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Tax Planning Insights
Comparing Tax Credentials
Standing Out as an Expert
Tax planning is highly complex and constantly subject to change. As such, clients often look for someone who has proven themselves as a verified expert in the field. In order to set yourself apart as an expert clients can trust, you may want to pursue one of many designations available to tax planning specialists.
Designations that set a financial professional apart as a tax expert include the Enrolled Agent (EA), the Certified Public Accountant (CPA), and the Tax Planning Certified Professional® (TPCP®). These are awarded by the Internal Revenue Service (IRS), American Institute of Certified Public Accountants (AICPA), and The American College of Financial Services, respectively.
Additionally, while each of these titles may serve as a validation that a financial professional has proven themselves an expert in the field of tax planning, they all have different prerequisites, expectations, and outcomes once they have been earned. It is highly important that anyone looking to prove themselves in the field of tax planning understand the differences between them and understand which choice suits them best.
Enrolled Agent (EA)
In the words of the IRS, an Enrolled Agent (EA) is a person who has earned the privilege of representing taxpayers before the IRS. Enrolled agents, like attorneys and Certified Public Accountants (CPAs), are generally unrestricted as to which taxpayers they can represent, what types of tax matters they can handle, and which IRS offices they can represent clients before.
EA is the highest title offered by the IRS. Prerequisites to use the designation require the applicant to apply for a preparer tax identification number (PTIN), sign up for the certification exam, and pass all parts of the exam.
The title can be earned in 12 months or less once the applicant has passed three exams. In total these exams cost $801 ($267 per test). Upon passing all three tests, applicants must pay an additional $140 fee to formally be recognized as an EA.
Once recognized, an EA is able to offer their services to clients. According to the National Association of Enrolled Agents (NAEA), “Enrolled agents advise, represent, and prepare the tax returns of individuals, partnerships, corporations, estates, trusts, and any other entity with tax reporting requirements. EAs prepare millions of tax returns each year and their expertise in the continually changing field of taxation enables them to effectively represent taxpayers audited by the IRS.”
An EA is highly qualified to assist an individual or business in preparing their taxes and ensuring they are compliant with all forms of tax law.
Certified Public Accountant (CPA)
The Certified Public Accountant (CPA) is designed for professionals to ensure financial expertise of those seeking advanced tax compliance and reporting expertise who help individuals and businesses maintain and improve their financial health and reporting procedures.
Prerequisites for this certification can differ, but generally, an individual wishing to become a CPA must hold a bachelor’s degree and have completed between 120 and 150 college credit hours, including a number of business and accounting courses. The specific amounts required may vary by state.
Prospective CPAs must also pass all four sections of the CPA exam with a score of 75 or greater. The CPA exam assesses knowledge and skills in accounting, business law, taxation, and auditing.
Finally, a prospective CPA must also have one to two years of work experience involving accounting, attest, compilation, consulting, financial advisory, management advisory, and tax skills.These requirements may also vary from state to state.
Earning a CPA takes several years to earn when factoring in the requirement of a bachelor’s degree. This also places the CPA as the most monetarily costly title of the three.
Once an applicant has earned the title of CPA, they are eligible for greater career flexibility and recognition. Typically CPAs work in accounting, business, and finance, but many other options are afforded to CPAs as well.
Tax Planning Certified Professional® (TPCP®)
The Tax Planning Certified Professional® (TPCP®) designation is designed for client-facing financial professionals who seek advanced knowledge in tax planning and tax professionals, including CPAs, who seek a stronger background in how to position tax planning as part of their holistic financial planning conversations.
The TPCP® requires passing three courses and their associated final exams, all of which can be completed in under 12 months for the cost of $2,495. To use the designation, financial professionals must also hold three years of professional experience, adhere to The American College Code of Ethics and Procedures, and participate in the annual Professional Recertification Program.
The TPCP® offers designees expertise to identify, evaluate, and implement advanced tax strategies for individuals and businesses owners, focusing on maximizing tax benefits while ensuring compliance with current legislation. By ensuring a financial professional is well-versed in each of these fields, the TPCP® designation allows its holders to better serve clients needs by including tax-savvy advice as part of a holistic financial plan.
Rather than focusing on preparing taxes like a CPA or working directly with the government like an EA, a TPCP®’s goal is to take long-term tax implications into consideration as another part of a client’s financial planning and factor it into other aspects including retirement planning, insurance, philanthropy, and more.
Conclusion
Ultimately, the best fit for you comes down to individual needs. However, pursuing any of these recognitions is likely to provide your career with a boost thanks to the validity they offer. As with many major decisions, the choice should not be taken lightly. Research and education are your friend in making this decision. The American College of Financial Services offers both of these things and can help you on your path as you look to a career as a financial professional.
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From The President About The College Insights
Your Campaign Is Here
When I think about The College’s mission — that is, to provide applied financial knowledge and education, promote lifelong learning, and advocate for ethical standards to benefit society — I think of the phrase “begin with the end in mind.”
Our mission ends with “to benefit society” and indeed, our ability to do that (and to help you, the financial professionals we educate, do that) will be the ultimate measure of our impact on this noble profession. Society, the consumer, the client – whatever you call the individuals and families you serve, they are the heart of everything we do. That’s why I’m so pleased to premiere the highly anticipated consumer awareness and engagement campaign with all of you.
As I shared in January, this is your campaign. You deserve a moment of recognition for the time and effort you’ve put into honing your specialization – whether that’s comprehensive planning with practical application, retirement income planning, philanthropic planning, tax planning, special needs planning, insurance and risk management, goals-based wealth management or any other area of planning expertise that is so deeply needed and appreciated by your clients. You’ve made the pursuit of specialized, applied knowledge a significant part of fulfilling your life’s work. And today we honor that commitment with a campaign designed to reach your ideal clients – and, if I may add, to delight you!
It's important to acknowledge that this campaign is more than a 30-second public service announcement. It’s a multichannel, always-on initiative to reach the people most in need of your advice. It’s part education and impact – and we know both will only come through a dedicated commitment to this effort.
As part of the campaign, you will have seen communications from our team about the enhanced consumer website and search tool at www.YourAdvisorGuide.com. If you are a College designee in good standing, serving in a client-facing role, please be sure to check whether your profile is complete and accurate on the site.
You may update it at any time on our Learning Hub. Again, this campaign is about you and helping your current and future clients appreciate what you can do through the power of specialized, applied knowledge. Being part of the Your Advisor Guide website is a key way you can become part of the campaign.
And because this campaign is so personal, and we’re in a relationship business, I’ve recorded a personal message to all of you. If I could call you all individually, I would – but we are 200,000+ strong! Please take a moment to watch this short video as well as the ad spot. On behalf of the entire team, both at The College and at our ad agency Big Com, I truly hope you enjoy it and share it with great enthusiasm!
Without further ado, here’s your consumer awareness and engagement campaign! Specialists Need Specialists, Too.
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Retirement Planning Insights
Behavioral Finance 101
What is Behavioral Finance?
Traditional theories pertaining to personal savings, the efficiency of markets, and other aspects of personal finance explain what people should do with their money. However, traditional economic theories don’t always do a good job of explaining how people actually behave. Why would that be the case? Professor of Wealth Management and Wealth Management Certified Professional® (WMCP®) Program Director, Michael Finke, PhD, CFP® tells us the answer can be found by understanding behavioral finance theories.
According to Finke, individuals tend to make mistakes, some of which they do over and over again. This phenomenon is known as “predictable irrationality.” For example, when markets fall as they did during the March 2020 COVID crash, investors will predictably sell stocks after they have fallen in value because many overreact to investment losses. Finance theory suggests that investors should instead buy stocks in order to rebalance.
Another example is the difficulty many people have with resisting the temptation to spend from more liquid savings. Finke states, “We all have this temptation. I’m a professor and I understand financial planning, but when my checking account gets too big, more boxes tend to show up from Amazon for some reason.” By acknowledging that a client may struggle with saving, a financial advisor can help clients save in such a way that they don’t have to struggle with temptation. They can advise clients to set aside the maximum amount for their 401k, place money in a brokerage account, set up automatic transfers of money so the client’s checking account doesn’t accumulate too much money, and more.
How Behavioral Finance Knowledge Can Help Advisors
Awareness of these behavioral phenomena allows advisors to adjust their planning strategies to help clients meet their goals. Another such phenomenon is the tendency to overweight small losses. Known as Prospect Theory, a concept discovered by Daniel Kahneman and Amos Tversky in the late 1970s, this phenomenon refers to a non-equivalency in people’s responses to gains and losses. According to Finke, “Gains tend to make people a little bit happy, while losses, even little ones, tend to make people irrationally upset.”
As such, clients tend to be exceedingly loss averse. Finke mentions several ways advisors can combat people’s irrationality towards losses by not giving quarterly performance updates or reframing information in a manner that does not elicit an emotional response.
Knowing behavioral biases allows financial advisors to predict how their clients may act in a certain scenario and help them achieve their long-term financial goals. However, not all people are the same. According to Finke, factors of a person’s personality can greatly impact how they will approach saving situations.
The Impact of Optimism
One such factor is optimism. According to Finke, optimists are more likely to save for retirement and make sound investing decisions when doing so. Part of the reasoning behind this is “dispositional optimism.” As Finke explains it, dispositional optimists are likely to expect the best outcome and plan accordingly. As such, these optimists believe they will live to see their eighties and nineties and make it a goal to maintain a high quality of life.
Optimists are more likely to live to see advanced age because they place a greater value on the future. Dispositional optimists will exercise, eat right, and plan well to make sure they live to their eighties and have the financial security to enjoy them.
Additional benefits of optimism occur when managing money. The average person takes a suboptimal amount of risk with their investments, typically electing for lower risk than may be optimal given their long-term goals. However, since optimists view losses as a temporary setback and believe the best outcome is still within their grasp, optimists will tend to take more risk and react less to losses.
For those who aren’t naturally optimistic, financial advisors can use framing to shed a more positive light on future goals. Pessimism can harm an individual’s motivation to take the necessary steps to plan for the future. After all, a pessimist might say, “What’s the use? The markets are stacked against me and I’ll never be able to save enough to have a comfortable retirement.” However, by hiring an impartial advisor who takes the emotional aspect out of planning, pessimists can mitigate their tendencies that work against long-term financial success.
This difference in viewpoint explains how people can generally have the same goals for retirement and some fall tremendously short while others wind up attaining their goals. Typically, people hope to maintain the same quality of life and ability to spend in retirement as they do in their working years. However, optimists tend to meet this goal more often than pessimists. This isn’t to say that optimists will always retire well and pessimists will not. But a positive outlook can certainly help.
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Insurance & Risk Management Insights
Using Life Insurance in a Retirement Plan
Much like how cereal can be a part of a balanced breakfast, life insurance can be part of a balanced and holistic retirement planning strategy; however, the first challenge to overcome when considering whether life insurance can be leveraged in your clients’ planning is the public’s waning knowledge on the subject. According to research, as of 2024 only half of Americans owned any kind of life insurance at all — this follows a steady decline from 63% ownership in 2011, leaving over 100 million people with a significant life insurance gap.1
Public perceptions on life insurance are often at odds with reality, especially among younger generations: only 36% of Gen Z individuals own life insurance, with rates generally increasing by age despite the utility of policies at any stage of life and the fact that such a gap leaves younger Americans uniquely vulnerable to life’s uncertainties. Many Americans believe life insurance is too expensive for them to afford, though nearly three-quarters of them overestimate its cost significantly; additionally, the number of different life insurance products (term life, whole life, universal life, etc.) are often confusing enough to make people avoid the subject.1
With retirement planning growing more complex and do-it-yourself each year, your clients considering retirement need all the income sources they can get. But should life insurance be one of those solutions? And how can financial professionals properly leverage it?
Why is Life Insurance Important?
On paper, life insurance is often simplistically understood as a death benefit: one or more individuals receiving compensation in the form of money upon the passing of another person to pay for expenses, supplement surviving loved ones, and other needs. However, retirement planning experts are highlighting the key role life insurance policies can play for advisors and clients alike — even when the policyholder/insured is still alive.
Much of this strategy has to do with leveraging cash value life insurance: a form of life insurance that policy holders pay cash into over time to build value, much like a 401(k) or IRA — and which they can later make withdrawals from largely tax-free. Such policies often have higher premiums for holders, and it’s true that taking out too much cash can eventually deplete death benefits, but experts say with proper management, clients really can have their cake and eat it, too. This is especially important when considering the possibility of a serious medical issue in old age and the expenses that come with it.
“The idea that you need to ‘lose to win’ with life insurance simply misses the many advantages of modern life insurance policies,” said College Professor of Practice Steve Parrish, JD, RICP®, CLU®, ChFC®, AEP®. “In some ways, these policies can do not just double duty, but triple duty for the retiree. If using a cash value policy with a long-term care (LTC) or chronic illness rider, that contract can provide tax-free retirement income for the healthy retiree, be a source of needed income for the retiree who incurs a long-term care event, and still ultimately pay out a tax-free death benefit to heirs.”
Paul Wetmore, MBA, LUTCF®, CLU®, FSCP®, an adjunct professor of insurance at The College, concurred with Parrish that using life insurance can actually reduce strain on a client’s other retirement planning assets and allow them to perform better over time.
“For example, a client without the hybrid life/LTC policy may need to have more assets earmarked for an unexpected need and be required to keep them set aside in something underperforming — maybe not in cash, but something low-risk and very liquid,” he said. “The lost performance on those assets may have a larger negative impact on retirement income when compared to the plan that has some current cash flow through life insurance.”
Life Insurance As a Retirement Plan
While many financial advisors may focus on planning for higher-income or affluent clients, experts emphasize that using life insurance in retirement planning isn’t just a strategy for that sought-after group, but one that can be applied to nearly any retirement plan. In fact, there’s even a term for it: Life Insurance Retirement Plan, or LIRP for short.
Despite popular perception, it’s often good to encourage clients to buy life insurance young so they can continue to pay into it as they age. That said, even with clients already in retirement, life insurance can still be a valuable investment. For those who may have maxed out their other savings vehicles like IRAs and 401(k)s, those who have dependents or a spouse relying on their financial support, or those who want to leave a legacy while still enjoying retirement, life insurance can be a valuable part of the retirement plan toolbox.2
In particular, married couples in which one partner is the primary source of income or caregiving or people who want to leave a legacy after they die can make strong use of life insurance as a retirement asset.
“In the first case, if one of those partners dies shortly after retirement, the surviving spouse may need life insurance either to replace the lost income of the deceased spouse or to pay for the costs of caregiving that that spouse was providing,” Parrish said. “In the second, tax-free life insurance is far more efficient as a legacy vehicle than leaving IRAs, 401(k)s, and other taxable accounts. Also, cash value life insurance can be a useful tool for securing a tax-favored source of retirement income that can help supplement other sources of retirement income and bridge Social Security.”
Wetmore agreed, but also notes that life insurance solutions may still differ subtly depending on the economic status of the client.
“Very wealthy clients may be more focused on strategic income tax-planning strategies rather than the long-term care benefits, as many high net worth clients are prepared to fund their likely health care from their assets instead of LTC insurance,” he said. “The vast ‘mass affluent’ population, though, will likely want to avoid significant asset depletion from a long-term care need through the hybrid policy benefits.”
In the end, using life insurance policies to fund a retirement plan should be considered in the context of clients’ unique goals — but especially in the context of tax planning, Parrish says it can be the ultimate flexible support option.
“Life insurance is a far more tax-efficient means of transferring wealth at death than 401(k)s or IRAs,” he said. “Keep in mind that more likely than not, the retiree’s children will be inheriting their parents’ wealth when the children are in their peak earning years and potentially in a high tax bracket. Also, research has shown that when retirees leave a known legacy rather than just leaving whatever is left over, they are happier in retirement. They can use life insurance for the legacy, and not feel guilty about spending their other retirement savings.”
More on Life Insurance and Retirement Planning
- Subscribe to Knowledge Hub+ today to view this session on using life insurance in retirement planning
- Specialize in insurance planning with the Chartered Life Underwriter® (CLU®) designation
- Enhance your retirement planning knowledge with the Retirement Income Certified Professional® (RICP®) designation
- Read our ultimate guide to choosing a life insurance policy
PhD, CFP®, CeFT® (Emeritus)
CFP®, MA
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