Although football season is still months away, nearly every day we see news headlines about a quarterback at some college or pro football team. Some would argue that it is the most important position on the field; perhaps that is why they are always among the highest-paid players.

I realize that not everyone is a football fan, so at the risk of boring some of you gridiron regulars, let me provide a little insight into why the quarterback has such a significant role. Just about each play in football begins with the quarterback touching the ball. From there, the QB is either following a prescribed play or creating the play using wisdom, experience, and the facts and circumstances as they exist at the moment the QB receives the ball. In some cases, the QB calls the plays, while in others, the plays are sent in from the sidelines by someone designated to do so. In almost all cases, however, the QB has the right to call an "audible" and change the play if the defense appears to be in a good position to stop the intended play. The audible is called by the QB yelling a series of names, letters or numbers just before getting the ball to alert his players on the field that a different play will be executed.

The similarities between a QB and a CPA financial planner acting as the financial QB are striking. A QB has 11 players to coordinate and do the right thing on the field with the goal to provide higher odds of success. A large client typically has at least 11 other players in their financial life in addition to their CPA planner.

These others may include one or more attorneys, one or more insurance agents, a banker, a broker, a realtor, another CPA and likely others. Who is the QB for this team of high-powered subject matter experts? In most cases, it is the client themselves.

Most people do not have a designated financial QB, yet most advisors would agree that there is tremendous benefit in having the various subject matter experts for an individual communicate regularly.

 

TAKING CHARGE

Who is the one calling the plays for your clients? In most cases, it is the subject matter experts acting alone or the client who calls the plays themselves. As you know from experience, any financial decisions made in a vacuum tend to have gaps or shortcomings. How often do we ask clients not to let the tax tail wag the dog? Yet each and every day clients make decisions based upon their understanding of what may save them the most in taxes.

A perfect example is your client who has tons of bank deposits earning less than 1 percent and then decides to go ahead and pay 4 percent for a mortgage because it is deductible. First of all, you and I know that it may or may not be deductible depending on their adjusted gross income. Second, why pay 4 percent to borrow money you already have, when you are earning less than 1 percent with your bank accounts? Seems to me that avoiding a 4 percent cost by using your savings is similar to raising the rate on your savings to the interest rate you would have paid for the debt. The 3 percent interest savings is way better than the tax deduction for the mortgage interest, and you'll keep the paltry 1 percent of interest income off of your 1040.

In your client's life, who is checking to see that the right play is being executed while they are deeply involved in the game? Once again, it is either the client or the subject matter expert for that particular area working without the benefit of the others. This problem happens too often, and can be witnessed in the following areas.

Your clients, for example, frequently have a set-it-and-forget-it type of mentality with their 401(k)s and retirement accounts. We often see individuals with very little attention paid to the investment allocation, the beneficiary elections or the amount of the contribution.

The same may be true of your client's life insurance portfolio. Life insurance for most people is something that you buy and stuff in a drawer until someone has to hunt down the policy because you've passed. This may have been acceptable 30 years ago, but today it is not going to work.

Since the 1980s, there have been a plethora of different types of life insurance contracts sold. And with these contracts, there is a wide range of assumptions that may occur that could impact that policy. I recall the days when overzealous life agents would forecast double-digit rates of return on cash surrender values. For many, their actual policies came nowhere near the illustrated returns and these policies may now be under tremendous stress. But no one will know whether the policy is under stress until someone takes the time for a closer look, or you get a letter from the insurer letting you know that your premium is about to increase materially because the policy did not perform as expected.

And of course, the same could be true of your estate plan. Assuming that your estate plan was in good shape in the past does not mean that it will always be in good shape. Laws change, people change and your life has enough twists and turns so that few estate plans will last unchanged forever. Clients may need to update their estate plans for many reasons. Among them are a change of domicile from one state to another, family changes, or simply handling things differently than when the original documents were drafted.

And who is the one who has the power to change things when it appears that a shift in tactics appears to be necessary? An asset manager, for example, may have discretionary trading authority to make changes in an investment account. But that asset manager may not be up to speed on other changes in the client's life that may necessitate a change of investment strategy.

With most wealth management decisions, the answer frequently ends up being, "It depends." Why do we hear this non-committal response so frequently? The reason is context. "It depends" could be based on the client's feelings or how some other future unknown event unfolds. A wonderful recent example of this was the changes made to the Tax Code over the past few years. As we approached the fiscal cliff, did all of your clients properly consider each possible move before the stroke of midnight on the precipice of the fiscal cliff? Their options included making major gifts as the estate tax threshold faced the possibility of a drastic reduction. There were opportunities to create material gifts, accelerate income under the theory that taxes were going to rise, and pursue opportunities with charitable planning or Roth conversions. Many of these decisions could have paid dividends for years to come, yet they had to be made under duress at year's end without a clear vision of the future consequences.

 

PANDEMONIUM

Another important piece of the context puzzle comes from the advisors themselves. As we know, not all advisors are good at what they do or when they act as fiduciaries. Consequently, recommendations may be made that may not be in the best interests of their clients. For this, and many other reasons, you'll frequently see conflicts or disagreements among the professionals as to the most appropriate course of action with a client matter. The CPA may say one thing and the insurance person another. At this point, the client is thoroughly confused and doesn't know who to believe.

Rather than battle over a conflict with another professional, the competent CPA PFP QB would be in a great position to help settle the score using the most important context - with that context being what is the best course of action to meet the client's overall goals, and not just the particular issue on the table at that moment.

The best way for you to be an effective QB for your clients' financial team is to be a comprehensive and proactive wealth manager. If your actions over the years have indicated that you are the person who tries to integrate the subject matters and the experts on the client team, it will be easier to have the QB conversation with the client.

In the conversation, explain to the client that there is a higher role for you to play. Explain how all of their financial decisions may be easier and more effective by soliciting your input prior to making a decision.

At first, many clients will feel as if their situation doesn't warrant that much attention. But after a thorough examination of their entire financial life, there should be enough interaction with the other subject matters and their respective experts to show firsthand how they will benefit from you getting the ball first.

John Napolitano, CFP, CPA, PFS, MST, is CEO of U.S. Wealth Management in Braintree, Mass. Reach him at (781) 884-2390.

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