Establishing a well-designed retirement portfolio is table stakes nowadays as clients increasingly expect an array of offerings, including tax advice and estate planning. The upshot is that wealth managers who are offering multiple services are retaining clients and those who aren’t are losing them.
A survey this year by Natixis Investment Managers of 300 U.S. finance professionals, including wirehouse advisors, RIAs, and independent broker dealers, revealed that 44% of advisors lost clients when they “failed to demonstrate value beyond portfolio construction.”
This trend has gained momentum over years, explains Dave Goodsell, the Boston-based executive director of Natixis, the French-based global asset manager, which manages over $1 trillion.
“Clients want their advisor to be their financial guide; they see the investment as part of a holistic plan,” notes Goodsell.
Firms need to act as if they are offering concierge services, responding to the specific needs and requests of each client. For example, many clients want their financial advisors to educate their college-age offspring about how to handle money, start a 401(k) plan, and attain their financial goals.
The world “has gotten more complex from a wealth management standpoint,” asserts David Winslow, the Charlotte, N.C.-based principal with RSM US Wealth Management, which manages $9 billion in assets.
For example, complying with rules around meeting Medicare premiums under the CARES Act and determining whether clients are eligible for stimulus programs can be a complex undertaking.
“One of the major barriers in accumulating and retaining wealth is income and estate taxes,” Winslow notes. Hence, RSM differentiates itself by specializing in tax planning combined with financial planning and wealth management expertise. Its team of Private Client Services focuses on income tax planning and estate and gift areas.
Winslow points to its assisting a long-term client and owner of a middle-market company with the sale of his firm to a strategic partner. The sale involved a high-level of complexity on a federal and state level and entailed “understanding the tax implications of the sale, the impact on 2020 planning, and integrating philanthropic objectives,” he notes.
RSM’s minimum investment is $2 million, and most clients have a larger portfolio. Most are entrepreneurs, many with family and middle-market businesses.
Combining tax and wealth management forms a natural “synergy,” Winslow says. In fact, “We can say to our client, we are saving you x amount of dollars in quantifiable tax benefits.”
Increasingly clients seek firms that are “assembling intellectual capital and leveraging talent in areas of investment management, income tax planning and estates,” Winslow asserts.
Elliot Pepper, co-founder of Baltimore-based Northbrook Financial, recently told RIA Intel that many of his existing clients are “doubling down on tax planning, and because of the stock market swings, they are seeking a deeper level of investment consultations than before.”
The move toward firms showcasing multiple services arises from clients’ “looking for a holistic and integrated offering. They’re tired of doing everything themselves and trying to quarterback it all,” explains Santa Barbara, Calif.-based Jeremiah Barlow, the EVP of Family Wealth Services at Mercer Advisors, which has manages $20 billion in assets and has 45 offices nationwide.
Like the renowned Mayo Clinic, where patients receive specialized care by a team of physicians, clients are pursuing a “Mayo Clinic” approach to wealth management, incorporating multi-disciplinary skills such as estate and trust planning, tax planning, financial planning, insurance analysis, and retirement planning, Barlow asserts. “The key here is having in-house experts in those areas that can go deep into their expertise,” he adds.
Mercer’s minimum investment is $500,000 and its target client is 35 to 55-years-old (with some older), mostly consisting of professional executives.
Assembling a team of experts that exclusively focuses on tax planning, estate planning, insurance, philanthropy, in-house investment, and financial planning, is critical to making this integrated approach thrive.
Barlow says that these advisors serve as the focal point of client relationships and pull in specialists to meet specific needs, similar to a hub and spoke model.
“That’s all because clients want a holistic approach with one-stop shopping that handles all of their wealth management concerns,” Barlow notes.
While the approach is client-centered, Barlow acknowledges that this multi-disciplinary team enables Mercer Advisors to differentiate itself from the thousands of other RIAs that specialize in retirement planning. “We’re looking for ways to stand out in a crowded financial marketplace. One way to stand out is to expand service offerings, not just investment offerings, which all the others offer,” he says.
For example, a recent client came to Mercer Advisors in the process of selling a business, and was doing so, with independent CPAs and tax experts, who weren’t on the same page. The client “was getting bounced around like a ping-pong ball,” Barlow notes. In selling the business, the client required a coordinated approach among retirement planning, tax and estate services, which he found at Mercer.
The comprehensive approach enables Mercer Advisors to serve as a true fiduciary, Barlow suggests. “It’s acting in their own best interests; they don’t have to coordinate other professionals and try to weave together solutions themselves,” he says.
Avantax Wealth Management, which HD Vest Financial Services rebranded to in 2019, aims “to marry tax planning and advice alongside investment management and financial planning,” states its president Todd Mackay. “When you have all three elements, you have the most comprehensive solution for that end client,” he adds.
As Irving, Tx.-based Avantax was founded by CPAs, its practice “starts with professionals looking inside their client’s tax business,” notes Mackay. The taxes provide “the best snapshot of the individual’s finances or the small business, and with that, they can identify opportunities that are most advantageous to them on their wealth management journey,” he asserts.
Once the tax situation is thoroughly analyzed and tax advantages are identified, an Avantax professional can move the client along the financial spectrum, encompassing saving for retirement planning, funding a child’s college education, buying a home, accumulating wealth, preparing for retirement or in the distribution stage during retirement, Mackay suggests.
During the pandemic, as volatility surged and many small business owners needed to raise cash, Avantax’s tax experts zeroed in on capital gains and changes in tax laws to help clients.
At Avantax, all of its financial and tax advisors operate independently, so there is no formal minimum, and hence, they can serve clients and small businesses at all wealth levels.
Avantax contends that its holistic approach of combining tax preparation with wealth management yields a competitive edge, and “dramatically” increases the odds that clients will achieve their financial goals.
Goodsell of Natixis concludes that “if advisors want to retain clients, the more you can be of value, above and beyond the investment plan, the greater the loyalty.”