Statement of Vincent J. Love, CPA

My name is Vincent J. Love. I am a partner in the firm of Kramer & Love. Prior to forming Kramer & Love in 1994, 1 was a partner in Ernst & Young and one of its predecessor firms, Arthur Young & Company. I joined Arthur Young & Company in 1967, after spending over three years as an officer in the United States Army. I am a Certified Public Accountant in New York, Ohio and Connecticut.

I currently, serve as the Chair of the New York State Society of Certified Public Accountants' ("NYSSCPA") Committee on Auditing Standards and Procedures. I am the immediate past Chair of the NYSSCPA's Committee on Professional Ethics. I served on the Professional Ethics Committee in various positions for eight years. I have also served on, and chaired, other committees at the NYSSCPA and the American Institute of Certified Public Accountants ("AICPA"). I currently am a member of the New York Mercantile Exchange's Appeals Committee. The Appeals Committee rules on appeals by an exchange member from a decision by an arbitration panel that the member be suspended or expelled for violating exchange rules. I have also written and lectured on professional ethics, accounting and auditing. A copy of my curriculum vita is included at Exhibit 2 to this statement.

Kramer & Love is a small firm specializing in expert witness and consulting services, arbitration and mediation and financial consulting. We do not do personal financial planning, nor do we recommend products or services to the public for a comrm'ssion.

I would like to address the hearing panel on the issue of CPAs accepting commissions and referral fees from non-attest clients (*1), provided that the CPA provide full written disclosure to the client prior to payment or receipt. Specifically, I will address the benefits to the public related to having access to CPAs to do personal financial planning for reasonable fees.

In addressing the CPAs acceptance of commissions and fees, I will discuss why it is in the best interest of the people of New York State, the changing environment that requires it, the capability of the CPA to fulfill the public's need for competent personal financial planning, and the safeguards that are already in place in the NYSSCPAs to require its members to act, at all times, in their clients' interest.

Statement

The Public Interest

The people of New York State stand to gain significantly from allowing CPAs to accept commissions as a form of compensation for performing professional services or referring products or services. Other non-CPA providers of services that require the ability to understand and analyze financial and related data most often design their compensation package for providing these services around commissions they receive from the provider of the product or service. Often they are employees of the provider, or have an exclusive relationship with the provider.

In the past, because they were prohibited from accepting commissions or referral fees, CPA could not compete economically with the other providers except for professional services performed for very high net worth individuals where the quality of the service was more important to the client than the cost.

Today, individuals who never before considered themselves wealthy have accumulated significant wealth, based on prior standards, through various tax-deferred retirement and other savings plans and appreciation in the value of their homes. Their life expectancy is longer than their parents and grandparents. They want to insure a comfortable retirement and leave the remainder of any wealth they accumulated to their children and/or grandchildren. At the same time, the number and complexity of financial products available to achieve their goals has grown geometrically.

The public needs access to the best qualified professionals to accomplish their economic goals. They need trained professionals and not salespeople to guide them through the difficult economic decisions they need to make concerning investments, savings plans, life insurance, long-terryi care insurance, etc. Times have changed; the economic environment has changed; and the public has a growing need for the skills and experience of the CPA. The CPA should be economically available to all of the people of New York State not just the super wealthy.

The changing environment

All one has to do is look around and he or she will see significant signs of change. Last week we celebrated the tenth anniversary of the demolition of the Berlin wall, opening up the former Soviet Block countries to investment. Last Friday, the President signed the Financial Services Modernization Act repealing significant parts of the 1933 Glass-Steagall Act and allowing banks, securities firms and insurers to merge. Over the past years, the Federal and State legislatures enacted laws that allowed individuals to save for their retirement, or their children's education, in tax deferred plans.

We have left behind an industrial age and entered an information and technology age. The number, variety and complexity of financial products and opportunities available to an individual to manage his or her personal finances has grown in leaps and bounds over the past few years alone.

Many of these products and opportunities are the work of farsighted legislators who anticipated the needs of their constituents. They passed laws enfranchising individuals, allowing them to provide for their own retirement through the use of Individual Retirement Accounts and 401k plans. The amounts in these tax-deferred accounts have grown, both individually and in the aggregate, through greater individual investment in the accounts and the unprecedented rise in the stock markets. With gaining more control over their retirement assets, the public is faced with the need to make decisions on how to invest the assets in these accounts to achieve the best results with the proper amount of risk.

To pass on any unused amount in their retirement accounts, individuals need to consider an insurance trust to pay the taxes on the value of their tax-deferred retirement accounts at the time of their death. But, what insurance carrier, what type of insurance, how much insurance and how to administer the trust are all decisions that the individuals must make. There are so many alternatives that the counsel of a trusted professional is required.

Other opportunities have been given to individuals to assist them in financing their children's education, such as, government scholarships and grants, and qualified State tuition programs established under Section 529 of the Internal Revenue Code. The planning and complex paperwork needed to take advantage of these opportunities creates an even greater need for competent advice and assistance.

As we live longer and longer, there is a greater need for some protection in case an individual will require long term care. The State sponsors the New York State Partnership for Long-Term Care. There are a number of providers who offer long-term care through this partnership. With each insurer offering a different insurance package, there is a need to analyze how much is needed to cover nursing home charges, who needs it most (husband or wife), at what net worth is it most advantageous, what waiting period prior to payment is appropriate, what are the indicia of need in each policy before the insurer will pay under the policy, etc. Again, to make a knowledgeable decision the public will need someone to turn to for assistance.

With change comes opportunity, the public interest requires access to the best help available to take advantage of the opportunity.

The capability of the CPA

The CPA has been the professional voted most trusted by the public. The CPA has gained his/her designation by attaining a specified level of higher education with a concentration of credits in courses designed to increase the CPA's skill level in accounting, auditing, taxes and the analysis of data. Besides obtaining the required education, The CPA must pass a vigorous test administered nationally and must comply with the State's requirement for continuing professional education. The Uniform Accountancy Act maintains and increases the requirements for obtaining a CPA designation and license.

None of the other providers of personal financial planning services have as great a requirement to obtain and maintain their proficiency,

The CPA deals daily with issues that affect the economic life of companies and individuals. He or she has the ability to understand the economic significance of the different opportunities available to the public. The CPA can parse through all of the opportunities available and design the best composite package of financial products and services to meet the specific needs of the individual.

The safeguards to protect the public

The CPA designation is controlled by the State. The State has established standards that the CPA must meet to continue to be licensed to practice in the State.

The Uniform Accountancy Act contains many requirements to protect the public. It increases the education requirement for taking the CPA examination, prohibits the acceptance of commissions or referral fees from attest clients, and requires that the acceptance of a commission or referral fee be disclosed to the client before it is paid or received.

Additionally, both the AICPA and the NYSSCPA have codes of conduct that require their members to act in the interest of their client. The State can require similar performance by CPAs. Exhibit I to this Statement contains the NYSSCPA's standards related to integrity and objectivity and the acceptance of commissions and referral fees. Below is the section of these standards that I believe is most pertinent when providing professional services to a client for a commission or accepting or giving a referral fee.

102-7 Applicability of Rule 102 when receiving commissions or referral fees. A member may perform services, recommend a product, or make a referral and receive a commission under certain conditions as explained in Rule 503. When providing such services or making a referral, the member is obligated under Rule 102 to maintain objectivity and integrity, act in the client's interest, and not knowingly misrepresent facts or subordinate his or her judgment to others. In addition, the member is obligated under Rule 201 to comply with the general standards when performing any professional service for a client.

A member may not recommend a product or service, or make a referral, without determining that the product, service, or referral is appropriate for the client.

The public interest is best served by the CPA, because the CPA has standards that require him or her to act in the best interest of the client and not knowingly misrepresent facts, or subordinate his or her judgment to others.

Summary

The changing economic environment and the complexity of modem life, coupled with a longer life expectancy, has created a need by the citizens of New York State for proficient, competent and ethical financial and economic advise. The CPA is the best qualified professional to deliver this service and should not be disadvantaged in the marketplace by a prohibition against accepting commissions or paying or receiving referral fees.

The public is best served and protected if the CPA can provide personal financial planning services on an equal footing with all of the other providers.

In closing, I would like to thank the Office of the Assembly Majority Leader and the Assembly Committee on Higher Education for this opportunity to be heard on this very important issue.