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Bending the Rules for Family

A case study in what can happen when your client dies and her heirs take her place.

David J. Drucker, 05/17/2007

I sometimes follow the postings on the NAPFA and FPA discussion forums because they highlight interesting planning conundrums, like the following.

We'll call our advisor who posted her dilemma "Jane," and those who responded will be given similarly bland names to protect the innocent (me). It seems one of Jane's best clients died last year, and the client's two sons came in seeking her help in managing their inheritances. However, contrary to Jane's typical process, the sons were unwilling to provide her with tax returns or other information about their incomes, presumably for privacy reasons. So Jane went public with this case, hoping her fellow advisors could advise her on how best to handle the situation.

Now, most of us in the business for any length of time would probably cut the client's two sons very little slack. Their response would likely be, "My way or the highway," or some variation of that. "I'm not a money manager; I'm a comprehensive planner," they would explain to the sons.

In fact, another advisor--"Bill"--replied to Jane with exactly that advice. In his post, Bill said, "My personal opinion is that, if you have certain requirements of your clients, and either a current client or a prospect is not willing to meet those requirements, you disengage. For instance," continued Bill, "I require that both spouses be present at our initial face-to-face meeting and that they bring with them all of the financial documents that I request, which they must agree to do when the meeting is scheduled. If one of the spouses doesn't show up, or if they don't bring their documents with them, the meeting is over before it begins. I'm not trying to be hard-nosed here, but if a person or a couple isn't willing to make this small commitment and stick to it, I feel that's a strong indication they won't keep any of their commitments, and I simply do not want to work with that kind of client."

Bill represents what I am sure is a widely-held view, and I believe he articulated it well. However, looking at the large number of responses Jane got to her discussion forum post, I had to wonder if there weren't some other ways to look at the matter.

Indeed, not everyone agreed with Bill's view of things. Many thought Jane should give the sons a try and offered ways in which to do it. "Thomas" opened the door with, "Mutual fund companies know nothing about their clients' tax situations and they manage trillions of dollars, so why should you be different if all you will be providing is investment management services?" The question, of course, is does Jane want to be, or does she consider herself to be, just an investment manager--even in some isolated cases?

"Ted" took a very client-centered approach, basing his reasoning on what these particular clients wanted and needed: "As financial advisors, we increase the odds of truly helping our clients by responding to their needs and desires rather than by imposing our world view and accompanying processes upon them. Though [the sons] have a different view of the services they expect, they do seem to make it clear that they want and need your help. It is laudable to adhere to the comprehensive-all-the-time standard but by doing so we, as a group, risk not helping the vast majority of the population who do not want to delegate the quarterback position, who wish to retain control, and who seek out advisor services on a more piecemeal basis."

This is an important issue Ted raises. We've all heard of the categorization of prospective clients as either "do-it-yourselfers," "collaborators" or "delegators." Ted's suggesting that Jane, if she hasn't already, decide which of these client types she wants to work with. If there's room for "collaborators," then perhaps there's room for the sons of her deceased client. These different client types require different approaches.

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