By Jack J. Desemar Jr.
The concept of teaming is becoming the dominant method to accomplish comprehensive–or convergent–financial planning.
Teaming is the concept of different advisors from different financial disciplines working together to form a cohesive plan for the client that ties all areas of planning together without gaps or omissions. Team members typically include stockbrokers, money managers, insurance agents, estate attorneys, CPAs and bankers.
Ready or not, teaming is even mandated by clients or institutions. There are several reasons for this. This article looks at those reasons and also the challenges that teaming entails for the financial professionals involved.
Industry convergence. Readers of National Underwriter are well aware of some of the changes that have been afoot as a result of the convergence of the insurance, securities and banking industries.
This convergence has been energized by enactment of the Gramm-Leach-Bliley Act of 1999, which enabled firms in the three industries to sell one anothers products.
One of the effects is that the financial community now functions as the “financial services industry” instead of separate industries of insurance, investments, banking, legal and accounting, each with its own disciplines, methodology, product solutions and training.
As this converging has gone on, the roles and duties of advisors from each discipline have become blurred. Sometimes this has confused clients as to who does what. Some financial advisors feel confused, too.
A good part of the confusion results from the fact that advisors are being forced to handle expertise outside their discipline. They now have to redefine and reposition themselves and even transform their practices.
As financial conglomerates acquire and merge more of these pieces to the financial puzzle, companies are trying to figure out how to make the different pieces work together to maximize resources and marketing efforts.
Further, executive, marketing and compliance management–as well as clients–are demanding continuity, consistency and agreement at every level. (Some go so far as to say management even wants each discipline to “like each other.”)
Information overload. Advisors are realizing that it is impossible for an individual to know everything to the level required, especially in the high-net-worth market.
Clients are also now experiencing information overload and confusion and are demanding more than just disjointed, incongruent single-issue answers.
Availability of seemingly good advice is not in short supply, of course. Clients can get many (often contradicting) answers to the same question from many sources, including the Internet.
This gives new meaning to the old paradigm that “knowledge is power.” Today, knowledge is cheap and available. Enough knowledge can be quickly downloaded to become the equivalent of a Ph.D. in just about anything.
The problem is, processing that knowledge has become challenging for many individuals to the point that a new paradigm may be emerging–i.e., “coordination and processing of knowledge is power.”
Shift to advice-based planning. There is a subtle but strong movement toward advice-based solutions. There is similar movement toward holistic, wealth management and comprehensive planning compensated by planning fees and asset-based compensation.
At the same time, there is a movement away from single-issue, product-sale-based solutions and planning compensated by commissions.