PREFACE

In which the author states his biases and tells you how this book should be read

Since 1982, I have been a certified public accountant doing tax returns and tax planning. Then in 1994, I started helping companies set up profit-sharing and 401(k) plans. For many companies the purpose of setting up a retirement plan is to pay the least amount of taxes now, and at the same time, help employees save for retirement. When I was educating business owners about various retirement plans (such as 401(k), 403(b), TSA, profit-sharing, money purchase, SEP/IRA, or defined benefit), they stated that finally they “got it.” And they got it because I did not try to sell them any investment products, I simply explained to them how the various retirement plans work and what is involved.

Once they decided to provide the plan best suited to their employees, at that point, I would recommend that they work with their investment advisor if they had one, or I would recommend one to them. I recommended working with advisors because I felt that most employees needed to learn some of the basics of investing. Most companies did not use an advisor, and offered no-load funds for the 401(k) investments. The 401(k) provider usually sends sales people or a broker to advise the employees just once, at the beginning. Unfortunately, the sales people were again trying to sell the company and its employees on the investment products rather than selling them on the benefits of investing, which usually lead to the company having low participation in the 401(k) plan. Consequently, the employees who did join were on their own to choose the investment options without knowing much about investing.

At this point, I decided to educate the employees about the basics of investing and explain why they should contribute to the 401(k) plan. Employees’ interest grew and so did participation in the plan because I was speaking the language that the employees understood, not sales talk. I do believe that most 401(k) plan providers should provide advisors for their plan participants. Of course, there is an additional cost for having a plan with an advisor. However, I think a plan with a good advisor is worth the additional cost.

Then, in 1998, when the Roth IRA was established, I talked to most of my tax clients during the tax season. I explained to them the tax benefits of starting and contributing to a Roth IRA and why they should start one. Most of them agreed and were interested in starting one. I explained that I was not licensed to open a Roth IRA for them, but recommended they go to their financial advisor or do it themselves if they were knowledgeable about investing. In cases in which clients did not have an advisor, I referred them to a couple of advisors I knew. At the end of the tax season, only two clients had set up Roth IRAs, even though more than fifty of them had shown interest in opening one. Most clients simply did not want to take the time to go see a new advisor to set up a Roth IRA even though they believed they should.

That is when I decided that I needed to provide advisory business as a service of my tax practice. By then I felt I was qualified to educate clients because I had been doing it for 401(k) plans. Because I started educating people about basic investment options, and I was not getting paid for educating them (I was being paid for doing taxes and administering retirement plans), I learned about many different investment options without being influenced by how I was paid. Obviously, after I became licensed to sell and service investments, I was compensated based on the products that I recommended to clients. Since then, I have used many types of investments with my clients. The investment world is constantly changing and I am constantly learning about new products and new tax laws. I knew I could make life a lot easier in my office by only using one or two products and fitting everybody into them (as many do), but that was not the right thing to do. Therefore, I am not going to tell you which investments you should use.