We find that the affluent want to work with the best professionals in all areas of their lives—especially when it comes to the areas of personal and business financial management.
Unfortunately, there are a plethora of different financial professionals seeking to do business with you. Identifying “the best” for you can feel like a Herculean task. Even differentiating one financial professional from another can sometimes be challenging, as so many of them present themselves in similar ways.
One type of advisor who has the potential to be extremely beneficial to your financial life is a Personal Chief Financial Officer. In our view, only a small percentage really provide comprehensive wealth management proficiency that puts them at a high level of what you would expect from a Personal CFO.
So how can you tell you’re looking at an experienced comprehensive wealth manager? The first step is to understand wealth management.
We find that most successful and affluent individuals and families are looking for wealth management to address full range of their financial challenges—even if they don’t specifically use the Personal CFO terminology when talking about what they want.
The Investment Side
Investment management addresses preserving or growing your liquid wealth.
This is the aspect of wealth management that most people immediately think of. Services tied to this aspect of wealth management should include the following:
• Asset allocation: Balancing risk and reward by having the investment portfolio based on a person’s goals, risk tolerance and expected need for money.
• Investment product selection: These might be individual investments such as stocks and bonds, mutual funds, and ETFs. Experienced wealth managers will utilize money managers to have specialists for your specific blocks of liquid wealth.
• Rebalancing: Where the wealth manager realigns the portfolio to objectives.
Almost all self-identified wealth managers provide investment management. In many cases, that is all they provide. Providing just investment management doesn’t go far enough. Wealth-planning experience is also required for a Personal CFO.
The Planning Side
Wealth planning requires the technical experience to deliver a diverse range of advanced strategies beyond investing. The tools and techniques of wealth planning range from basic to cutting-edge. The basics include legal strategies and financial products that are readily recognized and generally applicable for most affluent clients—such as trusts, partnerships and life insurance.
Under the broad umbrella of wealth planning is a range of specialties. Some of the most common among Personal CFO’s are the following:
• Income tax planning: Mitigating taxes on money earned through working and investing by enhancing what your CPA can do and working with your business controller or CFO.
• Estate planning: Determine the future disposition of current and projected assets. Critically, it’s important to determine who will own the assets, how it will be managed, who it will be distributed by, to and when.
• Marital and related relations planning: Planning for disruptions in the relationships between spouses and other partners. The intent is to take actions that will protect the family’s wealth.
• Business succession planning: Transitioning a privately-owned business to others, whether they are family members or not.
• Asset protection planning: Employing legally accepted concepts and strategies to ensure that a person’s wealth is protected from creditors, future divorcing spouses, another layer of taxes and predators.
• Charitable tax planning: Ways to be philanthropic without cash flow issues or disinheriting family or loved ones. The tax code fosters philanthropy, and Personal CFO’s utilize the code in your favor.
• Life management planning: An array of concerns from a wealth management perspective. An example of this is when the wealthy structure their wealth to deal with longevity concerns.
Important: A Personal CFO is not an expert in all the aspects of the above. However, they will have ready access to the requisite expertise on behalf of clients via a group of other experts that have already been vetted by them.
Therefore, Personal CFO’s will provide you with a cohesive team that is coordinated by the wealth manager.
The Secret Sauce: Powerful Relationships
A sizable number of wealth managers are highly technically proficient but you want to know how to spot a Personal CFO. An individual’s brilliance does not create status.
The key difference—the secret sauce, if you will—is that Personal CFO’s are both technically excellent AND able to develop a truly deep understanding of their clients that informs their actions. In effect, they build powerful professional relationships with their clients that extend far beyond the number of zeros on their clients’ bottom line.
We find that much of the wealth management industry is investment- and product-centric. Conversations are often heavily weighted toward how financial products and services are performing and what additional financial products and services might be needed.
In contrast, Personal CFO’s are highly client-centric. Their focus is on understanding their clients as completely as possible. That means their hopes and dreams, their concerns and trepidations, and even their core values as people. They take this approach because they are always looking for ways to add value to their clients’ lives as best they can.
The upshot: The ability to develop powerful relationships with their clients is what makes extremely adept wealth managers sought after. With proper planning, the solutions Personal CFO’s deliver to their clients, may end up with superior results.
Finding a Personal CFO:
How do you know if the person you work with or interviewing is elite?
1) Ask your CPA and attorney who they would recommend and why. a. If they give you a list or don’t know if the person is elite then they might not know any.
2) What training do they do on an ongoing basis to build their skills?
3) Do they have experience working with your objectives?
4) Can they provide to you how they help you; a. Create your plan
b. Implement your plan
c. On an ongoing basis, update your plan?
5) Who are some of the experts they work with?
6) Have they helped you recognize and implement solutions for concerns you have and they helped you uncover?
This report is intended to be used for educational purposes only and does not constitute a solicitation to purchase any security or advisory services. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. Fixed insurance products and services offered through CES Insurance Agency.
J. Kevin Best CFP®, MS, AEP®
Best Times Financial
345 Woodcliff Drive, Suite 2A, Fairport, NY 14450
Office: (585) 504-3600