John Bowen

Wide-Angle Lens

Affluent clients want their CPA financial advisors to focus on more than just investments.

October 20, 2008
by John Bowen, Jr.

If you're like a lot of CPAs, you spend a significant amount of your workday managing your clients' accounts. This makes sense, of course.

The problem, however, is that too many CPA advisors focus almost exclusively on their clients' investments and ignore a number of other important areas. There are several disadvantages to this approach. First, it means that you may not be giving clients the comprehensive service that helps generate greater loyalty, additional assets to manage and qualified referrals that can help you build a base of ideal clients. Second, it means that you have left your business vulnerable to client dissatisfaction during market downturns. Third, you are not providing a whole range of services that can significantly boost your revenue and income. And last, focusing on investments alone means that you are not doing all you can to bring much-needed value to your clients' entire financial lives — the true hallmark of today's top advisors.

In short, using an investment-centric business model greatly limits your ability to achieve success and do right by your clients. The good news: You can shift your focus and more effectively address the advanced concerns of affluent clients.

The Rest of the Picture

When CEG Worldwide surveyed roughly 2,100 advisors from across all channels — registered investment advisers (RIAs), independent broker-dealer representatives and wire-house brokers —they found that these elite advisors' top clients ranked a number of non-portfolio-related issues as key concerns. Among those issues were:

  • Protecting wealth. Making money is not an affluent investor’s only concern. They also want strategies for protecting the wealth they've earned. Nearly three-quarters of advisors say that their best clients are highly concerned about losing their wealth, while almost 40 percent say the same clients are worried about being sued. A significant percentage (35.8%) also say clients are concerned about having adequate medical insurance to cover what could be enormous healthcare costs down the road.
  • Taking care of heirs. Top advisors report that their best clients also are looking beyond their own needs to those of future generations. Nearly half of surveyed advisors say that "ensuring their heirs are taken care of" is very important to clients. And nearly one-third say that paying for children's or grandchildren's education is a key concern of clients.
  • Reducing taxes. Not surprisingly, top advisors say their clients care not just about how much they make, but also about how much they get to keep. For example, about 40 percent of advisors say their clients are highly concerned about mitigating capital gains taxes, income taxes and estate taxes.
  • Being philanthropic. Charitable giving has become a growing issue for the affluent in recent years. Top advisors in the industry say that more than one-third (37%) of their clients want to make meaningful gifts to charity.

A Comprehensive Plan

All of these key concerns spell opportunities for you. If you help clients address important noninvestment issues, you'll give yourself a variety of new revenue streams and differentiate yourself from the majority of advisors who never broach these topics with their clients.

Take estate planning concerns. We know from the research that clients are concerned about estate taxes. But we also know that the majority of estate plans for the affluent haven't been updated in more than five years — during which time the estate tax landscape has changed significantly.

The best way to capitalize on opportunities like these is to provide clients with an advanced plan that spells out various steps you recommend they take to address their full range of financial concerns.

This advanced plan should deal with four key areas of the client's financial life beyond his or her investments:

  • Wealth enhancement produces returns consistent with the client's level of risk tolerance and minimizes the tax impact on those returns.
  • Wealth transfer finds and facilitates the most tax-efficient ways to pass assets to succeeding generations in a manner that meets the client's wishes.
  • Wealth protection protects the client's wealth against potential creditors, litigants, ex-spouses and children's spouses, as well as protects the client against catastrophic loss.
  • Charitable gifting fulfills the client's philanthropic goals and can often support efforts in each of the other three areas.

Strategies might involve liability insurance and various forms of ownership and agreements. Wealth transfer ensures that heirs are taken care of in tax-advantaged ways. Tactics could involve using credit shelters as well as various forms of trusts. And charitable gifting solutions also address clients' desire to leave a philanthropic legacy (using trusts and other methods).
This advanced plan should be developed separately from any investment plan you create for clients. In most cases, it's best to build and rely on a professional network of advisors —accountants, attorneys, high-end insurance agents and other outside advisors — to analyze the client's situation and devise recommendations.

The Action Plan

When you develop an advanced plan and present it to your client, move through each of the four sections and point out the items that you believe are of highest priority. Once the client has reviewed the plan, discuss each recommended action in depth. Provide as much detail as the client needs in order to make a decision about moving forward on that item. For each item, you'll want to guide the client in choosing one of three actions:

  1. Drop it. The client decides not to implement your recommendation. Honor your client's decision by removing the item from the advanced plan. If you believe the item is important, make a note to raise the issue again in a year or two. As your relationship grows over time, the client may become more inclined to accept the recommendation.
  2. Defer it. The client decides to put the item on hold. This will often happen with more complex planning recommendations, such as creating certain types of trusts. Before taking such a step, the client will likely want to give it more thought and discuss it with family members and with other professional advisors. When the client does decide to defer a recommendation, encourage him or her to set a target date for finalizing the decision. Make a note to revisit the issue at that time.
  3. Do it. The client decides to implement the recommendation. In some cases, the client might choose to take the action him- or herself. This is a common choice when the task is fairly straightforward, such as making adjustments to property or casualty insurance. For other recommendations, the client may choose to have another professional advisor take the action. If the client already has a close relationship with an attorney, for example, he or she may be inclined to turn to that professional for help in making changes to a trust. Or the client will choose to have you take the action personally. In most cases, you will then turn to members of your network of professional advisors to implement the client recommendation.

As you systematically move through the advanced plan with your client, make notes on what the client decides concerning each task. Assign a priority to all of the tasks the client decides to undertake. (I've found that color coding is useful, with green for high priority, yellow for medium and red for low.) Then, at each subsequent meeting, review the actions that you have taken and track the progress the client has made toward his or her advanced goals.

There's no question that affluent clients today face a highly complex financial environment — one that requires smart decisions that go far beyond just which investments and money managers to choose. By identifying the full range of your clients' concerns and then offering them a comprehensive menu of solutions, you'll give your clients peace of mind, knowing that their entire financial lives are in good hands. In the process, you'll grow your advisory business faster and build a great life for yourself.

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John J. Bowen Jr. is founder and CEO of CEG Worldwide, a global training, research and consulting firm dedicated to helping advisors and the institutions that serve them become more successful.