Key Takeaways

  • Elite wealth planning goes beyond mere technical expertise.
  • The human element is the personal and emotional components of wealth management.
  • Wealth planning should be informed largely by the human element and changes in your personal situation.

Wealthy individuals and families by and large like to work with highly skilled advisors—from wealth managers to accountants, lawyers and beyond.

And why wouldn’t they? If you have the financial ability to access advisors who are known for their technical capabilities in areas like tax mitigation, estate planning, investment management and so on, why wouldn’t you pick those advisors over others who aren’t as knowledgeable about those issues?

But here’s something that might surprise you. We’ve  learned, from decades of working    with both the affluent and top financial advisors, that those advisors who may be the best technically are not necessarily the best advisors for you.

Why? Often, these advisors are missing a key ingredient that can empower them to better serve investors with sizable wealth.

The human element

Let’s be clear: It makes good sense to find and work with professionals who are technically skilled—ideally, technically brilliant.

But we think you should be looking for more, too. In particular, we believe any wealth managers you work with should be exceptionally good at bringing what we call the human element into all they do on behalf of their clients.

The human element as we define it is the personal and emotional components of wealth management. It includes understanding everyone and everything that is important to you,   as well as everyone and everything that could be affected by your financial decisions, and using that understanding as the basis for making a broad range of decisions about your wealth.

The following case study helps illustrate why it’s important to work with a wealth manager who is extremely adept when it comes to the human element.

A wealthy entrepreneur wanted his business succession plan stress tested to see whether it would deliver the results he wanted under various scenarios. A cohesive team of specialists were assembled to do the review and assessment. They concluded that, because of changes in the family dynamics since the time the estate plan was first signed, the most likely outcome after the business owner’s death would be an all-out war among his four children. If it got bad enough, the conflict could be the death knell of the 200-plus-year-old family business.

When it came to inheritances, the patriarch had decided on being even instead of fair. That meant each child was set to receive an equal share of the estate (including the company) even though only one of the four was involved in the company—as its president. The patriarch described two of the children as “do nothing” and “worthless.”

Thinking through the situation with an intense focus on the human element resulted in a new estate plan along with well-structured and rigorous succession and asset protection plans. It’s important to note that the existing wealth planning had done extremely well. However, the family’s circumstances changed. Now, the child involved in the family business will inherit the company. The other children will get comparable amounts of wealth but in different forms. 

The value of the human element

This case study reveals how important it can be to stress test some aspect (or all aspects) of a wealth plan from time to time, especially with an eye toward interpersonal, human-element concerns.

Stress testing is a systematic way to evaluate whether your plan is positioned to generate the results you expect it to. It can also be a good way to determine whether there are any meaningful opportunities out there that your current wealth plan isn’t taking advantage of.

Sometimes stress testing identifies technical mistakes that were made in the creation or implementation of a strategy. For example, some successful entrepreneurs will put different assets in separate entities. However, they might fail to insulate those entities from something adverse occurring in their personal lives. Another example is life insurance, which is often based on assumptions and projections. Sometimes, a stress test will show a technical failure—the life insurance will not perform as expected.

But stress testing also can reveal areas where strategies are correct, technically, but have become outdated because of changes in a person’s situation and needs.

That said, it’s more common in our experience that stress testing reveals everything to be on track, technically and from a human element perspective. Finding no problems at all can potentially be good and comforting news—especially if there was uncertainty going into the stress test.

Sizing up an advisor

There are two approaches that potentially can help you make a determination whether a technically proficient wealth manager is likely to deliver results that satisfy you.

1. Determine whether the wealth manager is focused more on products—or on you. Financial solutions are simply tools—and whether or not any particular tool may be right for you depends greatly on your goals, your needs, your preferences, your concerns and your challenges. Assess whether a wealth manager seems to be paying more attention to the mechanics of a solution—the ins and outs of a particular type of trust, for example— or whether that wealth manager spends more time trying to get to know you as a person.

If the focus is on you, it’s a sign that the wealth manager is also focused on outcomes— getting the results that you seek for your particular family, business and so on. These wealth managers also tend to be adept at explaining how their actions (or proposed actions) are aimed at delivering the specific results you seek.

2. Get a stress test done. You should consider stress testing if you’re not extremely confident that one or more of your wealth management solutions will get you the outcomes you want—due to a technical concern, a change in your personal situation     or both. You might also consider stress testing if you’re concerned about a proposed solution or strategy’s effectiveness relative to your goals. A stress test could help you decide whether you should go with that solution—or steer clear of it and the wealth manager who proposed it.

Conclusion

It’s a good idea to find and work with technically adept financial professionals who are well versed in the many strategies and solutions available to you. Expertise is valuable and can potentially add value to your financial life.

That said, you can still end up being disappointed with your results if all you do is seek out such experts and stop there. We believe a much better idea is to work with technically skilled professionals who also focus much of their time and attention on how potential solutions may (or may not) help the needs of specific clients.

This requires the human element—a willingness and ability to get to know you on a deep level. Wealth managers who combine the human element with great technical skill are likely to be better positioned to generate outcomes that their clients most want.

VFO Inner Circle Special Report

By Russ Alan Prince and John J. Bowen Jr.

© Copyright 2021 by AES Nation, LLC. All rights reserved.

No part of this publication may be reproduced or retransmitted in any form or by any means, including, but not limited to, electronic, mechanical, photocopying, recording or any information storage retrieval system, without the prior written permission of the publisher. Unauthorized copying may subject violators to criminal penalties as well as liabilities for substantial monetary damages up to $100,000 per infringement, costs and attorneys’ fees.

This publication should not be utilized as a substitute for professional advice in specific situations. If legal, medical, accounting, financial, consulting, coaching or other professional advice is required, the services of the appropriate professional should be sought. Neither the authors nor the publisher may be held liable in any way for any interpretation or use of the information in this publication.

The authors will make recommendations for solutions for you to explore that are not our own. Any recommendation is always based on the authors’ research and experience.

The information contained herein is accurate to the best of the publisher’s and authors’ knowledge; however, the publisher and authors can accept no responsibility for the accuracy or completeness of such information or for loss or damage caused by any use thereof.

Unless otherwise noted, the source for all data cited regarding financial advisors in this report is CEG Worldwide, LLC. The source for all data cited regarding business owners and other professionals is AES Nation, LLC.

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