How they view the role of the financial advisor.
It was the English philosopher and statesman Sir
Francis Bacon who said riches are for spending. But before your
high-net-worth clients can spend or invest the wealth accumulated over
a lifetime, they need to find a way to preserve their assets and keep
them from the long arm of Uncle Sam. In wealth management today, this
often involves forming a relationship between the financial advisor and
an estate planning attorney, and devising an estate plan for the
client.
That relationship can be delicate, however. An
uneasy alliance, if not properly cultivated, can deteriorate quickly.
Yet advisor and attorney are natural allies in this process, with a
common goal: to help the client develop or carry out the estate plan
that is most suitable for that client.
Estate attorneys say the relationship should not be
adversarial. "I'll see you in court," doesn't apply here. Rather, it
should be focused on helping the client achieve his goals. The
relationship can be complicated and even jeopardized, however, if
advisor and attorney come to the table with separate agendas, and lack
open minds in taking into consideration each other's comments and
suggestions.
"I don't look at it as a competitive relationship.
We're there to provide a service to the client, and they need someone
to provide that service," says Mike Kove, a partner with Kove &
Kosakow LLC in New York City.
Clients are often referred to him by financial
advisors who have analyzed the client's needs and assets first, so Kove
has a vested interest in making the process go as smoothly as possible.
"Most of my clients are not self-generated," he says. "They're
recommended by financial planners, brokers, advisors, accountants and
insurance agents. I expect it's that way with all of us, to a great
degree."
Financial advisors definitely "add value to what I
can bring to the table because I have someone who understands the
relationship and goals," says Robert C. Aument, a partner with Daspin
& Aument in Oak Brook, Ill. "They can challenge me to make sure I'm
doing what I need to be doing. You need an open dialogue because the
advisor understands the estate planning process, and as a result can
help the client achieve a better plan."
Jeffrey P. Hart, with Tarlow, Breed, Hart &
Rodgers PC in Boston, sees the advisor serving as the quarterback on
the client's team of professionals, which could include, besides the
planner, an estate attorney, accountant, life insurance professional
and an elder care specialist. The advisor's role as quarterback is
especially useful, he says, with very wealthy clients with lots of
assets and plenty of planning alternatives. "Somebody needs to circle
the wagons around the client," Hart says.
Without question, advisors can and often do bring
valuable client data into the relationship process, which makes the job
of formulating an estate plan easier. And for that reason, many
attorneys favor the advisor attending at least the initial meeting with
the lawyer and client.
"It puts the client at ease and the discussion seems
more in depth. There is already a level of trust with their financial
advisor, so it helps establish my credibility with the client," says
Stephanie J. Edwards, a lawyer with Waller Lansden Dortch & Davis
PLLC, in Nashville, Tenn.
She says financial advisors are helpful in gathering
pertinent information like the titling of assets and family background,
which the client may not volunteer. "One of the most helpful things is
having two professionals encouraging certain goals because it makes the
client more likely to follow through on the advice. If the planner has
already discussed with the client, for example, creating a life
insurance trust to remove the proceeds from the client's estate, then
when I bring it up in our client meeting the client is already
amenable, and more likely will actually implement it."
Aument agrees advisors help in his initial
assessment of the client's needs, and prefers that they attend the
first meeting with the client. "It adds a level of comfort having
someone in the room the client can trust. The advisor can help take the
mystery out of the process, and assist clients in addressing the
difficult nature of the subject matter in dealing with their own
mortality."
Although attendance at initial meetings is
encouraged, attorneys split on whether they like advisors present at
subsequent meetings with clients. Some defer to the client's wishes.
Attorneys definitely don't want advisors present in circumstances
involving attorney-client privilege.
Edwards, for example, defers to the client as to
whether the advisor should attend follow up meetings. "I don't have a
preference one way or another," she says. If the client has possible
adverse issues to discuss, however, say a tax situation, she doesn't
want him or, for that matter, any other advisor to the client present.
"I don't want to waive the attorney-client privilege," Edwards says.
Likewise, Hart believes there are certain meetings
advisors should not be allowed to attend, usually those in which the
client doesn't want to disclose certain things other than to an
attorney. These could include private issues affecting the family or
the children, or a medical issue. At other times, he says, "The client
may have another planner or investment advisor in the picture, and may
not want to disclose to one planner how much money he has with the
other planner in circumstances where the financial planner is also the
money manager."
Stephen Sutera, an estate lawyer in suburban
Chicago, prefers advisors attend his document-signing sessions, which
normally last three to four hours and are held after the initial
meeting. But he acknowledges the difficulty because of the large
commitment of time on the advisor's part.
One valuable insight the planner can bring to his
client, according to Hart, is alerting him when he feels that the
estate planning attorney is in over his head. "Sometimes clients have
their longtime attorney/friend do the legal work. If that attorney is
not an experienced estate planning attorney," Hart relates, "that's a
prescription for either the process grinding to a halt or going in the
wrong direction."
How soon should estate attorneys get involved in the
process? As soon as possible, many say, to avoid problems later. Others
say timing doesn't matter that much. "The earlier we get involved the
better," states Edwards. "If the financial advisor has already
established an estate planning plan before they come to the attorney,
then it's hard for the attorney to deviate from that plan even if it's
in the best interests of the client."
Sutera agrees. "My belief is the sooner the better.
When I'm interviewing the client, even though the financial advisor has
the family information, we still revisit that information with the
client. It's only after we revisit the family information, goals and
objectives of the client, that we can really create a plan that is best
for the client."
But Kove says it doesn't matter to him whether the
advisor comes up with a plan or not before he sees the client. "They
will make certain recommendations, and we'll review them when the
client comes to us. In the end, we're going to do what is best for the
client anyway. I'm not one of those who will totally disregard an
advisor's strategy, but will certainly take it into consideration in
developing a plan."
It is strongly recommended that advisors develop a
strategy first, before proposing or recommending a planning product to
clients. "Pushing a ' product before putting the strategy into place is
like putting the cart before the horse," says Aument, "and doing so is
a disservice to the client. If the advisor refers me to the client and
brings me in, then the assumption I'm making is that the advisor is
looking for my unbiased opinion, which may include disagreeing with a
product that the advisor thinks is appropriate."
Kove says he encounters this situation often. "If we
feel (the product) is not suitable for the client we tell them that,"
he says. "The client should get an opinion from someone who has nothing
to do with that proposal, just like you would go to a doctor for a
second opinion before an operation."
The same does not necessarily hold true for
investment products, however. Aument has no objection to planners
recommending stocks, bonds or mutual funds while the estate plan is in
progress. "The exception," he says, "is when the client is going to
utilize life insurance as a planning tool," whereupon he prefers being
consulted.
Attorneys increasingly see life insurance as a more
substantive part in the overall estate plan, with advisors playing an
important role in seeing to it clients are properly insured. Says
Sutera: "If you're truly a financial planner, you're kind of (the
client's) quarterback, and as the quarterback you should be analyzing
whether their life insurance is doing the job it's meant to do."
Bruce W. Fraser has written for many publications. He can be reached at [email protected].