) July 16, 2017 – Over the past two years, regulatory changes, compliance changes, and the rising volume of data available have made the role of the finance function increasingly complex. Few organizations are able to harness the insights that could be generated from the data they hold, and getting the data into a usable, consistent format is a common challenge. Many organizations are keen to update the finance function but have yet to identify a way to implement the new processes and technologies required to boost efficiency without disrupting day-to-day activities. The objective for many finance teams is not to reduce headcount but rather to redeploy staff in more productive ways.
Bipartisan Group Pushes Caregivers Tax Credit (The Hill) July 13, 2017 – A bipartisan group of lawmakers is working to provide a tax credit for family caregivers they say is a step toward recognizing the financial sacrifices caregivers often have to make. Several members of Congress detailed this legislation to create a federal, nonrefundable tax credit of up to $3,000 for family caregivers who work. They discussed why it was needed — at times diving into very personal stories of their experiences as a caregiver.
The Importance of Measuring Risk and Goals in Financial Planning (Financial Advisor) July 13, 2017 – Behavioral, psychometrical, primed-state profiling, Ibbotson standard, AI facial and emotional recognition software—these are just a few of the many new approaches to assessing an individual’s level of investment risk tolerance. And yet, there are no silver bullets when it comes to risk measurement or financial plan profiling. Every tool and process has a weakness. There are so many prognosticators offering their views of how investor risk-profiling needs to be radically reshaped.
Retirement Dread Is Replacing the American Dream (Bloomberg) July 18, 2017 – “With informed discussion, creative thinking, and timely legislative action, Social Security can continue to protect future generations.” That boilerplate language has been featured more or less verbatim in the yearly status report from the trustees of the Social Security and Medicare funds since 2001. It's the numbers that have changed dramatically, as the U.S. population ages. A report released late last week cites 61 million beneficiaries and 171 million covered workers and their families. That’s an increase of more than 32 percent and 14 percent, respectively, over 13 years. The outlook for the program is pretty grim.
Building a Data-Driven Culture Starts with the Team (Information Week) By Leon Tchikindas, July 13, 2017 – Being a data-driven organization is an ongoing process -- you need to invest in the right team, infrastructure, software, and processes that can promote lasting change. More and more companies are describing themselves as “data-driven,” but are they really? When we talk about being datadriven, we mean more than just passively collecting data and reporting on end-of-month financials. Data-driven organizations inform their decision making with key insights drawn from multiple data sources and nuanced analytics. In my experience, I’ve learned that a company can’t become data-driven in a vacuum. When non-technical or non-analyst teams start to dabble in data collection and self-serve processing, there’s a high risk of analytical bias and erroneous interpretation, which can lead to misinformed decision-making. Gartner predicts that through 2017, 60% of big data projects will fail to go beyond piloting and experimentation. To ensure this transformation sticks, you’ll need a qualified and specialized team supporting your efforts. Identify the core team To get a team up and running, you’ll want a data engineer, an analyst, a product manager (this is a plus, not a strict requirement), and an executive sponsor. Generally, this group will sit in marketing or finance at first. As the team begins to deliver value, it may start to support product and sales before spinning out into a group all its own. Your data engineer is responsible for moving and propagating access to data. Rather than analyze and interpret the data, their chief mandate is piping it to the right places. How technical they need to be will depend on the analytics stack, which we’ll get to shortly. Your data analyst should be focused on answering business questions using data. They know SQL, and are comfortable in a few other languages such as Python or R. This is a critical role, as your analyst will effectively be a bridge, translating data into business insights and coding business insights into meaningful reports and metrics. This role will grow to be even more important in the future. To help this team effect change, you’ll also need an executive sponsor, preferably someone at the VP level or above with some technical background. This person needs to believe in the team’s mission and can help tackle inevitable roadblocks from engineering, legal and IT, as well as concerns from stakeholders. Believe me when I say that this role is crucial. A company I worked at earlier in my career had a particularly convoluted data stack. There was no redundancy, the databases frequently got corrupted, and concurrent work among multiple analysts was challenging. Despite the analytics team’s advice, the stack was not upgraded until a power outage caused some data loss. Having an executive sponsor could have prevented this. Choose the right analytics stack Your team needs to precede your tool investment. Prematurely opting for a self-service solution often leads to data misinterpretations and misdirection. Our confirmation biases only compound the problem as we look to find insights behind the numbers. These false insights can instill a distrust in data, putting the kibosh on your data team’s ambitions before they’re able to get started in earnest. Let your data team drive the requirements gathering and RFP process for analytics products. They’ll be more attuned to how the data will need to be piped in, as well as data shape and volume. Choose a tool -- or a suite of tools -- your organization can grow with. But once you’ve found a tool, don’t plan to rest on your laurels. Your team should spend about 10% of their time exploring new technologies, as data is constantly evolving. Be prepared for challenges A company doesn’t become data-driven overnight or even in a quarter. You’re dealing with fundamental organizational shifts and change in mentality; even if people are philosophically on board, when you’re asking them to change how they’ve always done things, you may run into some pushback. But persevere, and the benefits will be tremendous. Here are the five major challenges you should anticipate. Technology: Plan to run into a few bumps in the road when it comes to deciding how to record, store, and process relevant data. Budget: Early on, ROI can be difficult to rationalize. This is where you’ll need your executive sponsor to go to bat for you. Perception: If the pain of blind decisions or the need for accurate data isn’t immediately apparent to key stakeholders, organizational penetration can be difficult. Hiring: Your first few hires will have to be multifaceted -- e.g., analysts with some engineering experience, engineers who can interpret data, clean data and come up with business insights, etc. These people are both valuable and hard to find, let alone hire. Bandwidth: Once your team is up and running, and the organizational appetite is there, expect to be flooded with requests. It’s easy to find yourself prioritizing and re-prioritizing requests. In this case, scaling is not at all linear; the next few hires will likely firm up your foundation, not produce more throughput. Where do you go from here? Building the right data team is a critical first step in becoming more data-driven. Such organizational change can be fraught with friction and you’ll often be tempted by shortcuts and compromises. Resist. Being a data-driven organization is an ongoing process -- you need to invest in the right team, infrastructure, software, and processes that can promote lasting change.
Visa Considers Extending 'War on Cash' Business Incentives Outside U.S. (CNBC) July 14, 2017 – Visa is hoping to extend its "war on cash" agenda to businesses in the U.K. after announcing new incentives for U.S. businesses to go cashless. The payment technology company revealed on Wednesday that it was launching a "cashless challenge" which would see 50 U.S. businesses receive $10,000 each to help them convert to a cashless payment model. It is now aiming to roll the model out to the U.K., though is yet to set a timeframe for the launch, a Visa spokesperson confirmed to CNBC July 14. Under the scheme, businesses in the U.S. are invited to submit plans outlining what going cashless might mean for them, their employees and their customers. Recipients of the award will then be required to use the lump sum to upgrade their point-of-sale systems so they are completely cashless. Any remaining money can be put towards marketing, the company said. "We're declaring a war on cash," Andy Gerlt, a spokesman for Visa, said in the announcement July 12. "We hope to offer a similar challenge to those merchants who are interested in other countries, including the U.K.," a spokesperson told CNBC in a separate email Friday. "At this time, we do not have a firm plan on when such an initiative would be available in the U.K." The proposed $500,000 investment in the U.S. should provide a boon for Visa, the world's largest processor of credit and debit cards: it takes a fee from every payment that runs through the network. This is one of the reasons many businesses are reluctant to make the transition, or choose to offset the cost to customers by having a minimum spend for card transactions. In the U.K. alone it is estimated that British retailers spent over £1 billion ($1.29 billion) to accept card payments last year, according to research released Wednesday by the British Retail Consortium (BRC). The EU recently introduced regulation to help businesses, particularly small- to medium-sized ones to cope with this burden. New caps on the fees for handling credit and debit card transactions saved U.K. retailers £500 million last year, according to the BRC. However, it argues more can be done by card companies to reduce transaction fees, beyond helping with the initial start-up costs. "It is ultimately the customer that decides how they wish to pay and BRC research shows that customers continue to use cash for more than 40 per cent of transactions in the UK," a spokesperson for the BRC told CNBC via email. "At the same time, cash accounts for only 11 per cent of retailers' costs associated with accepting payments, compared to 73 per cent for card payments, therefore card companies can better serve retailers and their customers by providing a more costefficient service." It is estimated that, as of this year, more than half of all customer transactions in the U.K. were made via card payments, spurred in part by the growing popularity of new technologies including contactless payment and Apple Pay. But the Bank of England's chief cashier, Victoria Cleland, has warned against businesses isolating those customers who continue to prefer notes and coins. In a speech delivered last month on the future of cash, Cleland pointed to the 2.7 million people in the U.K. – almost 5 percent – who rely almost solely on cash for their day-to-day payments and insisted that businesses ensure "financial inclusion." "While reliance on cash is less significant than in the past, it is still crucial to everyday life and I encourage the cash industry to continue to innovate, to evolve, and to keep cash relevant and fit for purpose," Cleland said in a speech on the future of cash.
Disruption Hits the Professional Services Sector (CFO) By Brian Peccarelli, July 5, 2017 – America’s CPA firms reached a quiet, but important inflection point last year. For the first time ever, the number of partners over age 50 declined from the prior year. The total number of partners also decreased. Why should CFOs care? The shift has exposed a clear rift in the professional services space between firms that are positioning themselves for growth and those that are allowing themselves to go gentle into that good night. While these data points may not feel like Earth-shattering news outside of the accounting industry, they will have a huge impact on the way businesses of all types are run in the coming decade and will dramatically shape the future of professional services. It’s all part of the massive demographic shift commonly referred to as The Great Wealth Transfer, whereby the baby boom generation, which is now age 52 to 70, is starting to retire and pass along somewhere in the neighborhood of $30 trillion in assets to generation Xers and millennials. They’ll also be handing over the reins of the businesses that built those giant nest eggs. Suddenly, all of those research reports and webinars about how to work with the millennial generation are starting to make sense. Fact is, one of two things is going to happen to today’s leading professional services firms: 1) they will successfully manage this transition, putting the generation that never knew life without the Internet at the helm, or 2) they will ride out the remaining years of their legacies, content to cash-out and chase sunsets in Boca or Scottsdale. Outside of re-arranging the ranks of leading firms and creating some good fodder for low-cost acquisition shopping, the firms in the second category won’t have a huge impact on the future of business. But those in the first category will change everything. Early signs of how this transition will change the face of work in America have already started to emerge. Take those data points on trends in aging among CPA firms, for example. They come from an annual industry report card of sorts called the Rosenberg Survey, which compiles stats on everything from firm demographics to profitability. What’s most interesting in the survey’s findings is that as the age and total number of CPA firm partners started to decline, profitability went up. In fact, for the most recent survey, average income per partner was $406,000, 3.6% higher than the previous year and the highest increase in profitability since 2007. Perhaps that’s why Ernst & Young CEO Mark Weinberger has been publicly celebrating the fact that the median-age employee at his firm is just 29 years old. He has also dramatically altered the firm’s culture to appeal to the millennial generation’s value system, explaining: “I’ve changed our value proposition. In the old days it was: ‘You come. You stay with us. You work with us. You get a pension.’ Today we know our people are not likely to stay with us for their careers. They’re going to have five, six, seven jobs throughout their careers.” But it’s not just lifestyle issues like flexible work schedules and more liberal attitudes toward job-hopping that are changing. Companies that are thriving the most throughout this transition period are those that have adopted the most technologically advanced approach to the businesses that once relied on “power by the hour” business models — dispatching armies of consultants to tackle labor-intensive jobs. Big data, for example, is already transforming the audit function at the major accounting firms. While just two years ago the nascent idea of leveraging big data analytics to parse massive, disparate databases of information looking for red flags was at best a speculative pursuit, today, it is becoming mainstream. In fact, this past month the Institute of International Auditors released official guidance on how to help financial professionals incorporate big data into their workflows. Likewise, the practical use of artificial intelligence is rapidly going mainstream as the next generation of tech-savvy professional services firm leaders begins to recognize the potential in being able to do more with less. From the highly publicized partnership between H&R Block and IBM Watson to the use of cognitive computing technology to process crossjurisdictional tax information for multinationals, the idea of a robo-accountant is no longer the stuff of science fiction. What does all of this mean for today’s CFOs and other business leaders? For one, it should be a call-to-action for those who are not currently gunning for growth by investing in professional development and technological advancement. The message is that they could easily be left behind. More importantly, however, business leaders should use this information as a litmus test for choosing who to invest in, which partners to work with, and how to evaluate existing leadership. Are they ahead of the curve, doubling down on what’s next in the commitment to break new barriers, or are they staying the course, content to coast on prior achievements? Only one of them will still be here tomorrow.
Bitcoin Seeks Recognition from U.S. GAAP (Thomson Reuters) July 11, 2017 – The FASB is conducting early stage research about developing an accounting standard for digital currency and the technology that underpins it. With the use of digital currency increasing, proponents say inconsistent accounting practices are becoming a problem. As the digital currency Bitcoin becomes more of a household name, the FASB is considering whether it needs to develop accounting guidance for digital currencies. The standard-setter for U.S. GAAP plans to discuss whether to add a project to its agenda at a public meeting, a FASB spokesperson said. The timing of the meeting has not been set. The accounting board’s examination of digital currency follows a request from the Digital Chamber of Commerce, a trade group representing the blockchain industry, to clear up accounting questions that have cropped up in the growing digital currency market. The organization in a June 8, 2017, letter called on the FASB to create guidance to address when to recognize digital currency and how to measure it. “It is what we consider a mission-critical issue,” said Perianne Boring, founder and CEO of the group. Bitcoin is the biggest name in the digital currency business, but there are other, growing competitors in the market such as Ethererum and Ripple. The technology underpinning digital currency, blockchain, is a secure, distributed database for maintaining a record of transactions. Proponents of digital currency and blockchain technology view it as a potential business game changer, likening its rise to the development of the internet. Use and acceptance of digital currencies as a method of payment is far from universal, however, and it is banned in some countries. In May, hackers demanded victims of the WannaCry cyber attack to pay ransom with Bitcoin to unlock their computer data, raising questions about criminals using digital currency. Still, backers say there is an increasing volume of digital currency transactions and point to major companies such as Microsoft Corp., Dell Inc., and Overstock.com accepting digital currency as payment. In addition to being used as a form of payment, digital currency also is held as an asset by businesses, which can sell the currency when its value goes up. The increased presence in the market indicates the need for consistent accounting guidance, the Digital Chamber of Commerce said. “As there is a lack of clear guidance for these digital currencies, there is currently a diversity of views on the accounting,” the group wrote to the FASB. Some financial professionals believe digital currency should be accounted for under Topic 305, Cash and Cash Equivalents; others say Topic 825, Financial Instruments, applies to electronic money; while others consider Topic 350, Intangible Assets, or, Topic 330, Inventory, the more appropriate accounting guidance. The conflicting views — and lack of authoritative accounting guidance — leads to auditing questions, which can turn off investors, and, in turn, research and development. It also can hamper start-ups from going public, Boring said. “If you can’t get an audit, you can’t go public, so it’s a major hurdle,” she said. The organization in its letter said it believed that the FASB should develop an accounting model that would allow businesses to recognize the digital currency when they control the associated economic benefits and measure the currency at fair value with changes recorded in income. This is similar to a position the Australian Accounting Standards Board took in December 2016 when it presented a paper to the IASB’s main advisory panel, the Accounting Standards Advisory Forum (ASAF), suggesting the international board investigate consistent accounting for digital currency. The paper’s author, Henri Venter, director in Deloitte Australia’s National Accounting Technical Team, said the lack of clear guidance in international accounting standards meant digital currencies were accounted for either under IAS 2, Inventory, or IAS 38, Intangible Assets, but the measurement guidance in neither standard provides sufficient information to analysts and investors about the value of the electronic money. Venter recommended that the IASB develop an accounting standard requiring the measurement of digital currency at fair value, with changes recognized in net income. The international board has not acted on the request, but IASB Chairman Hans Hoogervorst said at the end of the meeting that the board would keep it “on the watch list.” Members of the ASAF, including the FASB’s Harold Schroeder, also expressed apprehension about the IASB taking on an accounting project for an industry that is still in its infancy. “I think we’re way ahead of the game here. I think there are too many things that have to happen,” Schroeder said. The FASB is separately considering whether it should take on the broader issue of accounting for intangible assets, and could address digital currency within its work for that guidance. The FASB at its May 11 weekly meeting directed its research staff to assess the merits of overhauling the accounting for intangible assets versus focusing on areas of confusion that could be cleared up quickly. Accounting for intangible assets has been a contentious issue for most of the FASB’s history, with questions arising over the years about when intangible assets should be recognized on company balance sheets and how to recognize and measure them.
Form What? CAQ Offers Help for Audit Committees in Understanding and Using Form AP (JDSupra) By Cydney Posner, July 10, 2017 – Remember Form AP? That’s the form that the PCAOB is now requiring audit firms to use to name individual audit engagement partners. The form will also disclose the names and Firm IDs, locations and extent of participation of any other accounting firms, outside of the principal auditor, that participated in the audit, if their work constituted 5% or more of the total audit hours. Should companies care? Yes, says the Center for Audit Quality: the disclosures made in Form AP can help audit committee members in satisfying their responsibilities to oversee the engagement audit firm as well as other audit participants. SideBar: The PCAOB had been batting around the concept of identifying the audit engagement partner since 2009, when it floated the idea that the engagement partner actually sign the audit report. Investors had originally advocated that engagement partners be required to sign the audit report—similar to the signing of certifications by CEOs and CFOs and common practice in the UK—to reinforce their “ownership” of audit reports. In 2011, the PCAOB issued a proposal on signing of the report by the audit engagement partner; however, in light of comments raising concerns that a signature requirement would minimize the audit firm’s accountability and role in conducting the audit, the proposal provided only that the engagement partner be named in the audit report (and in a report already filed annually with the PCAOB), but not be required to sign his or her name to it. A 2013 reproposal, issued by a divided PCAOB, would have required inclusion of the name of the engagement partner in the audit report, but would not have required engagement partners to be named in firms’ annual filings with the PCAOB. However, comments on the reproposal were remarkably similar to those received on this topic in the past, with audit firms protesting that naming engagement partners would not improve audit quality or increase the auditor’s sense of accountability, but would still expose them to additional liability, especially if they could be deemed to be “experts” under SEC rules and might even be required to provide separate consents. The PCAOB then went back to the drawing board again and came up with the current compromise position that called for the engagement partner to be named in a new, publicly available form—Form AP—to be filed with the PCAOB. That concept apparently drew audit firms back into the fold. Form AP disclosures regarding audit engagement partners are accessible in a searchable database on the PCAOB website. That means that a company and its audit committee members will be able to find out whether the company’s audit engagement partner is the lead engagement partner on other issuer audits. The CAQ suggests that “[a]udit committee members may want to refresh their knowledge of the audit partner’s qualifications, industry, and other experience, and to understand whether the audit partner is the lead engagement partner on other issuer audits. This information could help audit committee members fulfill their broader responsibilities to evaluate and oversee the external auditor.” In addition, the CAQ observes, evaluating audit participants is also among the oversight responsibilities of audit committees, and Form AP can help in that task. To that end, the CAQ has developed “A Tool for Audit Committees,” designed to assist “audit committee members in their understanding of new auditor disclosure requirements from the [PCAOB] regarding audit participants. The tool can: (1) assist audit committees in discussing the role of audit participants with their engagement partner and company management; and (2) help prepare audit committee members to anticipate potential questions that may arise as a result of these new disclosures.” For audit reports issued on or after June 30, 2017, Form AP must disclose the names and extent of participation of other accounting firms. The CAQ believes that audit committees may want to raise questions regarding these disclosures and has included sample questions for audit committees to consider. For example, audit committees may want to confirm that the disclosure regarding the participation of other accounting firms is consistent with the committee’s understanding based on earlier audit planning discussions and whether the other participating firms are members of the audit firm’s network. The committee may also want to make inquiry into which of the engagement team members has met with the other accounting firms and how often those meetings have occurred. Some of the CAQ’s sample questions are set forth below: “2. System of quality control a. How does the firm network’s leadership, through its tone at the top, emphasize audit quality and integrity throughout its global network and among member firms? How is audit quality addressed with nonmember firms participating in the audit? b. How does the firm’s network address quality control matters pertaining to ethics compliance, including independence, for other accounting firm(s) participating in the audit? c. How does the audit firm’s system of quality control determine that other accounting firm(s) participating in the audit have the requisite competence and expertise related to PCAOB standards?” “3. Oversight of other accounting firm(s) a. How does the engagement partner supervise the work of other accounting firm(s) and evaluate whether it has been performed in accordance with professional standards?… d. Does supervision of and interactions with other accounting firm(s) vary if the other accounting firm is not a member firm? How does the signing partner take responsibility for their work? e. Have other accounting firm(s) participating in the audit recently been subject to internal or external inspection related to work performed on the issuer audit? If so, what was the result of the inspection and how has it impacted the engagement team’s planned oversight of the other accounting firm(s)?… g. Which of the other accounting firm(s), if any, are being used for the first time in the current year, and what incremental procedures are being performed to provide oversight of their audit work, if deemed necessary?” The CAQ also suggests that audit committees may want to consider the broader implications of these disclosures on other aspects of the company. For example, the investor relations department may need to consider how to address questions from investors, media or other stakeholders and develop a process for advising the audit committee of significant questions received. The CAQ also suggests that the committee may want to inquire about the impact of these disclosures on the audit firm’s social media policy and whether other audit participants are familiar with the firm’s policy.
5 Ways to Help Your Team Achieve Work-Life Balance (AccountingWEB) July 13, 2017 – A recent survey by Robert Half Management Resources reveals that a majority of professionals, including those in accounting and finance, have a better work-life balance now than a few years ago – and they have their managers to thank. According to the survey, 52 percent of professionals said their work-life balance has either improved significantly or somewhat in the past three years. Nine in 10 respondents (91 percent) noted that their manager is very or somewhat supportive of their efforts to achieve this balance, and 74 percent said their boss sets a good or even excellent example. “Managers can help by giving their teams more freedom over where and when they work, if possible, and providing greater autonomy,” Tim Hird, executive director of Robert Half Management Resources, said in a written statement. “These efforts go a long way to improve job satisfaction and retention rates.” But work-life balance isn’t just relevant to millennials, he stressed. Employees of all generations are under the gun to meet both work and personal obligations. “Businesses should promote work-life balance initiatives broadly and make sure all staff have the opportunity to weigh in on the perks that will best help them meet their goals,” Hird said. The survey found that professionals between the ages of 18 and 34 were more than twice as likely as those age 55 or older to cite improved work-life balance (67 percent versus 31 percent). Sixty-two percent of younger professionals reported their manager is very supportive of their efforts to achieve work-life balance, compared to 50 percent of the oldest respondents and 47 percent of those ages 35 to 54. Nearly eight in 10 (79 percent) of 18- to 34-year-olds said their manager sets an excellent or good example. Here are five ways accounting managers can help their teams achieve work-life balance: 1. Understand employees’ needs. Talk to your staff about their objectives and what you can do to help. Where one employee may benefit from working remotely a couple days, another may seek starting and ending his or her day 30 minutes earlier. Stay flexible and open-minded as you assist your team. 2. Show them the way. Are you sending emails at all times of the day and night, or are most of your communications delivered during work hours? Do you use your weekends to pursue personal goals or demand updated financial reports? Whichever options you choose, your staff are taking note – and figuring they must do the same. 3. Work with interim professionals. If to-do lists are expanding and the team is falling behind, bring in a consultant who can alleviate the burden and contribute specialized expertise. Project professionals can step in immediately to support your organization. 4. Spread the word. Employers commonly highlight their work-life balance offerings to job candidates, but you'll need to continue selling your firm’s program to current staff. Regularly and broadly communicate options available to your professionals. 5. Stay ahead of the pack. Views on work-life balance change, and what is popular today may not have the same appeal in six months or a year from now. Stay on top of emerging trends to keep your program fresh and ensure you provide in-demand benefits to your employees.
6 Traits of Leading Finance Functions (CGMA) July 16, 2017 – Over the past two years, regulatory changes, compliance changes, and the rising volume of data available have made the role of the finance function increasingly complex. Few organizations are able to harness the insights that could be generated from the data they hold, and getting the data into a usable, consistent format is a common challenge. Many organizations are keen to update the finance function but have yet to identify a way to implement the new processes and technologies required to boost efficiency without disrupting day-to-day activities. The objective for many finance teams is not to reduce headcount but rather to redeploy staff in more productive ways. The report’s authors predict that in the long term, new technologies such as blockchain and artificial intelligence (AI) will see the finance function expand because more will be expected of it. A survey by SAP and Oxford Economics explored these themes with representatives of 1,500 companies around the world. Seventy-three per cent of respondents were CFOs. Traits that make a finance leader The researchers identified a cadre of 173 leaders (11.5% of the survey sample) where the finance function drives performance across the wider organization. The researchers then studied their common characteristics. The researchers found that six practices that set finance leaders apart also boost performance and efficiency, as well as the effectiveness of governance, risk, and compliance across the organization. The first two are fairly straightforward: At fast-growing companies, the finance function deals with core processes very effectively and drives strategic growth initiatives. Four other key traits set them apart. According to the report, effective finance departments: Have a high profile around the business and influence in other areas. Finance chiefs are spending more time with internal clients, demonstrating the power of analysis that finance can provide, as well as how it can support strategy. In those companies whose revenues rose by more than 5% during the past year, 83% of respondents reported that their finance function’s influence and visibility have increased across the organization. Of that same group of high performers, 63% said finance exerts a strong influence over supply chain and procurement, and 70% said finance influences innovation and new product development, compared with 49% and 53% of respondents in companies experiencing lower revenue growth rates, respectively. Adopt technology to improve efficiency. Leaders are at least three times more likely than non-leaders to say technologies such as blockchain and AI are important to the finance function’s current success. As automation boosts efficiency, finance professionals are freed up to focus on value-added tasks. Real-time analytics (used to drive strategic growth initiatives) was deemed critically important or very important to the finance function’s performance by 83% of leaders, compared with 45% of non-leaders. Eighty per cent of leaders consider predictive analytics (used to improve organizational efficiency) to be highly important to the function’s success, compared with 37% of non-leaders. The internet of things is seen as a vital component of success by 66% of leaders, versus 31% of non-leaders. Work closely with the governance, risk, and compliance team and excel at handling regulatory change. Regulatory and compliance changes were highlighted as an area of concern in the research, and 77% of respondents said that these have added complexity to the finance function in the past two years. The report’s authors suggest that leaders encourage collaboration between the finance and risk management functions by ensuring they can easily share standardized data and reporting. Collaborate with departments throughout the organization. Collaboration is an essential ingredient in strong performance. Of the companies represented in the survey who had zero or negative revenue and profit growth, 46% said an isolated finance function prevents them from achieving their business goals. In addition to working closely with traditional partner areas of the business, such as internal audit, risk management, compliance, and operations, leading finance functions collaborate with other areas such as marketing, sales, and customer service. There is a big potential payoff for collaboration with these areas, the report suggests. This interaction may help explain why 40% of leaders reported market share growth over the past year, compared with 21% of non-leaders. Tone from the top is an important contributor. At the fastest-growing companies, collaboration between finance and other business units was driven by the company’s senior leadership.
Bipartisan Group Pushes Caregivers Tax Credit (The Hill) July 13, 2017 – A bipartisan group of lawmakers is working to provide a tax credit for family caregivers they say is a step toward recognizing the financial sacrifices caregivers often have to make. Several members of Congress detailed this legislation to create a federal, nonrefundable tax credit of up to $3,000 for family caregivers who work. They discussed why it was needed — at times diving into very personal stories of their experiences as a caregiver — at The Hill’s Cost of Caring: Family Caregivers and Tax Reform event July 13, sponsored by AARP. Rep. Dan Donovan (R-N.Y.) is an only child whose father died 30 years before his mother started showing the first signs of dementia. He chose for her to live at home instead of a nursing home, and spent the about $60,000 he had saved up for an apartment within a year. “My goal was to keep her home no matter what it cost,” Donovan said. But passing legislation isn’t easy in a fiercely divided Congress. Sen. Joni Ernst (R-Iowa), along with a bipartisan group of senators, introduced the Credit for Caring Act in the Senate and said she’s started discussing the legislation with Senate Finance Committee Chairman Orrin Hatch (R-Utah). Additionally, she said she met with a group of Republican and Democratic House members Wednesday, and the bill was brought up. “It is just about having those discussions and sharing the facts and figures, too, with the personal stories about how this will impact all of the senators in their home states, because this is an issue being faced by every American as they look at caring for their loved ones,” Ernst said. Republicans are aiming to pass tax reform legislation this year, and Donovan said if the tax credit for caregivers isn’t included, then it should be passed as a standalone bill. “I tell my colleagues who may not be as passionate as we all are about the subject, you go tell AARP you’re not for this thing and see what happens to you,” Donovan joked. Sen. Tammy Baldwin (D-Wis.) is a co-sponsor of the legislation and called it “a modest step but a very important step” to help enable people to care for a loved one in the way they choose. Rep. Michelle Lujan Grisham (D-N.M.) said the cost of long-term care is putting pressure on states and on families. “This is an effort to get Congress to start talking about caregiving and long-term care given the dynamics of the aging of America,” she said. The conversation also turned to healthcare reform, as a revised version of the Senate Republican healthcare bill is expected to be released Thursday. Leadership is facing a divided conference as both moderates and conservatives have criticized the bill. Ernst said she remained “cautiously optimistic” when asked if a healthcare bill could pass the Senate this month. Donovan was one of the 20 House Republicans who voted against the House-passed bill to repeal and replace ObamaCare. He opposed it, in part, because of a provision allowing insurers to charge older adults five times as much as than younger Americans. ObamaCare limits this ratio to 3 to 1. “You can’t be down here and be afraid to stand up for what you believe in because of how it’s going to affect you in an election,” he said, adding that “if we keep doing this on a partisan basis, every time the resident of 1600 Pennsylvania Avenue changes, we’ll have another healthcare policy for this country.”
The Importance of Measuring Risk and Goals in Financial Planning (Financial Advisor) By Blake Wood, July 13, 2017 – Behavioral, psychometrical, primed-state profiling, Ibbotson standard, AI facial and emotional recognition software—these are just a few of the many new approaches to assessing an individual’s level of investment risk tolerance. And yet, there are no silver bullets when it comes to risk measurement or financial plan profiling. Every tool and process has a weakness. There are so many prognosticators offering their views of how investor risk-profiling needs to be radically reshaped. Despite these prognostications, I’m less of a “Chicken Little” type, as I believe that we’re all better off if we focus on continuous improvement instead of perfection. Investors want a simple “yes” or “no,” and advisors need to think about which tools are best for their clients and practice. The decisions we make each day add up to an investor’s overall financial health, and keeping investors involved in daily activities that support their long-term financial plan helps ensure they are more engaged in the success of an oftentimes lofty goal some 30 years out. A pervasive trend in the last few years, and perhaps for the foreseeable future, has been goalsbased advice. Based on a September 2016 study by Vanguard research, advisors combining goals-based advice with interactive, investor-friendly risk measurement and a cohesive communication strategy, (“behavioral coaching”) presents the single largest opportunity to provide value to an investor. The study estimates the value provided through behavioral coaching at 150 basis points. Given how valuable goals-based investing and planning can be, any new approach that a financial advisor considers must be able to address risk in the context of a client’s goals. Such an approach requires acknowledging that the quantitative aspects of risk, also referred to as risk capacity, can differ for goals of varying time horizons and magnitude. A risk assessment should then layer in behavioral tendencies to build an investment plan that the client can stick to. The risk assessment can vary based on the investor’s goal and their priorities relative to one another, and in reality, behavioral tendencies are not static and tend to vary over time and across goals. No single risk assessment will be able to incorporate all the factors discussed above, which is why it is critical for an advisor to incorporate a self-assessment of the client’s risk into their process. At a minimum, this self-assessment should include a goals-based plan that lets the client prospectively evaluate different risk levels associated with each goal against important trade-offs, such as evaluating different income levels related to specific goals and changing spending patterns to save more now rather than later. Advisors have seen clients answer questions one way at the beginning of the process and yet respond differently to those same questions over time, so showing clients different visions of the future relating to their specific goals is sometimes most effective in helping them define a true sense of their own risk tolerance. Financial consultant Michael Kitces laid out a great explanation for why a two-dimensional risk approach (capacity and tolerance) should be the basis for all evaluation methods. A client’s capacity should act as a constraint to their overall risk tolerance or when setting risk related to achieving a specific goal. Of course, it’s not all about the measurement, and it’s important to note how clients engage with the process and the tools. Firms that engage in end-user testing know that investors relate to managing towards short-term micro goals and seeing the impact of daily activities. Suggesting that an investor track themselves against a goal with a 30-year time horizon is too amorphous. Rather, a broader goals-based approach lets an advisor focus on smaller short-term goals to demonstrate “wins” along the way, such as fully funding a 529 plan or making that last mortgage payment. This approach provides opportunities for celebration and achievement as investors move towards their ultimate goals. Another observation is that too many advisors focus only on investable assets. Many consumers struggle with daily goals and budgeting, which may prevent them from meeting their longer-term finance goals. The Center for Financial Services and Innovation (CFSI) has created a framework to expand this conversation that includes four components and eight indicators of financial health. The eight indicators focus both on outcomes and behaviors. Outcomes tend to be more stable or static, while behaviors tend to fluctuate more over time. It is important to monitor the fluidity of both to get a full picture of a client’s financial health within the context of their risk and ultimate financial goals. According to CFSI, “For consumers, improved financial health is a gateway to other goals and dreams; it is closely tied to mental and physical health, family stability, education and economic mobility. For providers, focusing on consumer financial health provides a business opportunity to expand into new market segments, increase customer loyalty and drive long-term revenue streams, while addressing unmet market needs. Incorporating financial health indicators into regular business practices and key performance indicators (KPIs) is the key to unlocking deep insights about the state of customers’ financial health and identifying the products, services and strategies customers need to improve it.” Advisors are encouraged to use tools that enable your clients to engage with these daily metrics so they feel involved in real life decisions and their daily transactions will create and power a “living plan”—one that’s not just updated annually, but rather is updated frequently with actionable intelligence for them. It’s critical not to just focus on your client’s wealth, but also to help improve their financial health, which has generally been outside the purview of many financial firms for a long time. To help be successful in creating this living plan, I recommend the following three steps: Pick a tool/process that you and your clients understand; it should measure capacity and willingness to take risk. Broaden the view beyond your advisory assets to focus on your client’s overall financial health. Integrate this into your offering not only from a process and procedures standpoint, but also holistically into your client portal and communication strategy.
Retirement Dread Is Replacing the American Dream (Bloomberg) July 18, 2017 – “ With informed discussion, creative thinking, and timely legislative action, Social Security can continue to protect future generations.” That boilerplate language has been featured more or less verbatim in the yearly status report from the trustees of the Social Security and Medicare funds since 2001, through presidents George W. Bush, Barack Obama and now, Donald Trump. It's the numbers that have changed dramatically, as the U.S. population ages. The 2003 report noted that “Social Security plays a critical role in the lives of over 46 million beneficiaries, and over 150 million covered workers and their families.” The report released late last week cites 61 million beneficiaries and 171 million covered workers and their families. That’s an increase of more than 32 percent and 14 percent, respectively, over 13 years. The outlook for the program is pretty grim. The trust fund for Social Security's retirement and disability benefits will stop being fully funded in 2034, as projected last year. If no solution is found, promised benefits will take about a 25 percent cut. Medicare's hospital insurance trust fund is projected to suffer a similar fate in 2029. That's a lot of Americans facing a lot of uncertainty. Add trends in income inequality and health care, plus millions of Americans lacking workplace savings plans—or any retirement savings at all—and the report takes on a special, scary resonance this year. While Washington fiddles, income inequality has risen to dizzying heights. Since 1980, there has been "a sharp divergence in the [income] growth experienced by the bottom 50% versus the rest of the economy," according to a December 2016 paper by economists Thomas Piketty, Emmanuel Saez and Gabriel Zucman. The average pre-tax income of the bottom half of adults—117 million people—has been stuck at $16,200, adjusted for inflation, for more than three decades. The average pretax income of the top 1 percent was $1.3 million as of 2014, more than three times what it was in 1980. Over the past 15 years, stock and bond investing has transferred a greater share of the nation's income to the top 1 percent, the Piketty study found. That top 1 percent now earns about 20 percent of the national income, while the bottom half earns 12 percent. Now, on top of that, changes to the Affordable Care Act (or Obamacare), Medicare and Medicaid could remove coverage or make it more expensive for millions of Americans, many of whom already face daunting challenges paying for health care, even as a trend toward high-deductible health plans (HDHPs) puts more of the responsibility for managing health care costs on workers. Medicaid, the government program for the poor and disabled, faces severe challenges in the Republicans' proposed replacement for Obamacare, which itself has seen a sharp rise in premiums and a narrowing of choices of insurer over the years. All the while, the steady shift away from once-guaranteed income streams of defined-benefit pension plans to definedcontribution plans leaves the financial risks and responsibilities of saving for retirement squarely on largely unprepared individuals—and around 30 percent of the workforce doesn't even have access to those plans. At the center of this storm, Social Security remains one of the few havens available to most Americans, one that is free from the vagaries of the financial markets and, to some extent, inflation. Without it, many elderly Americans would be living in poverty. U.S. Census data for 2016 show that more than 22 million people in the U.S. would have slipped into poverty without Social Security benefits. And it's not just the elderly who rely on Social Security checks. That 22 million figure includes 1.1 million children. For all that, Social Security recipients aren't exactly rolling in dough. The average Social Security benefit is about $1,360 a month, or $16,300 a year. After Medicare premiums, a chunk of any Social Security check often goes to pay for so-called Medigap, or supplemental insurance that covers some of what Medicare doesn't. The percentage of benefit checks that goes to paying for health care will grow over time with health-care inflation, which rises faster than inflation in the general economy. An annual report from HealthView Services, which makes retirement health-care cost projection software, estimates that retiree health-care costs will likely rise at an average annual rate of 5.5 percent over the next decade. That's more than double the company's projected cost-of-living adjustment (COLA) on Social Security benefits. All this is shrinking the definition of the American dream. Millennials, in particular, seem disillusioned. Over 50 years, “children’s prospects of earning more than their parents have fallen from 90 percent to 50 percent,” according to the home page of the Equality of Opportunity Project, a research effort that analyzes income mobility. The project is citing figures from a 2016 study, "The Fading American Dream: Trends in Absolute Income Mobility Since 1940." Fifty-one percent of the 18- to 29-year-olds who took part in a national poll released by Harvard’s Institute of Politics in late 2016 said they were “fearful” about the future of America. Those fears centered on the attainability of the American Dream, with every demographic within the 2,150 people polling as more fearful than hopeful. The groups with the most widespread anxiety about the future were white women, at 60 percent, and white men, at 54 percent. Only 32 percent of white females think they will do better than their parents financially; just 36 percent of white men think they will. That pessimism — or realism — extends to expectations for getting Social Security when they need it. Eighty-one percent of millennials worry that Social Security won't be there for them when they want to retire, according to a 2016 survey by the Transamerica Center for Retirement Studies. While a lot of data show that millennials are good savers, there’s only so much one can save if economic opportunity and income mobility are limited. A sturdier, more comprehensive safety net wouldn't ensure the American Dream, but it would reduce the retirement dread.