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TCJA high net worth clients

What Do Wealthy Clients Worry About?


To meet the needs of your wealthy clients, you must understand their concerns first. Bryce Sanders discusses seven concerns that keep high net worth individuals up at night, as well as seven ways you can increase your value to them.

Oct 9th 2020
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When working with successful, busy people, accountants would like to be the first call the client makes when they have a problem concerning money. Clients often don’t see their accountant in the problem-solver role. This is unfortunate because accountants are fiduciaries, supplying objective advice for a fee. Before this problem can be addressed, we need to know what the wealthy worry about.

1. Losing All Their Wealth: They were greedy and paid the price. Remember the 2008 Bernie Madoff scandal?  CNBC reported an investor whose fund invested $7 billion committed suicide in 2017. Afterwards, he was to pay $125 million to settle a case related lawsuit. He developed money problems and was unable to sell his Manhattan townhouse at the price he wanted.

How accountants help: Assuming you know before the fact, advise your client of the risks and potential outcomes. You might try getting other people to talk sense.

2. Taxes Going Up: Your clients know the federal government cannot support workers furloughed during the pandemic, send stimulus checks to everyone and extend loans to businesses without going into massive debt and running deficits. Common sense says there will be a day of reckoning. At some point, taxes will need to rise

How accountants help: This is exactly what you do. You let clients know they can’t guess what the government will do. A lot depends on the election outcome, including the legislative branch. You can advise they tax defer where possible. They might also gift to heirs who are in lower tax brackets. They could also accelerate or defer collecting income from their business. Once tax changes are made, you can interpret the rules to the client’s best advantage.  

3. Preserving Their Wealth: It’s a myth the wealthy want to make every last dollar and pay the absolute minimum in fees. Wealthy families have traditionally sought to protect their wealth from the erosion of inflation. They are happy with modest, consistent returns.

How accountants help: You are either a fiduciary providing advice for a fee or are licensed to invest client’s money yourself, earning fees from products sold or assets under management. In both cases you have applications and software to examine the risk level of their current portfolio and consider model portfolios utilizing indexes in the asset allocation categories. You can also caution them on the risks of concentrated positions, an issue faced by senior executives at listed companies.

4. Transferring Their Wealth: Here’s a paradox: Your client would like to pass their wealth intact to their heirs. The government, as their lifetime silent partner, would like to get as large a portion as possible through current taxes and estate taxes.

How accountants help: Accountants and estate planning attorneys are fiduciaries, working for the client. There are many strategies used by the wealthy as the media reminds us. Some might sound unfair, but many are legitimate. Some solutions might involve insurance products, yet the fiduciary aspect of your relationship means the client is getting unbiased advice. A key aspect of trusts is the importance of funding them once they are established.

5. Living Long Enough to Enjoy Their Wealth: The pandemic has reminded everyone of our mortality. It’s even more serious when a family member or friend has been affected. Wealthy clients can afford the best medical care. They need to have the right medical plans in place. They also need to consider their eventual need for in home care or assisted living.

How accountants help: You don’t sell health insurance. Long-term care insurance isn’t your field either. You do sell planning services. You can refer them to trustworthy agents, always giving them at least three alternatives. They need to go through if/then exercises with you and develop a roadmap. This should lessen their anxiety.

6. Many Worthy Causes Asking for Ever-Larger Amounts: Charities target the wealthy. It’s common sense. They are excellent at cultivation. Many clients want to support worthy causes. Nonprofits have a habit of repeatedly going after wealthy donors, seeking a larger share of wallet. They ask for “stretch gifts” during capital campaigns.

How accountants help: There’s lots you can do in this situation. Work with your client to establish a charitable contribution budget, similar to your vacation budget. This makes it easier for your client to say: “Not this year.” Another possibility is to establish a foundation, transferring the “ask” from a direct conversation with your client to a formal request from the foundation. The best solution is likely including bequests in their estate plan. Nonprofits realize they can get far more if they wait vs. asking continually during your client’s lifetime.

7. Children Feeling Entitled: Your client worked hard for their money. Their children might see their parent’s wealth as their early retirement plan. They might not see the need to work. They might have created expensive lifestyles for themselves. They want to provide for their children, yet not make life easy for them.

How accountants help: Many parts of the solution are actions you could implement yourself, yet might prefer done at arm’s length. Hopefully, time is on your client’s side.  The parents could get their children involved in their philanthropic efforts, researching causes and having a voice in how contributions are allocated. The parents could encourage their children to take roles in the family business. In extreme cases, trusts with a separate trustee can be a solution, but that often breeds resentment. Accountants can be sympathetic, but they don’t want to get in the middle of family disagreements.

The wealthy have practical concerns, like the rest of us. In many cases, accountants can be part of the solution or connect them with the right resources to help address the issue.

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