Too often, I've noticed that high-net-worth business owners have a collection of financial professionals working for them who fail to collaborate with one another. Business owners, therefore, don’t always know what questions to ask, whom to ask or what information to share with which professional, since on the surface it can be confusing how their area of expertise may overlap with someone else’s expertise.
For example, you might be tempted to discuss balance sheets, income statements and taxes with only your CPA, but chances are that both your corporate attorney and financial advisor should be kept in the loop about those issues as well. Tax matters have legal consequences that an attorney would need to know about, while financial advisors should have insight into tax payments because they can directly impact both cash flow and a business owner’s net worth. When all parties are involved, they are better positioned to craft powerful strategies for you and your business.
I believe it's time for the high-net-worth business owner — one of the all-too-commonly overlooked millionaires in America — to actively look at forming a “financial advisory board” to deliver the same insights that ultra-wealthy families receive from costly family offices.
In my experience as the president and CEO of a financial services firm, I've come to believe that this board should consist of about five experts: your financial advisor, tax advisor, corporate attorney, estate attorney and insurance professional. One advantage of forming an advisory board like this is that it could cost the high-net-worth business owner less than a traditional family office while also generating fresh ideas informed by the experts’ separate practices. Think of it as a "democratized family office" approach.
If you've decided you need a financial advisory board, here’s how to bring them together and organize their interactions.
Point Person
The first step is, in my opinion, designating your financial advisor as the point person — the one who handles communication and coordination with the other experts. This is a logical choice for many people because an advisor is generally the board member you not only interact with most often, but also the one with the most comprehensive view of your overall financial plan. At the outset, bring everyone into a room, and establish the advisor as the point person or chair.
Ideally, the advisor’s financial plan becomes the hub of the wheel that helps the different professionals work seamlessly together. As with any board, it’s important that all professionals check their egos at the door. After all, the goal isn’t to identify who is the smartest person in the room. It’s to make sure your best interests come first.
To that end, I recommend making it clear that it's your advisor’s job to get everyone on your board to agree that, despite what might be different views, training and communication styles, they will actively keep each other informed as needed. As just one among multiple potential examples, if some of your assets needed titling, it would be important that your corporate attorney or estate attorney – whoever is taking point on this item – inform the other professionals on your board.
Member Selection
Your advisory board should be respectful if debate arises — and it likely will — in an honest quest for the correct strategies. I recommend that your board members know they should continually look around the room, and within themselves, to ask if the proper people are present. For example, certain high-performing advisors are able to provide business consulting services, but if yours does not, it might be worth it to include a dedicated business consultant. If you have started a charitable organization, the executive director may merit inclusion. The same goes if you have a highly trusted banker.
However, in my experience, a financial advisory board that exceeds six members could become unwieldy. Furthermore, if the experts are capable, a couple of them should be able to wear multiple hats or at least outsource accordingly.
As for timing, I find it's best if your full board can meet in person every six months for the first year, and then assess whether to scale back to annual meetings. Being in the same room helps tremendously to create a real team dynamic among board members, and meeting twice in the first year can help everyone get on the same page when it comes to your goals, as well as to establish personal connections that can help to strengthen their collaboration going forward. Of course, if the requisite professionals operate in different parts of the country, technology can enable virtual conferences, and team members can coordinate as necessary throughout the year.
In terms of operations, I recommend going a step further by ensuring that your advisor maintains control of a secure computer server that centralizes all of your relevant financial documents. This will allow the advisor to share copies with the appropriate parties and keep track of that flow of data. If an unexpected issue, such as an illness, emerges for the client or a loved one, the advisor can get paperwork like tax returns and titles updated with minimal disruption.
Exacting Standards
Running a proper financial advisory board is a substantial responsibility. Many independent firms lack the skills and staff to support this service. If you discover that your advisor or another board member is not up to the task — perhaps if they struggle to get the other experts to help fit insurance, trusts and assets together into a cohesive strategy — you might need to consider finding another one who can.
Gone are the days when clients keep financial professionals around because they enjoy a friendly relationship. Results matter. I believe that a well-run advisory board can improve communication between the crucial experts you rely on, eliminate potentially limiting in-office "groupthink" by bringing together diverse expert perspectives to bear on your financial plans, and save valuable time while keeping your plans on track by cutting down on mistakes and helping you anticipate a broader range of possible issues.
The nation’s overlooked millionaires deserve results on par with those of traditional family offices. By working with knowledgeable advisors to establish and run such boards, I believe they can help take their businesses and wealth to new heights.
