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Script of new introductory video

This is the working script to my new personal introduction video that will be recorded soon and then made into a multi-media video some time after that:

“Hello, this is accountant Tony Novak with a quick 10 point personal introduction:

1. The value I bring to clients today comes directly from experience and relationships built over several decades of operating small businesses in the Philadelphia area. I feel like I’ve personally experienced every type of struggle and had to work through every setback that my clients share with me now.

2. Even while in high school and college, I developed a passion for small business by growing several acres of organic vegetables with my younger brothers and sister that were sold to local grocery stores and at a roadside stand from our small farm in Worcester Pennsylvania. We also raised animals for natural grass-fed meats and I was active in the local 4H club.

3. I’ve revived this interest recently while working with the agricultural and fishery businesses of southern New Jersey. I’m working to revive a failed commercial marina adjacent to my office into a sustainable aquatic farming business.

4. I improved and operated rental houses as a part-time business and built some know-how that eventually led to a leadership position with the local remodelers association. I served as local chapter president of the Bucks and Montgomery County chapter and as a board member of the National Association of the Remodeling Industry.

5. After finishing Fox Business School at Temple University, I was fortunate to be hired by Drexel Burnham Lambert, Wall Street’s most powerful firm in the mid-1980s at a time when modern portfolio management was just coming of age. I was one of the early geeks to adapt to the use of desktop computer technology for investment decision-making and was able to make a living as a Registered Investment Adviser in my own firm in Doylestown Pennsylvania for some years.

6. Eventually I gravitated toward small business focusing on tax planning, compensation and benefits issues. Villanova Law School allowed me into their graduate tax program even though I am not a lawyer. For many years, most of my clients were accountants and lawyers who asked me to handle their own transactions.

7. My focus on online delivery of services meant that I attracted clients from all over the country so I still maintain insurance licenses in all 50 states and DC that are used by Freedom Benefits and other Web-based financial service operations. Other  services are allowed across state lines through reciprocity laws. My accounting systems is up-to-date with tax filing information in every state.

8. I pride myself on being easy to reach online and I still give out my personal cell phone number. Clear communications are a personal passion.

9. My strength, I think, is in the ability to match a client to the right person, service or company that will best fit their specific need. I don’t pretend to know it all and I want to make it clear that I work as part of a team in almost every project.

10. I welcome a conversation to discuss your financial concerns and I will be pleased to share some ideas that have worked for others in a similar situation.”

I welcome any comments or suggestions.

The first draft is at

Where is small business health insurance headed?

I’ve tried to filter through all the vested interest and political noise in media to gain an understanding of where the small business health insurance is really headed. It seems that for every point under this topic there is sharp disagreement. I browsed through several hundred publications in forming this summary opinion for my own use in addressing client questions. This is a summary – without source references – of everything I could find:

Quality of information: Most of the information published in this field comes from those with a vested interest and political agendas. Terms like “may qualify” or “could enroll” dominate the reports. Little actual data is available. As a result, it is difficult to get to the truth.

Qualifying for tax credit: HHS says up to 4 million small businesses may qualify for a tax credit if they provide health insurance. Inc. Magazine says the number is actually about half of that at about 2.1 million. Presuming that median size of this population is between 1 and 2 employees (per U.S. census data), then the number of people affected by this issue is around 3 million. Deloitte says that 6 million to 13 million people could enroll through SHOP by 2021 but does not project what portion may qualify for the tax credit. The large majority insurance industry sources say few or none of their small businesses actually qualify for the credit. IRS says that is will audit claims for credit but has not published results so far. As a result, no data is available on whether any firms actually qualified for the credit that became available for 2010 and subsequent years.

Advantages of SHOP: There are two primary potential advantages of using the Small Business Health Options Program (SHOP): 1) eligibility for employer tax credits, 2) built-in employee choice. Employee choice does not apply in PA or NJ for 2015.

Disadvantages of SHOP: The primary advantages of not using SHOP are: 1) wider range of choices, 2) better service.

SHOP vs. private exchanges: In the few states reporting SHOP enrollments (not PA or NJ), results are poor so far. Private insurance exchange growth is clearly booming with plenty of investment capital, technological innovation and fewer regulatory boundaries. As a result, SHOP is lagging and private exchanges are booming.

Online exchanges vs. traditional enrollment: The large majority if small businesses are using traditional enrollment (physical work-site) methods rather than an online self-serve exchange.

Individual vs. Group insurance: There is still a strong belief among industry sources that individual exchanges are better choice for the majority of small businesses. This conclusion appears to be gaining traction in mid-2014. Plenty of hypothetical comparisons are published but no actual data is available to actually verify this opinion. Predictions of imminent demise of the small business group insurance market are unsubstantiated.

Diversity of opinion: There is agreement are clear that “one size does not fit all” with regard to insurance advice and that there are exceptions to every trend point listed here.

My personal disclosure: I don’t have any ownership interests in the post-reform health insurance market. I sold most of my insurance business in 2008 and lapsed the remaining health insurance appointments by the end of 2010. I do continue to receive payments for my web sites, writing and referrals to insurance exchanges. I continue to receive requests for advice in various forms and I would be open to consider possibilities to re-enter the market in the future. For that reason, I follow this topic closely.

The problem with fee-only financial advice

Much is written about the benefits of fee-only financial advice. Yet the drawbacks that prevent its wider adoption among the relatively large portion of working-class affluent individuals are almost totally ignored in public media. The result is that we are sending a harmful message to the bulk of Americans who would otherwise benefit from solid professional financial advice.

Fee-only planning presumes that the client has the resources to find, evaluate, work with and pay the fees of multiple qualified professionals with different specialties, presumably working as a harmonious team. A fee-only adviser is not supposed to be affiliated with those who are paid for executing transactions. It’s a nice idea, but seldom reflects reality. The risks of failure in this approach are significant, especially considering that the net financial results are only as good as the weakest link in that team. An excellent professional financial plan, for example, will be rendered valueless if a broker messes up a key transaction. We could argue that the execution of the advice is at least as important as the quality of the advice itself. Transaction-based professionals know that they are the real rainmakers who bring results to their clients portfolio and may be indifferent to those who talk about results without actually delivering them. We know that competency within the financial advisory profession is not defined by method of compensation.

In today’s real world, the majority of those fortunate enough to be climbing the economic ladder – perhaps because they have a solid career or a growing business – face extraordinary demands on their time and financial resources. They are fortunate to develop a personal relationship and pay one good financial adviser, let alone a team. Most see no need to pay one person for advice and another to execute it. Today’s clients are more likely to rely on emerging Internet-based technologies to efficiently bridge the gap between financial advice and execution or transactions. As a result, most of today’s upwardly mobile individuals say that they hope to utilize the one most competent adviser they know and trust to handle as many tasks as possible.

My take on this topic is simple: fee-only advice is likely the best approach for helping the rich get richer but it is won’t help working class individuals gain a financial foothold on a secure future. In my own practice working with mostly with business owners and working professionals, my clients are best served by me maintaining relationships with multiple types of financial firms who can best “get it done” once we’ve decided on a course of action.

A closer look at the self-employed health insurance tax deduction

The self-employed health insurance deduction seems simple at first glance but can trigger tricky questions when dealing with the details. Unlike other business expenses and itemized deductions, this is a separate deduction taken on the first page of the Form 1040 tax return. Because of its “above the line” status this deduction can be more valuable in reducing overall taxes than other deductions. Additionally, and perhaps more important, the deduction directly affects the amount of health insurance subsidy for modest income self-employed taxpayers.

These are some notes I made for myself in a recent review of the subject:

  • Self-employed health insurance deduction can be taken for medical, dental and long-term insurance
  • Self-employed health insurance deduction is described IRS Pub 535 “Business Expenses”
  • There are several ways to deduct health insurance on a tax return
  • Pay attention to what portion of the payment made is qualified as a deductible health insurance premium – some of the payment to an insurer may not be
  • Self-employed health insurance deduction includes the amount paid for children under age 26 even if they are not a dependent
  • Self-employed health insurance deduction is an “above the line” deduction but cannot be duplicated by a deduction on Schedule A (itemized deductions).
  • Self-employed health insurance is generally better than Schedule A deduction but is limited to the amount of your health insurance deduction. Additional amounts are reported in Schedule A.
  • Self-employed health insurance deduction can actually be a tricky item when preparing tax returns and manual adjustments are sometimes necessary to override the computer-generated tax returns.

Reflecting on 30+ years of writing

Tonight, on the eve of my 54th birthday, I am taking time to reflect on the impact of more than 30 years of business writing. I’ve never doubted that the pen is mightier than the sword and that the internet-connected keyboard absolutely blows away the pen. I’ve done a little bit of good with my effort. I’ve also caused myself some problems. My writing got me invited and then uninvited to testify before Congress in 2004 (or was it 2005?). My writing about health care reform sold for hundreds of thousands of dollars yet writing has held me back from earning much more. At times I’ve written more than 10 columns in a single day. I only rarely wrote under a pseudonym and I completely gave up that practice about 10 years ago. I doubt that I’ve ever gone more than a day without writing something.

I’ve made errors in my writing almost daily; it seems inevitable when most of that time I’ve been without an editor or publishing agent. (Although I recognize that my quality and consistency were much better during the times I had a good editor). I’ve had my temper-tantrums with editors and compliance officers, even quitting some well-paying jobs. I like to believe that I’ve never compromised on a value position but that’s a weak excuse for not having a more lucrative career. My writing has triggered numerous threats of defamation lawsuits including threats from the legal departments for at least two Fortune 500 companies. Ironically, one threat came at the same time I was serving as personal financial adviser to the company’s COO and his sideline business in Cape May; work that was totally unrelated to my relationship with his company. All of those legal threats eventually fizzled. I like to think it because I wrote the truth and they realized that the could not win. In reality, they more likely realized that suing me wasn’t worth the effort.

I am naturally drawn to controversial topics. There is not doubt that I’ve unnecessarily offended some people. By now I should know to be more sensitive. I’ve learned that every mistake and insensitive comment that I make in print can cost me readers, personal relationships and more. I once said that I’d rather offend people but be read than to be politically correct and be ignored. Sometimes I offend people with my writing style; presumptive and generally unyielding to seniority or those of superior expertise. Yet I don’t recall any time when I wanted to harm or insult an individual, rather only perhaps point out some corrupt value or faulty ideology that they might endorse. On a personal level, I don’t harbor a bad feeling about anyone. Looking forward, I see myself transitioning to a video delivery format. I expect the same cycle of problems will repeat yet I hold out hope that positive personality traits are more likely to show in video may help soften the sting of the learning curve.

Now is the time for effective tax planning

Today is June 30, 2014; the year is half over. Now is the time to be effective in planning and implementing changes that will be effective in reducing taxes. Those who wait until the last quarter will – like those in every other year – be told that tax planning strategies are “too little too late”.

I’ve been involved in the tax planning process for individuals and small businesses for more than two decades. We (tax planners) repeat this same message personally and in the media every year. Yet only a relative handful of prudent people take the time in the third quarter to be effective in using the tools that can reduce or eliminate income tax liability. So here we are again saying that there are plenty of ways to improve your net results by lowering taxes ONLY IF you take the time to develop a strategy now.

The tax planning process begins with a review of last year’s tax return and a computer-aided projection of the current tax year’s tax return. To save time, I begin this in advance of a discussion with you and we review the findings together. This part is the equivalent to an annual physical exam with your physician. Then the human factor takes over with a creative discussion of “what if” scenarios to gauge the appetite for a range of possible. Although it is not the central purpose of this procedure, it is surprising how often we discover mistakes in last year’s tax return or other important issues not directly related to tax planning.

The most difficult part of the process comes next with a discussion that flushes out a complete list of advantages, disadvantages. proponents and objections for each possible option that leads to a selected strategy. This step may be further complicated by the different objective of the parties and stakeholders. Even so, the whole annual tax planning process can often be accomplished in a few hours of discussion at a cost of less than $1,000 – typically a small fraction of the savings realized. Income tax planning, IMO, produces the highest, most immediate and tangible financial payoff of any type of financial planning.

My own private practice has moved proactively – and perhaps a bit ahead of market demand – to ensure that I can deliver mid-year tax planning service in a secure multimedia format (document review, transmittal and storage, video-based discussion and effective follow-up) remotely to make it harder for my busy business owner and professional clients to postpone this important and profitable task.

I challenge you to commit to investing a small amount and a few hours right now to save thousands of dollars on your tax return at next spring’s filing season.

“Fee only” financial planning update

It was great to read in Financial Planning Magazine that the Boards of two of the nation’s most prominent financial planning organizations (CFP and NAPFA) finally synchronized their definition of “fee only financial planning”. Under the new rules, a planner cannot even own a minority interest in a commission-based business. One prominent planner said that he might have to give up his NAPFA membership and fee-only business claim because he owns less than 2 percent of a family real estate business even though the business is located in another state and he is a completely passive shareholder.

The news does not affect me. In my case, it it clear that I never met the definition because I ‘ve always owned one or more commission-based businesses  (Freedom Benefits and Members Insurance Exchange). It does not matter that the businesses are otherwise completely separate and that there may be no overlap between the clients of the insurance exchange and advisory clients.

So in my case, I’ll continue to only charge fees for my work but I won’t call it “fee only”.


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