In the wealth management service experience paradigm, the client expectation framework is built upon a foundation of “more is more.” The traditional support deliverables (e.g., expertise, empathy, access and transparency) remain integral, but not static, as expectations evolve. And in a nod to societal mores, convenience has joined the ranks of impactful must-haves in the advisor/client relationship.
The ease with which individuals today can accomplish previously time-consuming tasks is unprecedented. The ability to work, shop, order take-out and communicate with loved ones without leaving your room does have its benefits. But that doesn’t mean it’s good for you in the long run.
The same might be said for wealth management clients who demand their advisors expand their core offerings to deliver highly specialized tax planning in-house. Yes, it may be convenient to engage with a one-stop shop. However, a client’s tax situation is often as complex as the regulations governing them are fluid.
There are instances where working with professionals solely dedicated to one area is prudent – and not just when it comes to medical care or home repair professionals.
Tax management is an important aspect of wealth management. Do firms and their advisors benefit more when the offering is kept in-house or kept separate from a firm’s core offerings? Often, it depends upon the client’s circumstances.
Do clients see tax management as a service expectation or a service enhancement? It depends on who you ask. While many firms outsource tax planning to focus on investment oversight and financial planning, others are bringing it in-house in an effort to provide an end-to-end support platform. Even wealth management executives who see benefits to both approaches have strong feelings on the matter, and stress that outsourcing tax-planning services does not remove advisors from the client care process.
Dallas Mock, Managing Director, Client Advisor at Caprock, a Boise, Idaho-based wealth management firm and multi-family office, says, “While there are pros and cons to each, we believe that outsourcing tax planning offers a better overall solution. While common denominators exist among successful families, the nuances we see are enough for us to seek tax management teams that line up best for each family’s tax servicing needs.”
Many wealth managers see their role as more in the mold of a quarterback who has a direct line of sight into a client’s entire financial picture and who works alongside other professionals to deliver optimal results via collaboration.
“Our strength is coordination and illustration. We orchestrate the relationship between wealth management, tax and estate planning so our clients experience one integrated team,” says Sam Diarbakerly, Founder and Wealth Advisor at Generation Capital Advisors, a wealth management firm based in Boston.
He continues, “Clients expect us to coordinate with their other key professionals. Many have longstanding CPA relationships, and our job is not to disrupt them but to enhance coordination and illustration. If a client needs a specialist CPA, we introduce someone from our network with deep expertise in their specific area. We remain the quarterback across wealth, tax, and estate decisions. The client sees one team. Our value comes from active coordination, not from performing every service in-house.”
Mock concurs, saying, “The control and oversight (or lack thereof) of a family’s ‘financial well-being’ is a direct result of the family office’s ability to coordinate and collaborate with the tax team. Lack of control over the tax strategy (from portfolio design/implementation to estate planning), just because the solution is outsourced, would be a failure for the family office. After-tax return outcomes are always the focus during the portfolio design process.”
The Great Wealth Transfer Is Shifting Client Expectations
Successful firms with a long-term outlook are equally focused on serving the needs of existing high net worth clients as well as the next-gen beneficiaries who are their heirs. And both coteries reap the rewards of tax-efficient estate planning. First-gen investors can maximize their legacies, as the tax burdens of beneficiaries are mitigated.
As newly affluent investors come of age and bring their expectations around service to the marketplace, a domino effect is changing how firms interact with these clients.
Mock says, “The Great Wealth Transfer has significantly heightened clients’ expectations for continuous, sophisticated tax planning, and they now see tax‑efficient estate planning as an essential, standard component of advice rather than a specialized extra.”
He continues, “Our clients now expect their estate plan to be updated regularly as tax laws and family situations change, not created once and left alone. They also better understand that federal, state and GST taxes all interconnect, and they rely on us to monitor changing limits (such as exemptions and annual gift limits) and advise them when to make changes.
“When there are gaps in understanding how everything works, clients lean on us to flesh out the complicated nuances of structuring a plan that aligns with their needs. As the keepers of the total balance sheet, we are in a preferred position to offer guidance on ways to optimize it,” Mock adds.
There is no question that tax planning is an integral part of the wealth management process. As next-gen clients are increasingly seeking out financial advice, they are being more proactive in their relationships.
Diarbakerly notes, “Clients absolutely want to learn and work alongside their key professionals. Many estate plans were created decades ago when baby boomers were in their prime, so a lot of incumbent estate attorneys have aged out. That creates a real opportunity for younger, forward-thinking estate attorneys to work with both the current generation and the next one. Tax-efficient transfer planning is now table stakes, not a luxury add-on.”
The Benefits Of Outsourced Tax Planning
Beyond optimizing service, there may be other benefits to a “divide and conquer” approach.
Diarbakerly believes, “The jack of all trades is the master of none. Rather than trying to recreate a robust tax operation, we partner with best-in-breed tax firms that have deep benches and specialized expertise. Outsourcing removes the liability and staffing burden of maintaining an in-house tax department. The downside of bolting tax onto a wealth platform is often an overworked, understaffed operation that doesn't deliver what's promised.”
Every wealth management enterprise is focused on delivering the best services and support to the clients who trust them with their assets, future and legacies. For Mock, that means leveraging the power of what he calls “the network effect of outsourcing solutions.” He says, “In conversations with prospective clients, we often say that all the best servicing solutions can’t live under one roof. This is particularly true with tax management services. An in-house solution may limit the ability to service all manner of complex balance sheets.”
Wealth Solutions Report can be reached at info@wealthsolutionsreport.com.
