The 2009 Federal Budget: Answering the Call

By Don Nilson, CMA, FCMA

As professional accountants, we must remember that we are an important part of the broader financial services industry. We have a public that we serve with our expertise, be that the general public (as public accountants)
or specific parties (as industry participants). Interestingly, the 2009 federal budget is now calling for general financial education for Canadians. We ought to be doing our part to answer the call. I believe there are two parts to this.

First, we ourselves must be financially educated. “What did he say? Is he kidding? Of course we are financially educated – we are accountants!” As a lecturer for 30 years in the continuing education field for professional accountants, I am not quite sure I am prepared to agree with you. Despite the mandatory CPLD model in our profession, I find that, on average, we are not on the front edge of pushing out our current depth and breadth of expertise, and instead tend to trade on old expertise. I believe the profession needs to raise the bar of our average professional, and achieving this requires every member to contribute to that process, not deflect the responsibility to our professional bodies. As I recently said to one of my junior staff , “It takes a lot of energy to really be someone.”

We must invest our learning time wisely. Unplug the boob tube, cancel the cable and start reading. We must be wary of the misinformation and disinformation we receive in the daily media as our knowledge source. William Bernstein, the physician turned money guru, describes the business press as “financial pornography.” His advice is to avoid it, with two exceptions: The Wall Street Journal and Th e Economist. My recommendation is to educate yourself – form a financial book club with friends and colleagues. In the financial field, start with Bernstein’s Intelligent Asset Allocator. On corporate strategy, read Dudik’s Strategic Renaissance. To raise your IQ a few points, read Beinhocker’s Th e Origin of Wealth.

Over the years, I have given away hundreds of copies of what is my seminal vehicle for helping friends and
clients embrace sound personal fi nancial management: Stanley and Danko’s The Millionaire Next Door. In short summary, personal fi nancial management draws from sports analogy – wealth accumulation is about offence and defence. The former is about the making of money, or more specifically “disposable income” (income after tax). As public practitioners, we are effectively members of the offence team, mostly by helping narrow the gap between before-tax and after-tax income.

As industry members, we may also contribute to the overall success of the money-making process itself.
Defence is about keeping the money generated on offence; i.e. it is about how money is spent. The authors
say that financially successful people run a balanced team. They don’t rely on a glittering offence that piles
up the score, while the defence meanwhile is allowing almost as many points to be scored by the opposition.
The authors also classify people as “prodigious accumulators of wealth” (PAWs) and “under-accumulators of
wealth” (UAWs). PAWs spend a lot of time on defence. Their attitude to what constitutes a baseline of life’s
entitlement is not what the low and middle class associate with wealthy people. Eighty per cent of them
spend less than $35,000 on a new car!

Once we have succeeded in “up-educating” ourselves, we can now turn to the second thing that we should be doing as accountants in order to answer the federal budget call to financially educate Canadians. We need to be an active part of that educating process. Those of us in the financial services industry need to take a deep breath and enter the half-time locker room of the defence, and talk with our clients about how they are spending their money, and how they are inculcating money values to the children they are raising. And we must lead by example ourselves. A financial services firm recently moved into offices across the hall from us. One of the chaps drives a Porsche. A client of mine walked into the office the other day and asked, “Is that your Porsche in the parking lot?” Ouch! Not!

Many of us in public accounting have been educating our clients for years. If you haven’t – if you treat the work you do for them as a “black box” – then it is time for a paradigm shift. Don’t let their financial ignorance, and need for you, stand in the way of advancing their financial education.
In the workplace, senior financial professionals need to think about the role model they advertently – or inadvertently – play to those around them.

For those in industry, it may also be time for a paradigm shift. Your HR strategies perhaps should include educating employees with in-house seminars on personal financial/debt management, access to related resources on the web or company newsletters, group savings plans (RRSPs or TFSAs) or employer sponsored
personal financial planning (not a taxable benefit, by the way).

Finally, as accountants, we need to actively ensure our kids are being educated in financial matters. Social scientists have proven wrong my long-held belief that attitudes towards money are formed by age 15 – they say it is age 10. The 10-year-olds in western society today have grown up in the most broadly distributed middle-class wealth in the entire history of this planet. The successive generations of financial comfort in the last hundred years have significantly raised the bar of baseline expectations. “Affluenza” is the modern neologism to encapsulate this phenomenon. The term gained notoriety in the high-profi le divorce case of Canadian fashion mogul Peter Nygard, whose defence lawyer cited the risk of affluenza in awarding child-care costs of $68,000 per month. That’s right… per month!

We also need to lobby our school districts to incorporate more, and better, financial education at the high school level. As professional organizations, we need to identify ways to fill all of these knowledge gaps. The Financial Planners Standards Council, for instance, has long been involved in the financial education of our youth.

To misquote, paraphrase and modernize a saying of the 16th century’s Sir Francis Bacon: family finances, to be commanded, must be obeyed. It takes a lot of energy to really be someone. ■