why each is necessary.
by anthony glomski
as discussed in collaborative wealth management: defining the framework, it’s in vogue for financial services workers to call themselves wealth managers or wealth advisors. but, research shows that only a small fraction of these workers really provide clients with a complete and consultative approach to managing their complex financial lives.
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regardless of which acronym(s) you have on your business card after “cpa,” one way to assure clients and prospective clients that you’re a true wealth manager is to have a carefully defined wealth management process in place.
let’s take a closer look at the process.
proc·ess1
noun
-
- a series of actions or steps taken in order to achieve a particular end
if you take away nothing else after reading this post, remember that having the right framework for wealth management is a prerequisite for success. the collaborative wealth management approach consists of a series of five meetings. these five meetings help you identify a client’s unique challenges and to design and implement a range of tailored solutions. let’s take a closer look at those five types of meetings and how they fit together in the process:
1) the mutual discovery meeting. the first step is to help your client accurately uncover (and clearly measure) what they want and need most out of life. without knowing what they want their money to accomplish, even the best financial strategies in the world won’t be of much help to a highly successful person.
with that in mind, the initial mutual discovery meeting is centered on a detailed interview that enables you to define your client’s financial needs and goals, and to determine where they are in life today and where they want to go (even if they don’t know themselves). the outcome from this meeting gives you the foundation for creating a “comprehensive client profile” (more on that below). this profile is used to create solutions that are customized to each client’s unique situation, and to lay the groundwork for working with other advisors (attorneys, risk specialists, planned giving specialists, exit planning consultants, etc.) who may be involved in the wealth management process.
because this part of the process is so critical to the success of your client relationship – and because so few investors ever do a formal mutual discovery meeting interview – we focus extra attention on this step below.
2) the investment plan meeting. this meeting is centered on two key elements.
- a complete diagnostic overview of your client’s current financial situation.
- presentation of a recommended plan and policy statement for achieving the client’s investment-related goals.
these elements are based on the information that was uncovered during the mutual discovery meeting. these recommendations are based on the four key drivers of investment success:
a) return,
b) risk,
c) costs and
d) taxes.
the plan presented in this meeting becomes your actionable investment plan, which is structured to accomplish two main goals:
- bridge any gaps between where your client is now and where he or she wants to be.
- maximize their probability of achieving well-defined investment goals.
in short, the investment plan serves as the road map that will guide your client through the journey of growing, preserving and passing on their wealth over time. having a plan in place will help ensure that rational analysis – not emotional reaction – is the basis for their investment decisions.
3) the mutual commitment meeting. at this meeting, which occurs after you have reviewed the plan carefully with your client, go over any questions or concerns you and your client (and client’s family) may have about the plan to determine whether or not to move ahead and to implement the recommended investment strategies. only after your client has completely approved the investment plan should it be put into motion. let your clients decide how often they wish to have future meetings with you and the manner in which they prefer to be contacted – phone, email, text, snail mail, etc.
4) the 45-day follow-up meeting. within 45 days of implementing your client’s investment plan, there is a great deal of legally required paperwork for them to complete. extremely busy people like your clients may find all the forms and emails burdensome. the 45-day follow-up meeting helps you and your client organize the various statements they have received. it also allows you to help them understand the financial paperwork involved in working together. also, this meeting is a great opportunity to review any initial concerns they may have about working together. encourage clients to ask questions now, in the early stages of your relationship. there is no better time to clarify exactly what the plan is for preserving their hard-earned wealth.
5) regular progress meetings. the creation of a wealth management plan is not a “one and done” exercise. it’s an ongoing process. over time, the markets change and, more importantly, clients’ lives change – especially in the wake of a sizable inheritance or liquidity event. it’s important to review and update their plans consistently. at regular progress meetings, a client’s current financial position is compared to their plan to assess the progress you and your client have made toward their goals.
this plan includes a strategy for addressing your client’s critical non-investment goals. this comprehensive blueprint for addressing their advanced planning needs will be developed in coordination with a network of professionals such as attorneys, risk specialists and tax specialists. at subsequent progress meetings, you and your client can decide how to proceed with specific elements of the wealth management plan. over time, every aspect of your client’s complete financial picture can be effectively managed.
the key role of the personal cfo
as you have probably realized, truly consultative collaborative wealth management stands in stark contrast to how most investors and their advisors operate today. even the most affluent and successful people you know – professionals, entrepreneurs, executives – rarely take this type of coordinated and comprehensive approach with their finances. the vast majority of people tend to address retirement, estate planning and other financial goals on an ad hoc basis – treating these issues as separate concerns and placing each one in its own discrete box. given that, their efforts to deal with their many interconnected issues are not coordinated.
this leads to challenges that can jeopardize their financial health as well as that of their families, their practices or their businesses. that is why it’s so important to manage wealth comprehensively: it lets your clients see the big picture at all times and to manage their finances around the big picture instead of focusing on only one aspect of their money.
unfortunately, too many advisors (like their clients) take an ad hoc approach to wealth management. they deal with issues only when they arise, and they gather just enough information to implement a single particular response to the current problem at hand. unfortunately, being reactive rather than proactive keeps clients and their advisors at a permanent disadvantage and back on their heels.
as noted earlier, many financial firms claim to offer comprehensive wealth management – in reality, they focus almost exclusively on investment management. there’s a big difference between the two. they may offer a few additional services, but they lack the truly comprehensive approach that you need to coordinate your entire financial life – and to anticipate client needs before they arise.
to make wealth management a true part of your financial life, always remember this:
your clients are not just the ceos of their companies or practices – they are the ceos of their families.
being the ceo of one’s family (or the co-ceo, along with a spouse or partner) means that you have a duty to define a vision for your family. as the trusted confidant to the family ceo, your job is to help that ceo clarify what they truly value in life and what they want their family to achieve. then you can better determine the best path to make that vision a reality – just as you would define your own firm’s direction and path.
part of your responsibility as the wise cfo to the family ceo is deciding where to get specialized help toward realizing their vision. in some ways, the financial side of a family unit is actually a lot like the financial side of a business. in both cases, there are important decisions to be made about allocating resources, saving, investing and planning for future growth and preservation. as with any business, your client and your client’s family need a financial leader who can present them with good ideas, act as a sounding board and work with them to ensure that they have what they need to make smart decisions about their money – just as the cfo at a company does.
many successful people think they can hold down the role of both family ceo and family cfo. they think they can think through the full range of financial challenges they face and develop optimal responses that work in concert with each other. eventually, they will realize they can’t handle both roles and they will seek out a trusted financial professional to act as a personal cfo for their family.
as a cpa, you are their most trusted advisor. why not put yourself in the right place at the right time by having a collaborative wealth management process in place? this will give you a tremendous advantage over other investment advisors who take a more one-dimensional approach to manage their clients’ financial lives.