Independent Thinking^®

The Value of Integrated Wealth Management

It’s tempting to try to deconstruct wealth management. Why not try to manage it all yourself?

That’s how many people tend to think about planning and investing, until that approach unravels.
 
A basic wealth plan seems serviceable, until family circumstances, concentrated holdings, and the real impact of taxes are considered – and found unaccounted for. And even the best stand-alone plan doesn’t accomplish much sitting in a drawer, collecting dust, while the family it was meant to serve and the world at large moves on. Changing tax laws and constantly changing market conditions – along with changing family circumstances – require a hands-on approach and more regular interaction.
 
Active wealth management integrates financial planning and portfolio management, to meet specific investor and family goals. It’s not easy: Every individual and every family (happy or not) is unique. Large single stock positions, a business to sell, an interest in philanthropy or socially responsible investing, a blended family, a child with special needs – there are at least as many considerations for wealth managers to factor in the planning as there are family members involved. It’s important to employ advisors who can look across the disciplines of wealth management to not only advise on prudent actions, but to also implement the plans in an effective manner. As appropriate, the advisor should also be able to spot extenuating or extraordinary issues and identify the right external advisors and specialists to resolve them.
 
Consider a California couple in their early 60s embarking on the sale of their insurance brokerage business. They are so focused on the sale itself that they can overlook their own finances, except to wonder, albeit late in the game, how they should invest the proceeds of the sale. However, the correct way to approach strategic planning in this scenario is – and should be – far more complex.
 

• Have we first analyzed whether the proceeds from the sale of the company are sufficient, on an after-tax basis, to meet our ongoing retirement lifestyle goals?
• Have we determined the level of risk our portfolio needs to assume to meet those goals? For example, is it possible a very conservative portfolio should be structured because it meets our goals under most outcomes and we don’t want to take on unnecessary risk beyond those objectives?
• Are there specific wealth transfer strategies that we should consider in advance of the sale to minimize the estate and gift tax consequences of the transaction and enhance our goal of transferring assets to the next generation?
• Have we considered utilizing a trust to receive the assets in an effective wealth transfer plan? Do we have the appropriate terms in those trusts that are aligned with the specific needs of the beneficiaries and our family values, and are flexible with regard to changing tax laws and circumstances?
• Have we selected the appropriate trustees, whether individual or corporate, to assist our family as long-term fiduciaries in the governance process?
• What are our options with respect to benefiting our philanthropic causes, and how do we evaluate the tax, cash flow, investment and estate planning implications of a gift to a charitable foundation or long-term charitable trust?

Working with a professional advisor who can coordinate many aspects of the overall wealth management plan enables this couple and others to be involved in the key decision-making related to their financial affairs but also to rely on the expertise and service of an experienced team. The team can bring together all the elements of a strategic plan and engage as appropriate with other generations of the family, key specialists and the family’s other advisors – all with sensitivity to the long-term financial goals and circumstances of each member of the family. Done right, this approach saves time and money.
 
It doesn’t surprise us that many of our own clients are financial professionals, working and retired. They know the work involved; they value an objective assessment of their goals and the associated opportunities and risks; and they want that assessment to inform the management of their assets. They also prize the human relationships – and the sense that they and their families have a team that they can count on, in all market conditions.
 
Integrated wealth management starts with strategic planning that shapes – and continues to inform – asset allocation, portfolio management, financial and legacy planning, and customized trust and fiduciary services. It considers the impact of taxes, costs and complexity at every juncture, from plans that enable families to know what to expect, not just in broad strokes but also in practice, providing financial education as needed throughout the process. An integrated team that knows each investor’s lifestyle, family, business, estate planning and tax circumstances should produce better results – through all market cycles – than those who work in silos.
 
Integrated, multi-disciplinary advice reflects the way most clients should be served and the way that practice should be evaluated: as a whole. The sum of wealth management, as it should be practiced, provides far more value than that of its parts.
 
Chris Zander is the Chief Wealth & Fiduciary Advisor at Evercore Wealth Management and the President of Evercore Trust Company of Delaware. He can be contacted at [email protected].