I'd argue that knowledge is not power. Knowledge is powerful. Knowledge can give you an edge in whatever you do. But at the end of the day, knowledge itself is not power — it is an enabler to power or greater success.
We will approach this from two different points of view. The first is that of your clients, and the second is your firm's.
When asking if knowledge in the hands of your clients is helpful … I could easily argue from both sides. There is knowledge that they already have that may be harmful, such as the knowledge they harbor about their current advisory relationships. They've got your firm, an attorney or two, an insurance agent or two, one or more investment people. You get the drill: They have many, many subject-matter experts doing things for them, and it is likely that many of them have been in their role with your client for a long time.
Their knowledge about their current team of people is that they've worked with them for a long time and generally like each one of them. But do your clients really understand the distinction between satisfied relationships with people that they like versus outstanding service where most of their significant issues are being regularly addressed with minimal gaps in their overall wealth plans? Unfortunately, I must argue not. So, in this case, the knowledge that they hold about their current team is likely to potentially cause more harm than power.
Let's address their knowledge that they have a will, trust, durable power of attorney, and a health care power of attorney. But how many times have you asked for copies of these documents, only to find that they are very out of date and contain provisions and people that are no longer relevant to the client's current situation? My answer, unfortunately, is 99% of the time. Incumbent law firms rarely proactively reach out to check the adequacy or relevance of the estate plan. And if your client has an army of subject-matter experts, chances are that each expert sticks to their silo of knowledge and hasn't a clue that things may be outdated.
Even worse is when your client acknowledges that they have the aforementioned documents, but they aren't being used. Your client's knowledge may be limited to feeling good that the documents exist and have been executed. They are not experts in estate planning and probably weren't encouraged to use the documents properly. This lack of execution is easily seen in your client's asset ownership structure. We commonly see assets not being owned by the entities or trust that they just paid a lot of money to bring to life … yet they sit dormant in the file waiting for one of your client's subject-matter experts to wake up and help them rearrange the ownership of their assets to work better with the estate plan.
The same is true with many legal documents. One of my favorites is when it comes to business succession. I love it when I ask a prospective client if they have any governance or documents spelling out what happens if an owner dies, becomes disabled, or simply wants to leave. Most say, 'Yes, we have those documents.' Then we look at the docs and see that there are no formulas or methodology spelled out for valuation, nor terms for the buyout with any meat on the bones. Most, frankly, are simply an invitation to go to war. This could be the most damning and costly knowledge that your client mishandles.
Knowledge that can create power or empowerment for your clients is also good … but most of it must come from a solid advisor. Some examples of helpful knowledge are knowing that their spending is within line, and that they can meet all their objectives and obligations.
Knowing and understanding market cycles and risk are significant. The worst thing in the world is a client who thinks you are a magician and can always make asset values rise. A good understanding of the risk they are taking with their investments and the wide range of possible outcomes can help prevent unwarranted exuberance in good times and a pessimistic depression during bad times.
It is also helpful when both spouses have enough knowledge to minimize unnecessary panic or worry. This is common when there is one dominant spouse in the financial relationship. The only thing the nondominant financial spouse typically cares about is that they'll be OK when something happens to the fiscally savvy spouse. While that innocent spouse may never really understand the numbers, letting them know whenever you see them that financial independence is or is not probable is helpful knowledge.
The last part about client knowledge that I'd like to talk about is regarding how much knowledge your client wants or needs to feel empowered. Think of it this way: If you were to ask someone what time it is, do you want to know what the time is or how the watch is made? As CPAs, we too often want to share gory details with clients about the behind-the-scenes research and all the reasons why strategy X makes the most sense for their business continuity plan. For some clients, that may be what makes them tick. But you may be surprised to find out that most clients want as little of the gory details as possible and want your help to make the right decision based on their objectives and vision for the family.
Find a smarter room
Now allow me to shift the discussion regarding the knowledge housed in your head or in your firm. I know that CPAs are smart — very smart. You must be just to get the darn license and make it through the rigors of school, the exam, and the actual work. But some CPAs carry that a bit too far, and sometimes think they are the smartest person in the room. At the Accounting Today Firm Growth Forum this year, one esteemed speaker said, "If you are the smartest person in the room, you are in the wrong room. Surround yourself with smarter people."
As this relates to the quality of your advice, consider this: You have a wealthy client where in each of the past few years you've advised them to update their estate plan. You had the knowledge to tell them that the update is needed, but can't understand how they can ignore this sage wisdom for so many years. Consider changing the way you suggest they fix the gap. Instead of telling them to call their lawyer because the plan is out of date, consider asking if your firm can help to architect the new estate plan and to coordinate with the attorney to get it done. You will be surprised how many breathe a sigh of relief and thank you for your proactive service.
A similar experience can be had after you prepare a client's personal tax returns for the year. You may notice that there were missed opportunities for tax planning. Once again, telling them what to do after the fact isn't very helpful. In the next year, make sure you reach out to them well in advance of the year-end to see if you can help them to avoid a few of the missed opportunities from the prior years.
It is important that your firm leader has all the knowledge necessary to deliver on the robust promise of proactive and holistic financial planning. But if your firm had to rely on that one person for all things requiring knowledge, your financial planning practice will never scale or flourish. Hire the talent needed to deliver the advice competently. Unlike trying to find CPAs to tally up last year's results, there are many hungry, smart people eager to bloom in the world of financial planning.
Another alternative here is to identify the forward-thinking members of the firm now and get them started in professional financial planning training and credentialing. It will take them three years to get past the apprenticeship portion of the program, and based on what I know about our profession, this may be one of your best talent retention tools.
