As professionals who advise the public, we regularly hear the question "Are you doing what is best for your clients?" Most of us feel confident in our answer; however, a gap often exists between the words and the actions of professional advisors, not because of nefarious intent, but rather due to the narrow scope of the advisor's practice. This gap between perception and reality can happen with CPAs, accountants, financial planners, attorneys, and insurance agents, and nearly no one is exempt. In fact, even the best of the best can find themselves in what I call a "transactional rut."
A transactional rut occurs when your practice is growing and generating fees with reasonable overhead, and your clients aren't complaining. This reads like your best-case scenario business plan, doesn't it? So what's the problem? The risk of being in a transactional rut is that your clients will start viewing you as a vendor, and your service as a commodity they can obtain anywhere. The paradigm shift can occur subtly; you may not even realize it until times get tough and clients then leave you for a cheaper or more convenient vendor.
So how can you avoid this rut? Innovate. Change when you don't have to. The proven, time-honored path to business success as a professional advisor is in developing unique, meaningful relationships with clients whereby you provide real value. Quality relationships take effort, but they are also enduring, through good times and bad.
Think of your clients. Do you know who all of their professional advisors are? Have you ever had a meaningful conversation, for the benefit of your mutual client, with a client's advisor in another discipline? Throughout my career, I have asked a few thousand people if they have ever had all of a client's advisors in the same room at the same time to discuss what was best for the client's situation. One person has said "yes."
Ask yourself this: Wouldn't it be best for your client to have a meeting involving you and all of his or her other advisors? Is the point of view of the CPA different from that of the insurance agent? How about the perspective of the attorney versus the financial planner? Your client can have the best advisors in the world, yet their strategies are not coordinated and integrated. And what could happen? Your client could lose money and have no idea that it's due to inefficiency. Is this what is best for your client?
Here is a recent example from my practice. I had an initial visit with a physician (older than age 59 ½) who brought in his tax return and brokerage statements. He was very successful and had a high income. However, last year he had some unusual issues that resulted in his gross income being $70,000. I also reviewed his exemptions and deductions before telling the doctor that he could have taken approximately $100,000 out of his traditional IRA and paid zero income tax. He looked at me like I was crazy.
I then went on to explain that his taxable income would have essentially gone from -$100,000 to zero, and when your taxable income is zero, your tax due is zero. Any other year, this withdrawal would cost the doctor more than $30,000 in taxes. His stockbroker was focused on growing the IRA to the best of his ability. His CPA also did what the CPA was paid to do: Minimize last year's tax liability. There was no coordination between the advisors and the client, yet each advisor believed he was doing what was best for his client. Do you think the client feels that way now?
Unfortunately, this example is more common than clients and professional advisors realize. Boilerplate planning can be destructive to your client and risky to your practice. If you are sincere in wanting to do what is best for your client, seek quality relationships with clients and productive value-added alliances with other professional advisors who share your values and vision. This will help you patch up those transactional ruts so you don't fall prey to them in the future. The payoff is a clientele that recognizes your true value, increased knowledge for your practice, and a more rewarding career legacy.
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