Making the Team Approach to Wealth Management Work

Why interpersonal traits are central to the effectiveness of collaborative teams.

May 15, 2008
by Lewis Schiff

Last month, I revealed how “middle-class millionaire” financial advisors are different from financial services advisors whose clients have not yet amassed a personal net worth of between $1 million and $10 million. This month I divulge the intricacies of advanced planning process.

In addition to examining the spreadsheet of their assets, CPAs and financial advisors must ask difficult questions to understand a family’s complex emotional dynamics. This is where advanced planning process plays a key role.

The advanced planning team then takes these two batches of information — asset analysis and emotional dynamics — and collaborates on solutions and how to implement them.

Reader Note: Access free report on the highly effective habits of successful advisors by the authors of The Middle-Class Millionaire.

Surprises of Collaboration

A survey of experienced collaborators from many occupations (The Ideal Collaborative Team, Mitch Ditkoff, Tim Moore, Carolyn Allen, and Dave Pollard, 2005), explored how they believed collaborations worked. In a truly collaborative team, three characteristics of team members drive client-centered solutions:

  • Having enthusiasm about the subject;
  • Being open-minded and curious;
  • Speaking one’s mind even if it’s an unpopular viewpoint.

Several additional personal traits — not experience or training — were rated as “very important”:

  • Candor
  • Courage
  • Timeliness of follow-through
  • Listening skills and
  • Self-management.

The Ditkoff survey also supports the empirical observations of Arthur Bavelas, a principal in my firm, Advanced Planning Group. Bavelas noted that advisors with technical proficiency don’t necessarily make good team members. Most advisors with a technical focus have difficulty asking the hard questions about the desired outcome of the planning process and focus more on crafting legal documents. If that’s the case, the other members of the team must step up to ask the family to identify the desired outcome of the proposed work and to explain the interpersonal relationships among siblings and the parents and grandparents.

Seven Steps of Collaboration

Al Gibbons of AEG Financial Services in Phoenixville, Penn., is a highly respected expert on advanced estate planning techniques. Looking at the collaborative process in greater detail, Gibbons outlined the seven steps of high-performance team collaboration in estate planning in an article in the Journal of Practical Estate Planning. The insights he offered extend easily to advanced planning beyond estate planning.

Step 1: Agree on the Process

Since advanced planning encourages transparency, discussing the process itself with your client is the chief focus of the first step. The financial professional who has the most established relationship with the client — and who is most likely the first professional to whom your client turned to for advice about the current planning problem — typically obtains agreement on how the process will unfold. This CPA, attorney or advisor then takes on the role of project manager, and at least initially explains what type of additional expertise might be required to create solutions for the client’s concerns.

Step 2: Assemble the Team

After your client agrees to the overall process, the lead CPA, attorney or advisor (“project manager”) will discuss potential members — or suggest a private wealth specialist to act as a facilitator to assemble and manage the advanced planning team. This specialist maintains a list of various professionals who are top experts in high-net-worth and ultra-high-net-worth planning for life insurance, business succession, taxation and investment management, etc.

Depending on the client’s situation and the role of the lead advisor, expert assistance might include: valuing artwork of a particular type and period, foreign and dual-jurisdiction tax issues and creating a private foundation with a specific mission. The private wealth specialist promotes efficiency and complete implementation — two elements where traditional planning often fails.

During a conference call, team members can clarify their roles and gain an understanding of the case facts. In high-performance collaborations, advisors operate in a way that allows each other and the client to find and implement the best possible solutions.

Step 3: The Meeting

The project manager then arranges the first meeting with the team. Before the meeting, the client should know who will attend and their role. During the meeting, the first piece of business after introductions is reviewing the facts to confirm everyone’s understanding. Typically, the attorney summarizes the wills, trusts and any other legal documents, the insurance expert provides details about life insurance policies, while the CPA offers the tax returns, income statement and balance sheet for reference.

As a check of the client’s current situation, the client’s plan goes through a fire drill. If something happened to the client yesterday, what would their financial affairs look today?

Key results to identify would include:

  • Asset distribution
  • Estate, income, and capital gains taxes
  • Sources of liquidity
  • Survivors’ financial situation
  • Charitable intentions met
  • Stated goals satisfied by plan results

Step 4: Set the Overall Direction

At the conclusion of the initial meeting or soon afterward, the team and the client can agree on the goals and direction of the team’s work, although precise details won’t have been formulated at this point. While certain tasks remain, such as valuations, the drafting of documents or even consultation with other specialists, the client and team members should feel comfortable with the approach.

Step 5: Complete Data Gathering

At this step, some team members often go off on their own to complete the data-gathering phase so the group can consider possible solutions. Before evaluating possible new outcomes for the client, the team needs the details about life insurance offers, valuations, research on a complicated tax issue or any other possible issue that could influence the crafting and implementation of a solution.

The results of data gathering may change earlier assumptions about solutions. A client with large estate tax exposure won’t be able to use life insurance as part of the plan if he’s found to be uninsurable or insurable only with a rating that causes the coverage to be too expensive.

The project manager must maintain the project progress and monitor the work of each advisor’s task since delays in one aspect of data gathering can affect the time frame for delivering solutions.

Step 6: Evaluate Alternatives

With all of the data gathered, the team can list alternative solutions and their cost-effectiveness. If a business is worth less than anticipated by the client — or a parcel of undeveloped land would sell for considerably more — the team may uncover both new solutions and new problems to solve. The findings from the data collection may also present new challenges for the client, since the initial goals may not be met or only met with more complex strategies and greater cost. When a highly successful entrepreneur discovered he had hepatitis C, for example, he confronted new personal challenges beyond losing life insurance as a planning tool to fund a new buy-sell agreement or to cover his substantial estate tax exposure.

Step 7: Implement the Plan

As long as the client sees value in the proposed plan, implementation should proceed aggressively. An advanced planning team compresses the average time it takes to complete a case since it can bypass the barriers to implementation. If the complexity of the plan exceeds a client’s ability to understand it, however, implementation may stall. Failing to understand a plan due to a lack of financial sophistication is one problem; not being convinced of its merits is a different one that advisors can address with more conversation and possible modification. The longer plans linger without implementation, the more likely your clients’ focus will shift to other matters.

So next time you’re meeting with a client, keep these best practice tips handy and follow them for a better client-advisor relationship. Your clients will thank you for it.

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Lewis Schiff is a private wealth specialist who works with high-net-worth (HNW) clients globally. His collaboration with Russ Alan Prince, the critically acclaimed new book, The Middle-Class Millionaire: The Rise of the New Rich and How They Are Changing America (Currency/Doubleday) was published in February 2008.