JANUARY/FEBRUARY 2017


Collins ADVISERS FORUM

Working with a financial adviser to manage wealth strategically

By John Collins

Managing personal wealth is, in many ways, like running a business; a coordinated and holistic plan is required to ensure your most important objectives are achieved. Successful business leaders develop strategic plans for growth in consultation with a group of financial and non-financial advisers, such as a board of directors, lawyers and accountants. Wealthy individuals require similar management of their financial matters—meeting growth goals, reducing risk, managing taxes, planning for future generations, developing a plan for charitable giving and so on.

Financial planning is a personal process that is unique to each family and individual. Clarifying your goals and selecting the right adviser or team of advisers will help you to reach your chosen destination.

Getting started

To paraphrase Lewis Carroll: "If you don't know where you're going, any road will take you there." Arguably, the toughest part of implementing a plan is taking the first step. Holistic planning must start with establishing a plan to manage your wealth. In many cases, you'll want to identify and work with a team of financial advisers to establish your wealth management plan.

Set financial goals. The first step in creating a relationship with a financial adviser is to understand your own personal financial goals. Organizing your goals into short- and long-term focuses will help you prioritize action steps and make the planning process easier. Your short-term goals may include such things as tax management, investment strategy improvements and retirement account investment. Longer-term goals for yourself and your family include retirement cash flow planning, lifestyle needs and wealth transfer planning.

Wealth transfer planning encompasses not only developing tax reduction strategies but also providing for a surviving spouse or children and grandchildren, both during and after your life. Even if you have only a general idea, discussions with your adviser can help you arrive at a clearer, more detailed understanding of what you want your financial plan to achieve.

Research your options. Once you've established your general financial goals, you can do some research to find an adviser whose skills will support those goals. Personal recommendations from people you trust are helpful as a starting point, but the decision requires careful and dedicated consideration. You should analyze a potential adviser as you would any major business decision.

• Review the adviser's qualifications, background, years of experience and referrals.

• Request the tax and income profiles of the adviser's other clients. Reviewing those profiles will indicate whether your circumstances fall into a profile the adviser is accustomed to addressing.

• Determine what services the adviser provides.

• Find out how the adviser approaches financial planning so you can get an idea about the process used.

• Ask how the adviser is paid for services.

A financial adviser's fee should be carefully weighted against the benefits. An effective wealth plan includes sound advice, tax savings and a more effective investment portfolio. All these areas depend on the successful application of the adviser's services to your wealth plan. In addition, there are several tax deductions available that reduce the costs related to working with a financial adviser.

You should also determine whether you want to hire a financial adviser to serve as part of a team or to serve two roles: for example, filling one spot on the team as a tax specialist and also serving as the team's point person.

Structure your team. To successfully create and monitor a financial management plan, you need a team working on your behalf. The team should include yourself, your spouse and your spouse's advisers, a tax adviser, a lawyer (perhaps multiple lawyers, depending on real estate needs, estate/gift tax needs, etc.), an insurance adviser, an investment adviser and, if applicable, a trustee.

One team member should serve as point person. Another way to think of this is that the point person is your CEO, and you are the chairperson. The point person's job is to help articulate your strategy, develop the plan and direct the other team members toward achieving your goals. This financial adviser will ideally fill one specific role on your team and will also offer enough expertise in the other areas of your plan to effectively manage the team for your purposes. This approach lets you focus on the vision and priorities for managing your wealth and enables the experts to ensure effective implementation.

Developing a trusting relationship with an adviser who is able to place your needs in the contexts of all of the different tax/strategy/investment/risk management products and instructions is the best way to achieve overall wealth management success. To this point, it is important to use your street smarts when considering a financial adviser. Is this a person you can trust? Does the perspective offered by the financial adviser in creating your road map feel right to you?

Build trust with your adviser/adviser team. Advisers should earn your trust. Your trust should not be given up front based simply on a recommendation. As you start working with your adviser or adviser team, provide them with your goals and ideas and then see what results they deliver. Certainly, results offer a tangible measurement you can use to assess the trust you develop with an adviser or group of advisers. But other, less concrete factors play a role in developing trust, such as the adviser's personality and your subjective assessment of your interactions.

Prioritize your needs and have the adviser or adviser team start by addressing the goals one at a time. Consider starting with something lower on your priority list. This will give you a chance to assess how the adviser/adviser team works with you.

It is useful to set expectations early on. How often do you want to communicate with your adviser? What kind of reporting do you expect? How often will the point person interact with other advisers on the team? Will the advisers consult with each other before making a recommendation to you?

Financial planning is a very personal matter; there is no cookie-cutter approach, so you should not hesitate to build a unique framework that makes you feel comfortable and in control.

Attend to timing and adjustments. Once you've established a trusted adviser relationship, you should meet with your adviser or team as frequently as you deem necessary. In many cases, quarterly meetings are appropriate, but early on you may prefer monthly meetings to help build trust and develop team cohesiveness.

The meetings should follow an agenda: Start by addressing old business, and then move on to new business based on what's happening in the marketplace, throughout the legislative landscape and within your family or family business. Significant changes that affect your financial situation, goals and overall financial well-being should be discussed with your adviser/adviser team in a timely manner.

Exercise patience. People tend to be quick to hire an adviser because they want to get it over with, but this is unwise. The process should be approached with the same dedication and due diligence you would bring to a major business decision. Exercising patience in building your financial adviser team can bring tremendous long-term benefits: Think of it as selecting a board of directors. This group will drive your financial plan, growing and maintaining your wealth throughout your life and into future generations. You want to build as competent a team as possible.

At times, it may be necessary to change team members. You should continually evaluate the success of the team and your trust in each adviser.

Involve your family. Most likely, your ideas about wealth management include members of your family in some capacity, whether the issue at hand is wealth transfer, succession planning for the family business or planned charitable donations. Including family members in the wealth management process is important for a number of reasons.

• If you and your adviser do not know the long-term goals of your individual family members, the plan you develop will not be structured to reach those goals.

• The best way to ensure that your spouse and children will make savvy financial decisions is to provide them with hands-on financial education and to involve them in meetings—and decision making—with your financial adviser.

• In the event of your illness or death, you want your family members to be aware of the current financial plan and to be acquainted with your adviser so they can continue the relationship and the plan.

• The best legacy you can leave your family members is one that empowers them with the knowledge and skills to continue not only your family value system but also your family wealth management system.

Special considerations

Once you've undertaken the effort to create a relationship with a financial adviser or adviser team, there are additional steps you can take to make the relationship successful.

• Keep the control. Through your communications and interactions with your adviser, make sure your goals are being met. If you're unsatisfied with your adviser or a member of your adviser team, address the issue. Ask questions, and don't shy away from challenging an idea if it doesn't seem to support your overall goals.

• Continue to play a lead role in setting agendas for adviser meetings, and clarify expectations as needed. Hold your lead adviser responsible for keeping your adviser team both objective and focused.

• Consider setting performance goals for your adviser or adviser team. This type of reporting back to you as a client will help track your relationship with the adviser or team, as well as the progress of your financial strategy.

Choosing an adviser is an important decision that will affect your long-term financial well-being. Involving a team of the right professionals will allow you to plan for all of your financial and non-financial goals.

Holistic wealth management is a fluid process, and it is important to revisit aspects of your plan with your adviser on an ongoing basis and to take the steps that will enable you to maintain a trusting relationship that is flexible, timely and in keeping with your personal wealth management vision.

John Collins is a principal in PwC's Personal Financial Services practice. He works with a high-net-worth individuals and families, family offices, corporate executives and owner-operated businesses (john.collins@pwc.com).


Copyright 2017 by Family Business Magazine. This article may not be posted online or reproduced in any form, including photocopy, without permission from the publisher. For reprint information, contact bwenger@familybusinessmagazine.com.