Personal Financial Planning

By Lewis J. Altfest

Published by McGraw-Hill Irwin; 2006; ISBN-13: 978-0072536409;
704 pages, hardcover; $137.19;

Reviewed by Walter M. Primoff

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SEPTEMBER 2007 - Unlike most textbooks, Personal Financial Planning will be useful both to CPA practitioners and educators alike. It covers personal financial planning (PFP) as a professional practice area, not as a product sales technique. The text is an excellent desk reference and overview of the PFP field. It is also well suited for an elective course in any entry-level CPA curriculum, best taken after a student has completed courses in accounting, finance, and taxation.

For generations, CPAs have provided tax, estate, retirement, and similar planning services that constitute major technical components of PFP. Since the profession’s inception, many individuals have also relied on their CPAs as trusted personal counselors. This “financial psychologist” role is vital to PFP. As a result, readers will come away from this text with a greater understanding of why PFP is a natural extension of a CPA practice, and how PFP can increase the relevance of existing planning services to clients.

Most PFP texts cover the financial planning process and related analytical techniques. This book does so in a clear and interesting manner. Rarely, however, does one come away from any text with much sense of the professional thought process employed by a skilled planner. What separates this book from the crowd is Altfest’s skill at portraying this professional thought process throughout the book. This is likely due to his unique blend of academic and practice experience. After practicing as a CPA, he served in investment research capacities at several major Wall Street firms. He later became a partner at Lord Abbett & Co. Today, in addition to his Pace University teaching duties, Altfest runs his own investment management firm.

The persnickety Professor Kingsfield from “The Paper Chase” told his law students, “You teach yourselves the law, but I train your mind … to think like a lawyer.” Professor Altfest shows readers how a seasoned financial planner thinks through and solves real-world client problems. CPAs will likely match the text’s numerous war stories against their own client experiences and approaches to solutions. A master case involving clients “Dan and Laura” is discussed and developed in every chapter. (In the “Tax Planning” chapter, Dan reveals his enjoyment of preparing his and Laura’s joint tax return himself and performing related Tax Court research. This reviewer suggests that Dan find something better to do with free time.)

Single-volume PFP texts typically explain the PFP process, offer an overview of each process component (e.g., taxes, estates, investments, and risk management planning), and conclude by presenting a related comprehensive financial plan. The purpose is not to provide in-depth discussion on individual components. Rather, it is to emphasize the PFP process that integrates them into a comprehensive financial plan, creating a whole that is greater than the sum of its parts. For many financial planners, Altfest’s discussion of hands-on integration of the components alone will make his book a worthwhile addition to their library.

Many financial planners who manage the affairs of the world’s richest people have long viewed the family as a business, with three components of capital: financial wealth; human resource capital (potential and actual growth of family members); and social capital (a family’s benefit to society.) Altfest’s book adapts this concept in a unique way. It shows how families resemble a business that can “profitably use (business) financial techniques.” Accordingly, net present value, internal rate of return, financial ratios, and other tools of business financial analysis are incorporated throughout the text. Altfest shows how creating financial efficiency better positions a family to achieve its members’ goals.

The text is complemented by a content-rich website (www.mhhe.com/altfest) that contains additional chapters, appendices, chapter summaries, and the comprehensive financial plan for the “Dan and Laura” case. The website includes a separate password-protected section for instructors, containing a full range of teaching guides, PowerPoint presentations, Excel spreadsheet solutions, and other aids for teachers of a PFP course.

For practicing CPAs, the book’s value would increase even further if it included more discussion on a few topics important to them. Such topics would include the use of packaged PFP software, the “professional team” approach to providing PFP services, and planning for small business owners. Perhaps these topics can be expanded in future materials on the website. These are just quibbles, however. Altfest should be congratulated for writing a text that simultaneously presents rigorous PFP theory and portrays real-life planning through the eyes of a highly skilled and experienced PFP professional.


Walter M. Primoff, CPA/PFS, is the CEO of PrimGroup, Cos Cob, Conn., and Woodbury, N.Y.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



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