From the July 2007 issue of Investment Advisor • Subscribe!

July 1, 2007

High Performance Collaboration

Advanced-planning advisors needs more than technical expertise

As we examined last month, private wealth specialists can help you with those special cases where you require more comprehensive analysis using a higher level of expertise to implement effective solutions. These advisor-to-advisors form specialized teams to solve investment, estate planning, taxation, insurance, and business-ownership issues for your high-net-worth (HNW) and ultra-high-net-worth clientele.

The private wealth specialist coordinates the work of other experts. Efficiency and thorough implementation--areas where traditional planning processes often stall--are two key elements of how top private wealth specialists work. The third element is high performance collaboration.

The Movie-Making Model

Al Gibbons--a CLU, ChFC, and AEP--of AEG Financial Services in Phoenixville, Pennsylvania, is a highly respected expert on advanced estate planning techniques who has spent many years working with advanced planning teams. When describing how top advisors collaborate on a case for a high-net-worth client, he describes a movie-making model. "If I were to make a science fiction movie, there are special talents that I need to bring to the set in order to accomplish that goal, and so we would assemble that team," he says. "We'd make the science fiction movie and then we disband. The next month, I'm doing a documentary. That requires a whole different series of challenge than the first one." Advanced planning works the same way.

When he and other experts work as part of the team, it's not the same team all the time, since clients at this level have distinct, complicated needs. If he's doing an insurance transaction, then his job is to make sure that that the asset performs the way it's supposed to perform. When the group completes its main work together, he does have continuing responsibilities to monitor a life insurance solution to make sure it performs the way it should, for example.

It's Your Client

When experts form a project group or join an existing one, the owner of the client relationship should be clear to everyone. The private wealth specialist who is coordinating the effort doesn't own the client, nor do the experts, although all must act responsibly within their regulatory or fiduciary requirements. Ownership of the relationship always resides with the original advisor whose pre-existing relationship with the client makes the opportunity possible.

"There has to be a lot of trust between the advisors," says Gibbons. "There has to be a platform for mutual respect. And when you have that platform and mutual respect, you don't have competing egos." You want to select your advisors based on reputation and credentials--and willingness to be a good team player. What you don't need in a team is one or two advisors striving for control of the client, which can happen if the expert isn't experienced in working as part of an advanced planning team.

"I don't argue with people," adds Gibbons. "I don't try to manipulate them. I don't try to sell them. It's important that the client is also a partner in this process. In the end we have a solution that everybody buys into. It's not confrontational. It's not a salesman approach pushing something that's not appropriate for the client."

Advising the Advisors

Arthur Bavelas, president of Resource Network Ltd. in Radnor, Pennsylvania, (and a consulting principal to my firm, Advanced Planning Group) is a private wealth specialist, solving client problems brought to him by financial advisors. Recently a client worth $60 million with complex real estate holdings needed to update his estate plan. Issues included leaving a legacy, structuring future transactions to conform to prudent tax and estate strategies, cash management, and liquidity. Bavelas brought in real estate attorneys and an accountant to structure a few financial transactions. Bavelas then called in Gibbons to analyze survivorship life insurance needs, facilitate the underwriting, and to implement the transaction.

In some situations, the role of the expert is to evaluate a solution already under consideration by the client. One client's attorney called Gibbons last winter about a pending insurance transaction suggested by someone we can call Salesman X. The attorney was skeptical about the value of this solution and wanted a second opinion.

At first the client situation appeared relatively straightforward: net worth above $50 million with a simple balance sheet. The details, however, revealed something else. If both the husband and wife died, their estates would have severe liquidity problem--a shortfall of up $15 million in cash to pay estate taxes.

Salesman X's recommendation didn't resolve the clients' problem at all. In fact, the suggested transaction was actually against the law in the state of New York, where they lived. Given the client's exposure, Gibbons felt the urgency of the problem and knew he had to act quickly and facilitate an appropriate solution.

Gibbons assembled the players: the client's attorney, an accountant, an advanced underwriting attorney, and an insurance broker. The clients didn't have much excess income, nor did they have any gifting capabilities without incurring taxes, so the solution couldn't rely on too much out-of-pocket money or gifting. After three conference calls in two weeks, the group finally settled on a rather complex strategy, which depended in large part on an existing real estate partnership.

The other part was $15 million of life insurance.

As team coordinator, Gibbons job is also to provide summaries of progress to team members, such as notifying them when the clients have their insurance-mandated health exams. Next, they'll examine the offers from the insurance companies and walk the clients through the options and make a final solution. Then, he makes sure it's implemented.

Efficiency Is Required

Gibbons believes that advanced planning teams should complete 80% of a client's estate plan in 20% of the time typically spent on this task. That efficiency depends on three factors: management of expectations, creation of the simplest plan possible that will address the client's issues, and setting a completion date for the work.

Since a financial plan must address current realities yet be flexible enough to respond to new developments ranging from market conditions to family dynamics, advisors need to prepare clients for the evolution of their plans. Just as one-time medical check-up doesn't provide a guarantee of future good health, financial plans require periodic re-evaluation.

When clients understand the plans recommended by their advisors, they agree to them quicker. The complexity of a plan must match the client's ability to digest it. Clients may hesitate to proceed for many reasons, such as lack of comfort in how an asset will be used, their money personalities, and uncertainty about the appropriateness of solutions in complicated family situations, among others. If a client understands a proposal but isn't quite convinced, that's a problem the advisors can address with more discussion and possible revision. On the other hand, clients won't implement if they just don't understand a financial plan caused by a lack of financial sophistication--or inadequate explanation by an advisor. The longer plans and documents linger without implementation, the more likely clients will lose interest in the project all together. If your compensation depends on implementation, this scenario is one to avoid.

High-net-worth clients typically want the process to take a reasonable amount of time, usually 30-90 days. Few clients will enjoy many rounds of tax law minutiae. They want results. As Arthur Bavelas has observed from hundreds of cases, knowledgeable advanced planning teams compress the average timeline to completion since they can sidestep the barriers to implementation.

Collaborative Technology

"We have a technology platform that allows all the advisors to collaborate and actually see what's happening at least financially and legally with our clients," James Kaplan, president of Karr Barth Private Client Group, LLC, in Princeton, New Jersey. "The hardest part of doing good planning for people is the information-gathering piece. You go out and meet with someone and you can do a two-hour fact find, but there's always stuff that you don't get. So the platform gives us that."

Kaplan's firm uses the Web-based platform eMoney Advisor, but somewhat differently than most firms, in that it's used to foster collaboration with other advisors. With the client's permission, Kaplan provides the attorney, accountant, and other advisors with their own logins to support the planning process.

Kaplan feels the better the communication and the greater the cooperation, the better the result for the client.

Perhaps the most common, and significant errors, in advanced planning--lack of implementation--can be reduced, if not eliminated, when an experienced team works together to address financial issues. One expert recounted a story of discovering signed trust papers sitting in an attorney's file cabinet, but nothing implemented to fund the trust critical to the client's estate plan. When a group of top experts collaborate on a case, the client receives much better planning compared to what even a very smart professional can deliver juggling several technical issues on his own.


Lewis Schiff is the principal of Advanced Planning Group, a family office network for advisors. His forthcoming book, The Middle-Class Millionaire, will be published in January 2008. He can be reached at lewisschiff@advancedplanning.org.

Reprints Discuss this story
This is where the comments go.