it doesn’t undermine your most trusted advisor status, it cements it.
by anthony glomski
your $5 million high-net-worth practice
by now, you’ve gained a solid understanding of the many financial issues and challenges that your clients face, especially entrepreneurs who may be approaching a liquidity event. what’s more, you have seen the process that goes into addressing those challenges in a manner that coordinates each client’s entire financial life – from their investments through their broader non-investment issues. it’s not just about their taxes and their company’s financial statements.
more: why a virtual family office? why now? | maximize your client’s charitable giving | estate plans: can you ask clients these eight questions? | when clients don’t listen | do you know your client’s total picture?
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as you seek to implement solutions in these areas, consider all the tasks that must be accomplished in order to maximize the probability of achieving what is most important to your clients and their families. among other responsibilities, it is essential to do the following seven steps:
- build, monitor and manage their household balance sheet – including their investment portfolio and real estate and any other business interests – in a way that adequately preserves the wealth they have created and realized.
- design a plan for reducing the impact of taxes as your client experiences a sudden and dramatic increase in wealth. they will also need a plan for optimizing their tax situation post-exit – while maintaining the flexibility to address continually changing tax code rules.
- create a multipronged estate planning strategy (often a series of trusts and other solutions) to ensure that your client’s heirs and others close to them will be well taken care of and financially secure after your client passes away. you also want to prevent the government from eroding up to 40 percent of your client’s wealth through taxes. this strategy should also be reviewed and updated to reflect new laws and regulations.
- construct a wealth protection plan that effectively digs a moat around your client’s family and their wealth to guard their assets from those who might take them unjustly.
- craft an approach to philanthropic giving that empowers your clients and their families to use their wealth to have a tremendous impact on their communities, and perhaps on the world at large.
- create a family wealth plan that helps you instill wise financial values in your client’s children and heirs as they potentially realize significant wealth. you may not want them to become stereotypical “trust fund kids” who may be tempted to dump their entire inheritance into a car collection (yes, this happens).
- develop a life plan post-liquidity event that ensures your client continues to have meaning and purpose in their life. you don’t want them to feel disconnected and depressed, as some entrepreneurs do, when they are no longer running the business that they worked so hard to build and nurture. engage professionals to remind your business owner clients that they are not losing their identity when they sell; they are simply starting a new chapter.
not exactly a trivial to-do list, is it?
the good news is that you don’t have to take these steps alone. in fact, trying to fly solo will greatly work against you if you try to serve your clients’ increasingly complex needs with a generalist approach.
instead, you’ll want to build the right team of trusted professionals to help you implement these and other key steps in your client’s financial life. by enlisting the help of talented professionals at the right times, you will cement your status as your client’s most trusted advisor and put them on a path to a lifetime of financial comfort, peace of mind and meaning.
remember that the collaborative wealth management process consists of three parts (investment consulting, advanced planning and relationship management) as shown in the formula below:
collaborative wealth management (cwm) =
investment consulting (ic) + advanced planning (ap) + relationship management (rm)
relationship management is all about getting the right guidance to manage your clients’ entire financial lives over the long haul. it means meeting their most important financial needs by assembling and leading a team of financial experts – true professionals who have deep knowledge in the full range of issues with which you require help.
why do you need a team?
there are many compelling reasons to build a team of experts that can help you implement collaborative wealth management for your clients. for one, many of the tasks that you need to accomplish in order to build and maintain a strong financial future for your clients and their families are complex and time-consuming – for example, creating estate plans, crafting planned giving strategies and implementing tactics to minimize taxes without incurring irs scrutiny. these responsibilities are too complex for you to handle on your own, or even by “average” professionals with a general knowledge of finance. these solutions demand a very high level of ongoing specialized expertise and focus.
what’s more, any solutions that you do implement for your clients need to work together with other solutions that you have put in place (or intend to put in place). otherwise, a decision you help your client make in one area could have negative financial results in another area. this often happens when a business owner assembles a collection of professional advisors who work in silos, never coordinating their efforts with the others, and simply providing their advice piecemeal to the client.
it’s human nature that highly trained specialists prefer to work independently. it’s usually easier for them to convince a client to use their preferred solutions without having any of the other experts on the team weighing in or providing oversight. some of the solutions that come out of expert silos are great, but others can be a ticking time bomb. for example, an estate plan must also involve careful tax planning. estate attorneys – who may do an excellent job of facilitating the transfer of your client’s money after they are no longer around – may not know about (or be able to execute) the best possible tax strategies for your client.
it’s crucial to have someone who really knows all aspects of a client’s life – like you do – coordinate and review the entire team’s efforts. that’s why our firm acts as each client’s personal cfo, leading the efforts of our expert team and coordinating the actions of the various professionals.
it’s not uncommon for successful entrepreneurs to work with multiple advisors. but in such cases, someone needs to take charge and provide the full financial picture to the other professionals involved in helping the client. using a coordinated team will also minimize the likelihood of falling into “check the box” syndrome – which happens when an entrepreneur or other successful professional makes a decision about their situation and assumes it can be crossed off the list entirely. a well-coordinated team of experts knows that each one’s strategies may need to be re-evaluated as laws and rules change over time.
the second reason for having a personal cfo is that no single person – not even the smartest advisor on the planet – can be a true expert in all of the investment and advanced planning solutions that today’s successful people and their families require. no one is a jack of all trades.
think about all of the complex issues and strategies involved with investments, wealth enhancement, wealth protection, wealth transfer and charitable giving. how realistic is it to expect a single professional to possess the knowledge and skills needed to navigate all five of those areas? sure, a world-class investment manager may know a few smart tax strategies – but chances are he or she will have little to no experience using advanced asset protection solutions that safeguard wealth after a liquidity event. likewise, you may be a top-flight cpa who can help your clients save large sums in taxes, but how knowledgeable are you about investment solutions that maximize your client’s ability to preserve their wealth?
as a successful cpa, you’re also an entrepreneur. sure, you have to wear many hats sometimes, but you don’t attempt to manage every component of your firm’s operations alone. instead, you have hired (or plan to hire) a cfo, cto, cmo and other key professionals to oversee the respective operational areas of your firm and to give you important information, guidance and recommendations about topics on which you are not a deep expert.
the same dynamic should apply to your clients’ financial lives. by surrounding your clients with a diverse group of specialists who have a deep understanding of their respective areas of expertise, you can provide your client with the best possible advice in each area of their financial life. compare that to being a “jack of all trades” who is master of none. how well is that serving your clients, especially those with complex financial situations?
top financial advisors go out of their way to build and manage relationships with other professional experts on an ongoing basis; they don’t try to do everything on their own.
in my own career, when building virtual family offices for entrepreneurs, i certainly don’t attempt to do everything myself. instead, i build relationships with expert professionals. why? so i can bring the very best solutions to clients. our clients need and want this, but often lack the time and expertise to manage an expert team of professionals effectively. that’s where you come in as either a personal cfo or as the coordinator your client’s virtual family office.
to help make our firm uniquely positioned to assist successful entrepreneurs with their specific set of needs and concerns, we have interviewed many experts in several fields and have hand-picked those who are the best fit for our clients. we call this group our “think tank.” the think tank consists of a formal panel of experts that meets regularly to brainstorm solutions on behalf of our clients.
in short, it doesn’t matter how knowledgeable you are: it is essential to build relationships with outside professionals – and manage those relationships on an ongoing basis. there’s simply no other way today to achieve true, lasting and meaningful financial success for your clients and their families. you might also enjoy learning from the expert professionals you have recruited to your team.