As CPAs get deeper into financial services and wealth management, they will have to solve more and more complex financial problems which often cut across unfamiliar planning territory.  One group of clients many firms hope to close, can be both challenging and rewarding.  They are high net worth individuals, those clients who fit into the $10 million-and-above club. If you are fortunate in grabbing the opportunity to inform and perform for high net worth clients, you must stop and think about what is important to this group.

What drives and motivates them?  By tapping into their passions, one can customize extremely focused conversations that grab their attention and curiosity.  For instance, based on the experiential data gathered from estate planning attorneys in Boston who recommend life insurance to fund trusts, the gestation cycle from recommendation to funding of the trust is between 6 and 18 months.  When an estate attorney recommends insurance, it is because there is a disparity between the tax the client owes and the ability to fund the obligation.  So the question is: Why the reluctance to bulletproof the estate plan with life insurance?  CPAs, seeking this type of client, must be prepared to address these issues from within the firm.

High net worth clients are successful people who do not like being told what to do.  They made their hay by watching, learning, observing and honing their personal desires to be successful in spite of the obstacles.  Because of their nature and indomitable spirit, they believe they will figure out a way to solve a problem or address a goal.  They are more used to delegating their low-profit responsibilities to others so that they can concentrate on their own success.  So when a CPA advises his client to purchase a $10 million life insurance policy for estate and intergenerational planning purposes, he may find resistance, even though it was explained that without this valuable protection asset, half of their estate would be lost to taxes.  Why would they not be ripping at their breast pockets grabbing for their pens to sign applications to stop this giant crack in their foundation?  The reason is they do not want to pay for it, even if they can afford it and that issue seldom gets addressed satisfactorily by planners.

When a client pays a $250,000 premium for a $10 million life policy, he or she is taking away from the principal and growth of their investment portfolio.  They step back to analyze the situation and it takes a long time to figure out how to bite that premium bullet given the information and options presented by their advisors.  They know that they might lose wealth to the government but their first reaction tells them it is an expensive protection proposition and they are hot-wired to go around or over obstacles.  As advisors, we have to anticipate these reactions and be able to address them from the client’s perspective and certainly be able to offer a solution that speaks to their resistance.

(to be continued)