[IMGCAP(1)]In these emerging days of IBM’s Watson computer and robo advisor platforms, the revenue-generating methods deployed by many firms are in serious jeopardy of having their lunches eaten.

The thesis here is that doing forecasts and asset allocation with an intelligent program to guide your client is something that may be adequate for many of your clients. The only way to prevent extinction for the advisory firm dependent on fees from asset management is to render advice on a broad range of technical tax, financial, legal and economic issues, as well as having a complete understanding of what is most important to your client. For many the answer is consistently the same — family.

Successful operators of a traditional accounting and tax practice do not always have much interaction with the client’s family. The exceptions to this intergenerational gap would include clients with a business that involves family members. But even in the case of a family business, the accounting firm may only have relationships with the family members who actually work in the business, and actually know little about the client’s other family members.

Knowing the client’s family — and anyone or anything else who is important to them — is vital. It’s easy to do a financial plan in a bubble. Many advisors want to take the shortest route to completing the plan and do forecasts, gather assets and send their clients around to estate planners, insurance agents and other needed professionals. These others may interact with the family through their traditional services, and ultimately get to know the client’s family members and perhaps begin a business relationship with them.



Contrary to popular belief, it is not harder to do a financial plan where you invest the time to dig deeply into what is most important to your clients. It is more time-consuming, but it becomes the foundation for a richer client experience that transcends the generation gap and the ups and downs of financial markets and investment decisions.

The mechanical part of planning cash flow and cost of living is an important foundation for a financial plan. So is building a portfolio that will meet the client’s long-term needs. As you go through that process, begin asking questions about the family to discover what may be driving many of their financial decisions. Do not assume that family only includes children. Family may include parents, aunts and uncles, siblings, close friends or anyone else who is an important part of your client’s life.

When building a cash flow forecast, begin asking if your client is providing any support or regular gifts to anyone. Probe a little deeper and ask if there have ever been one-time gifts or loans to anyone. Also find out if they would like to provide any support to anyone else. Sometimes clients may want to help out their child or their older sister, but don’t know if they can afford to do it.

For clients with younger children in their life — whether your client is the parent, grandparent or uncle — find out what kind of gifts they’ve given. A new tennis racket or tickets to a concert are nice to know about, but what we are really looking for is whether your client has made material gifts, such as 529 contributions, tuition payments or expensive tangible gifts like computers or cars. It is common for grandparents to want to help with grandchildren’s college expenses. Many aren’t really aware that they can pay certain expenses directly to the institution in addition to their annual gift exclusion of $14,000.

Once again, the pattern that the planner needs to consider is how significant are family issues in your client’s financial decision-making process. When you show that you really care about what is most important to your client, they’ll know that their goals and objectives have been heard and that you are definitely out for their best interests, because you know what they are. As the planner, do not feel awkward probing for anything else that they may want to do for their family.



As a real-life example of how probing can pay off, let me digress. Early in my planning career I served a single woman who had never married and wasn’t too excited about endowing her nieces and nephews with any more than a nominal amount if there were any assets left over upon her passing. However, she always asked to set aside a rather substantial sum of money in her forecast and wouldn’t tell me what that was for. After several attempts, she finally confessed that this sum of money was to build a mausoleum for her deceased mother. Once we knew what she was contemplating, it was factored into her cash flow and the conclusion was that this expenditure was indeed something that she could easily afford, and the mausoleum was built a year later. For her, this was a life dream come true that she thought she’d never afford.

Another black hole for many CPA firms lies in the form of beneficiary planning. Beneficiaries for retirement accounts, life policies or trusts are something easily hidden in plain sight from the firms simply offering tax or commoditized forecasting and investment services. In the course of either tax preparation or financial planning, it is imperative that you ask and understand the why behind your client’s choice of designated beneficiaries. For example, do you really think that your client would want a $2 million IRA to pass equally to his 25-year-old son and 21-year-old daughter if he is predeceased by his spouse or divorced? Most clients with $2 million retirement accounts would agree that the risk of putting so much money in the hands of such a young and possibly vulnerable person would not be in the child’s long-term best interest.

This issue of beneficiary planning can get even worse in the case of a large life insurance policy. It is not uncommon to see life policies for families in the millions of dollars range. The compounding of errors here may span from death tax issues to tax-free cash in the pocket of an immature beneficiary. A better choice for the life policy may be a trust. Properly drafted, the trust can kill two birds with one stone. It may be able to avoid death taxes and provide spendthrift protection for the immature beneficiaries through the use of an independent trustee. The planner who merely looks at their clients’ life insurance policies from a capital needs perspective or through the examination of in-force ledger statements prepared by the issuing insurance company is missing a very important part.



The estate plan is probably the best way to understand and interact with a client’s family. Once again, many of the commoditized forecasting and asset management shops simply send their clients to an attorney to get a new estate plan. A well-run wealth management practice has the conversations about estate planning with their clients prior to involving an attorney. The wealth manager needs to know how a client feels about their children and their children’s spouses, and about any special needs people in the family or any charities that your client wants to endow.

This is also the time to have the conversation about how to leave assets between spouses, and the use of independent trustees for asset protection purposes or protection for a possible second future marriage. An estate where everything is simply left to the other spouse with no trusts can leave these assets vulnerable to a second spouse. If there is no language to the contrary, and the widow or widower does remarry, they’ve got to make a decision. Absent making a decision, the new spouse will get some or all of the estate, depending on if there are any new wills in place. Without a will, your client’s state of residence will dictate who gets what under their laws of intestacy. A good wealth manager will help your clients figure this out before there is a problem. If this issue was not adequately addressed before the passing of the first spouse, the planner can have the discussion regarding the division of the assets between a new spouse and children from a prior marriage, or anyone else that your client wants to take care of in their dispositive documents. This may also be a good time to introduce the notion of a prenuptial agreement.

The ultimate conclusion of a family wealth plan where family is the centerpiece is the family meeting and communication of the plan. Anyone who may be a future part of the family finances who is old enough to care should be communicated with. The planner should coordinate and facilitate the meetings where the family is briefed on their role or for a general update as needed or desired.

For example, your client’s brother or best friend should know that they are the backup trustee for the trust established for your children. Your sister-in-law needs to know that she is named as the backup guardian of your minor daughter.

Your clients’ closest family members, those either receiving assets under a will or trust or empowered in such crucial roles as trustee or health care power of attorney not only should know, but they want to know what you’ve done. Adult children, for example, really care about their parents’ financial wherewithal, what their plan is, and how they’d like to be cared for in the event that they cannot care for themselves.

This meeting is also a great time to inform them of the provisions of your clients’ trusts. It is better for them to know while your client is alive that the trusts have an independent trustee or if they restrict access to assets.

Many clients may try to conduct these conversations with family by themselves. For very simple situations, that is probably OK. But for more complicated and larger situations, it is best for the wealth manager to be the communicator. It clearly establishes your role as the head coach or go-to person in the event of a problem. This role, coordinating everything and knowing the family members, is a great service for all clients. It creates a legacy of great service after your client passes and the family continues to benefit from your great planning and ongoing wisdom.

John P. Napolitano CFP, CPA, PFS, MST, RLP, is CEO of U.S. Wealth Management in Braintree, Mass. Reach him at JohnPNapolitano on LinkedIn, or at (781) 849-9200.

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