CPA Exam

A Personal Counselor or Mentor is something that some exam prep providers include as a benefit of choosing their materials. While I agree that it is important that a review provider answer your questions as part of their support, there is no practical reason that you need to have a personal counselor as part of your exam preparation process.

Why do I say this? Because the exam that you take is not personal to you.

Everyone takes the same exam covering the same material tested at the same level of depth. The exam does not adapt its depth based on your background or experience. To say it one more time: EVERY candidate needs to know the SAME material at the SAME depth for the exam.

Because every candidate needs to know the same information, I am not sure what a personal counselor can do that you are not able to do for yourself. You can look at the results of your study sessions and determine how well you know a topic. In fact, you know more than anyone else can about how well you know a topic.

For example, let us say that there are 10 questions, and you know with certainty 6 of the 10 questions. That is 60% proficiency, but that is not enough and you need to study that topic more. Even though you do not know the other 4 questions, statistically you will get one of the four correct – giving you a 70% score. If you get lucky and guess two of those four correctly, you will score 80%, and someone else just looking at the percentage probably will say you are proficient and can move on to the next topic. But you know the truth, that you really are not 80% proficient on that topic.

In terms of guiding you through your studies, a personal counselor is not needed for this, either. Assuming that the study materials are set up properly with a good study plan, only you know best how much time you need to spend on each topic. When you are reading the book, watching videos, and/or doing practice questions, you know how well you know the topic and how much longer you need to spend to feel comfortable.

I believe that there are two essential support functions that actually add value to your studies:

1. A detailed study plan that helps you go through the materials, points out the main topics and can be tailored to your pace of learning and time frame for study.
2. Subject matter experts who can answer your questions about anything in the materials while you are studying. Whether it is a concept in the book or a question that you just can’t figure out, a knowledgeable person who is experienced in that exam should be available to answer your questions in a timely manner (one business day).

All of this to say, when you are making a decision about your study materials, be sure to look for things that actually add value to your studies, and not just what sounds good. At HOCK, we have continually refined our materials and processes since 2003 so that we can offer you the most comprehensive materials and support without any unneeded and potentially expensive extras.

HOCK Exam Prep with unlimited access and teacher support:

• Certified Management Accountant (CMA)
• Certified Internal Auditor (CIA)

In my last two blogs, I have written about how review course providers and the certification-issuing organizations add value to their certifications. In this blog, I will look at what you should do in order to maximize the value that you get from having the certificate.

Conduct yourself in a professional manner at all times

Perhaps the most important thing that you can do is to conduct yourself in a professional manner at all times. As I wrote earlier, most certificates get their value simply because they are valued by the business community. Certificates have value because the people who hold the certificate create value for them. Every individual benefit from all of the others who hold the same certificate. In order to keep this value, each holder needs to act so that the business community as a whole will continue to value that certificate. For example, everyone who is a CIA is connected to everyone else who is a CIA. When a colleague finds out that you are CIA, their first impression of you will be based on what they think of the other CIAs that they know. If enough individuals behave poorly and unethically the “brand” that is CIA will lose value. So, if you want your certificate to retain or grow its value, you need to behave in a way that will bring value to that certificate and everyone else who holds it.

Have a responsibility

In addition to holding yourself to the highest standards of behavior, you also have a responsibility to hold fellow certificate holders to a similarly high standard of behavior. When others are acting in a way that does not bring value to the “brand,” you need to work with them to change their behavior. Even though any certificate can survive “a few bad apples” in the profession, everyone needs to work to make certain that there are as few as possible.

Market the certificate

In order to maximize the value of your investment (in both time and money), you also need to market the certificate, for example, help people know what the certificate is and what the requirements are to obtain it. If an HR person in your company is not familiar with the CMA, give them information about it. That information, coupled with your behavior, will help them understand the value of CMA. Also, use the letters of your designation on your business card, your CV, and anywhere your name is used.

Become active in a local Chapter

If you are able to, you should also become active in a local Chapter of your professional organization. Chapters help to grow the profession and are a way of letting the larger community know that the certification has value. While it may be difficult to see any specific, direct benefit from attending a Chapter event, you need to remember that you are part of a larger profession and that you will benefit indirectly from the success of the organization. Professionals before you built a brand that you are benefitting from, and you need to be certain that the professionals who come after you will be able to benefit from your professional organization in the same way you have.

I encourage you to be proactive in doing these things (and more) because your certificate will only have as much value as the effort that everyone puts into it.

Brian Hock, CMA, CIA

A week ago, I wrote about how a small regular investment grows over time with compounding interest. A reader recently sent me an illustrative story about compounding that I want to share.

Once upon a time, there was a king who collected almost the entire rice crop harvested by his subjects as tax, promising to give it back during tough times. After many good years, there came a year when there was no crop. However, the King was stingy and unwilling to return the rice as promised. A clever girl did a favor to the king and then asked for a reward.

The reward that she asked for was that she would receive one grain of rice on the first day, and double that on the second day. On the third day, she would receive twice that from the second day. And so on for 30 days. The king thought that it was a modest request and granted it to the little girl.

However, when the King started to pay the reward, he realized what it would become.

On day 6, the little girl received 32 grains of rice.

On day 12, the little girl received 2,048 grains of rice.

On day 18, the little girl received 131,072 grains of rice.

On day 24, the little girl received 8,388,608 grains of rice.

On day 30, the little girl received 536,870,912 grains of rice.

After 30 days, she received a total of 1,073,741,823 grains of rice. (After I read this, I did the math in Excel to make certain that it is correct.)

As you can see, the increase from day to day gets larger the more days that the girl has been “investing.” While no investment offers 100% daily returns, the same concept applies to lower returns and longer periods of time.

I am certain that there are similar stories in many cultures. What version of this story have you heard?

Brian Hock, CMA, CIA

It is only about two weeks into 2021 and I expect that many New Year’s resolutions have already been forgotten and abandoned. Whether it was to lose weight, study more, or quit smoking, many of us have probably already given up on our resolutions. Perhaps we’ve told ourselves that we will stick to them longer in 2022.

Instead of short-term resolutions that do not last very long, wouldn’t it be nice to have a resolution that could change not only your life, but also the life of the generations that follow you? I have made one such resolution this year, which is to leave a legacy that will allow my income to continue forever for generations following me. This is nothing more than a savings plan, but it is a savings plan that is not for me, but for my children, their children, their children, and so on. It is essentially a family endowment fund that will last for generations. The best news about this resolution is that it is not as difficult as you might think.

We are all familiar with the idea of saving for our retirement. Whether it is a government pension plan, a company plan, our own personal plan, or some combination of these, we are all aware that we are saving (or that we should be saving). Unfortunately, statistics show that many people do not have enough set aside for their own retirement, and now I am suggesting that people save for their great-great-grandchildren? Before dismissing this as impossible, let’s look at some numbers.

(A preface to the numbers: I know that people in different countries have different rates of return available to them. The US stock market has had an annualized compound annual growth rate of 7.47% from 1950 through 2013, and because I live in the US, these are the numbers that I have to work with.)

Let us assume for the purposes of this example a more conservative 6% annual return on investment. This means that in order to have your annual salary be the annual return of a retirement fund, you need to have 17 times your annual salary saved when you retire. If your annual salary is $40,000, then you will need $680,000 saved when you retire.

How do you get to $680,000? Any financial calculator will help you do the math, but if you have $0 saved now and you invest $131 a month for 50 years at 7%, you will have $683,798.19 after 50 years. Then, for every year after that, your children and grandchildren will have $40,000 of annual income, forever. The best part is that $131 a month is less than 4% of a $40,000 annual salary.

Now, let’s change the time frame and look at it from the standpoint of a gift that you can give your children starting when they are born. If you start saving $100 a month for a child when the child is born, that $100 a month at 6.2% for 65 years will be worth $1,005,114! With just $100 a month, your child can be a millionaire when they retire. If we are more optimistic (though perhaps somewhat unrealistic) and use a 9% return, then that same $100 a month will be worth $3,921,762 when your child is 65.

You can also use this plan to help teach your child about saving. If you put $100 a month away for 16 years at 7%, it will be $35,808 when your child turns 16. When your child gets their first part-time job, let’s say that they will start helping pay the $100 a month by paying $10 of it. After they finish college and get a job, you can have them contribute $25 a month, and as they get older increase the percent that they pay increases until they are paying all of it. They will have learned from an early age that saving is the best insurance for the future and will continue to make the payment. Then, when they turn 65, they will have $1.4 million, assuming a 7% average annual rate of return.

I understand that not everyone has access to a consistent 7% return, and that $100 per month may not be realistic in some economies. But also consider that in an economy where salaries are smaller, a smaller amount is needed to be able to generate your annual salary. As a percent, if you save 3% of your salary every month and invest it at 7.2%, you will have a principal that will generate your annual salary in 50 years. Or, at a 6.2% annual return of return, if you save 5% of your salary every month you will have a principal that will generate your annual salary in 50 years.

I invite you to use a financial calculator and play with the numbers. When you do the math, you too may decide to make a resolution that will last for generations.

Brian Hock, CMA, CIA

Recently, I was talking with someone who was interested in HOCK CMA study materials and I was telling them that HOCK students receive unlimited support for as long as necessary to pass the exams without any time limit. That person responded excitedly, “Wow! That is really a value add!” This reaction started me thinking—value-added activities are part of the CMA syllabus and are also applicable to CMA materials.

Value-added activities

Value-added activities are those activities that create more value for the customer. Because those activities create additional value, customers are willing to pay for them. However, there are also a lot of costs that are incurred that do not add value to the customer but instead only increase the cost of production and correspondingly the price. For example, the cost of storing inventory is not a value-added activity. For most businesses, advertising also is not value-added to the customer (it is value-added for the business, but not the customer).

HOCK value-added exam prep

As a student, you are interested in what adds value to the materials you purchase, i.e. materials and services that will help you pass the exam. At HOCK, we focus on adding the most value that we can and doing so at the best possible price by eliminating things that don’t add value to you. Some of the things that we do at HOCK that are value-added and/or help us reduce our costs are:

1. Unlimited support from exam experts.
2. No set expiration on the materials you purchase—use them for as long as you need to pass the exams.
3. Always up-to-date materials.
4. No expensive marketing contracts that increase our costs
5. All of our products are available electronically, meaning there is no delivery cost except for the hard copy textbooks.
6. Just-in-time inventory eliminates inventory storage and spoilage costs.

Because we focus on adding value in everything that we do, we are able to provide more study tools, more complete materials, and better guarantees than our competitors in the market. As a customer, this is what you want—effective and cost-efficient materials that will help you pass the exam on your first attempt.

I invite you to learn more about our CMA, CIA, and CPA materials on our web site and see how we can help you achieve your certification with effective and efficient study materials.

Brian Hock, CMA, CIA