Properly protecting assets to fulfill a family’s wishes and having the right documents implemented is what separates advanced planning from theory, as we discussed last month (January 2008, “Protecting Family Assets”). Advisors must ask difficult questions to understand a family’s complex emotional dynamics–in addition to examining the spreadsheet of their assets. The advanced planning team then takes these two batches of information and collaborates on solutions and implementation. For those advisors who primarily practice solo, high-performance collaboration may at first appear to be a rocky, contentious path to reaching a client’s goals. An advanced planning team of experienced collaborators brings just the opposite, however: thoroughness, speed, and efficiency–even as it debates the wisdom of various solutions.

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–rated as very important: candor, courage, timeliness of follow-through, listening skills, and self-management. Mitch Ditkoff, one of the researchers, made an interesting comment about the tenor of good collaborations: Since collaborations are often like marriages and go through various ups and downs, it is essential that the collaborators enter into the relationship with the kind of attitude that can weather the roller coaster ride of the sometimes chaotic and challenging creative process.

The survey also supports the empirical observations of Arthur Bavelas, a principal in my firm, Advanced Planning Group. Bavelas has a great deal of collaboration experience. He 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, Pennsylvania, is a highly respected expert on advanced estate planning techniques with many years of working with advanced planning teams. In my July 2007 column, he described a movie-making model to explain how ad hoc advanced planning teams collaborate on a case for a high-net-worth client. “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 observed. “We’d make the science fiction movie and then we disband. The next month, I’m doing a documentary, and that requires a whole different series of challenges than the first one.”

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 also easily extend to advanced planning beyond estate planning.

Step 1: Agree on the Process

Since advanced planning encourages transparency, discussing the process itself with the client is the chief focus of the first step. The advisor with the most established relationship with the client–and most likely the first professional to whom he or she turned for advice about the current planning problem–typically obtains agreement on how the process will unfold. This lead advisor, who takes the role of project manager, 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 the client agrees to the overall process, the lead advisor 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, among other areas. Depending on the client’s situation and the role of the lead advisor, expert assistance might include, for example, 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 lead advisor or private wealth specialist 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 will summarize the wills, trusts, and any other legal documents, the insurance expert will provide details about life insurance policies, 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 his or her 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, typically 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 facilitator or lead advisor must maintain the project progress and monitor the work of each advisor’s task since delays in one aspect of data gathering, such as life insurance underwriting, 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 clients’ focus will shift to other matters.