the role of the personal cfo

woman and man talking with coffee, laptopyour client? the family ceo.

by anthony glomski

truly consultative collaborative wealth management stands in stark contrast to how most investors and their advisors operate today. even the most affluent and successful people you know – professionals, entrepreneurs, executives – rarely take this type of coordinated and comprehensive approach with their finances.

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the vast majority of people tend to address retirement, estate planning and other financial goals on an ad hoc basis – treating these issues as separate concerns and placing each one in its own discrete box. given that, their efforts to deal with their many interconnected issues are not coordinated. this leads to challenges that can jeopardize their financial health as well as that of their families, their practices or their businesses.

this is why it’s so important to manage wealth comprehensively: it lets your clients see the big picture at all times and manage their finances around the whole instead of focusing on only one aspect. unfortunately, many advisors and other professionals deal with issues only when they arise, and they gather just enough information to implement a single particular response to the current problem at hand. unfortunately, being reactive rather than proactive keeps successful people (and their advisors) at a permanent disadvantage.

many financial firms these days claim to offer comprehensive wealth management, but in reality, they focus almost exclusively on investment management. there’s a big difference between the two. mainstream financial firms may offer a few additional services, but they lack the truly comprehensive approach that you need to coordinate your entire financial life – and to anticipate client needs before they arise.

to make wealth management truly a part of your client’s financial life, you need to recognize an important fact – one that you’ll no doubt appreciate:

your clients are not just the ceos of their companies or practices – they are the ceos of their families.

being the ceo of your family (or the co-ceo, along with your spouse or partner) means that you have a duty to define a vision for your family. as the trusted confidant to the family ceo, your job is to help him or her clarify what they truly value in life and what they want their family to achieve. then you can better determine the best path to make that vision a reality – just as you would define your own firm’s direction and path.

part of your responsibility as the wise cfo to the family ceo is deciding where to get specialized help toward realizing their vision. the most common area in which “family ceos” look for guidance is their finances.

in some ways, the financial side of a family unit is actually a lot like the financial side of a business. in both cases, there are important decisions to be made about spending, saving, investing and planning for future growth and preservation. as with any business, your client and your client’s family need a financial leader who can present them with good ideas, act as a sounding board and work with them to ensure that they have what they need to make smart decisions about their money – just as the cfo at a company does.

many highly successful people think they can hold down the role of both family ceo and family cfo. they think they can think through the full range of financial challenges they face and develop optimal responses that work in concert with each other.

eventually they will realize they can’t handle both roles and they will seek out a trusted financial professional, to act as a personal cfo for their family. as a cpa, you are their most trusted advisor. why not put yourself in the right place at the right time by having a collaborative wealth management process in place? this will give you a tremendous advantage over other investment advisors who take a more one-dimensional approach to managing their clients’ financial lives.

there’s another important benefit to becoming a personal cfo – you’re in much better position to charge project-based fees and retainers because of the value you bring the client. our experience is that clients greatly prefer this type of billing versus paying recurring invoices with miscellaneous hourly charges.

the mutual discovery meeting

only a small percentage of financial advisors are offering clients a collaborative and truly comprehensive wealth management process for achieving financial freedom. it’s a carefully defined and executed process that cannot be delivered piecemeal to clients. but as a cpa, you are in ideal position to learn it, deliver it and implement it.

part of what makes collaborative wealth management so effective for addressing entrepreneurs’ needs is the mutual discovery meeting. this initial stage of the process focuses on helping your successful clients – whether business owners, professionals or executives – identify their deepest, most important financial wants and needs.

the reason for this is simple: only after those needs and wants are identified can you design a customized portfolio to support those goals. without this foundational information, the management of wealth becomes nebulous and ill-defined. you can’t solve the complex and sometimes conflicting challenges your clients face until you position your client’s assets around the values, needs, goals and issues that are most important to them.

the mutual discovery meeting helps you identify all that is most important to your clients in seven key areas of their lives their answers to the types of mutual discovery meeting questions below will help develop an all-encompassing picture of who your client really is and what they want from life so their assets can be ideally positioned to support that picture.

1) values define what is truly important to your clients about their money and their desire for success. what are their deep-seated values underlying the decisions they make to attain those goals? when they think about their money, what concerns, needs or feelings come to mind?

this is a particularly important area to address. our values are core motivators of everything we do in our lives. those values have a profound impact on every important decision we make. and yet, most of us have trouble articulating our values. even entrepreneurs who may have carefully spelled out the core values of their companies have trouble doing a “deep dive” into their own personal values. it’s not as easy. the mutual discovery meeting interview process can therefore bring substantial advantages to the process of managing your client’s situation effectively.

2) goals. what does your client want to achieve with their money over the long run? think professionally and personally, from the most practical to their biggest dreams.

3) relationships. which people in their lives are most important to them? think family, employees, friends and colleagues (and even pets if they’re considered part of your family).

4) assets. what does your client really own? where and how are those assets held? from business assets to real estate to investment accounts, to artwork and retirement plans, it’s important to take stock of it all. many clients are surprised to see how much they really own when it’s all laid out for them in one simple view.

5) advisors. on whom do they rely for advice? how do they feel about their relationships with each of those professionals? this systematic process is designed to work in partnership with all of your client’s trusted advisors so the team – with you as the leader – can arrive at customized, comprehensive solutions that complement each other. very important: each of the specialized experts you bring on to your team is highly accomplished. but they must be able to “check their egos at the door” in order for the team approach to work. if they can’t, then they are not right for your team, no matter how great their skills and reputation may be.

6) process. how involved does your client want to be in managing their financial life? how do they prefer to work with their trusted advisors? hands on? hands off? or somewhere in between?

7) interests. what are your client’s passions in life? consider hobbies, favorite sports and leisure activities, charitable and philanthropic involvements, and religious and spiritual relationships, as well as their children’s schools and activities.

if, like most affluent entrepreneurs, your client works with multiple financial advisors, remember that most professionals use some type of fact-finding process when first meeting with their clients or prospects.

but, have you ever noticed that these questions usually focus almost exclusively on the client’s assets and net worth? in contrast, note that only one of the seven categories that make up collaborative wealth management’s total client profile above focuses on financial assets. six of the seven categories are focused on helping your client (and their personal cfo) better understand who they are as a person – not as an asset holder or investor.

there’s a big advantage to getting at this information. by engaging in this mutual discovery process and using the insight you gain to create a personalized profile, your client’s wealth and all the choices they make involving their wealth become better aligned with the life they want to build.

collaborative wealth management is a process-driven approach to positioning your client’s financial life. it’s designed to help them achieve all that is truly most important to them, their family and their community.

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