One of the most interesting aspects of being a financial advisor is the ability to gain insight into all sorts of different areas of clients’ lives. Far from the domains of “just” insurance and/or investments in the early stages of the industry, today, a true advisor helps define goals and aspirations, identify challenges, take advantage of opportunities, and optimize the accumulation and distribution of assets.
In fact, a favorite industry analogy is that a financial advisor acts as a sort of “quarterback” for their clients, giving impartial and helpful advice and acting as a trusted intermediary for a wide variety of relationships and interactions. And in order to provide the best advice and service to clients, advisors often gain, at the minimum, a working knowledge of a number of areas that fall outside the realm of traditional finance, including tax and legal issues.
Unfortunately, however, that disciplinary overlap has the potential to create interprofessional conflict, particularly when a client’s accountant or attorney might not be giving them the best advice possible, or worse, is simply wrong. Which in turn, raises the question: How do you, as a financial advisor, tell your client that their CPA or attorney is wrong?
In this week’s #OfficeHours with @MichaelKitces, my weekly broadcast via Periscope and guest hosted this week by Jeff Levine, we discuss potential pitfalls when addressing the issue of a client getting incorrect advice from another professional, specific steps to take in such a situation, and ways to ensure a positive outcome for everyone involved.
Because, even though you’re not trying to make anyone look bad, there are all sorts of problems that might arise if you don’t handle the situation properly, including: running into compliance issues by providing “legal or tax advice”; offending the accountant or attorney, because, after all, they’re the licensed experts in their respective field, not you; and, upsetting your client, since they might feel you’re calling into question the trust they’ve placed in their CPA or lawyer.
The question then is: How do you handle such a situation? Often it’s best to follow a three-step process, where the first step is to reach out to the professional in private and, while deferring to their expertise, indicate that there may be a misunderstanding or some miscommunication regarding the issue at hand. Next, refer to an outside source, preferably a thought leader, or notable expert in their field (i.e. a well-known attorney if you’re talking to an attorney, or a well-known CPA if you’re reaching out to a CPA – people tend to respond better from “advice” from their own profession) as the catalyst reaching out, and finally (and this is key), asking them for their thoughts, because (again) it’s important to defer to their expertise.
Because, ultimately, doing what’s best for the client sometimes require Solomonic tact, and ensuring that everyone involved saves face is the easiest way to do that. And, as an added bonus, you then might even have an opportunity to develop a new relationship with a center of influence after helping them navigate a potentially problematic situation.
(Michael’s Note: Today’s #OfficeHours features Jeffrey Levine, CPA/PFS, CFP®, CWS®, MSA. Jeff is the Director of Advisor Education at Kitces.com. You can follow Jeff on Twitter @CPAPlanner. The video below was recorded using Periscope, and announced via Twitter. If you want to participate in the next #OfficeHours live, please download the Periscope app on your mobile device, and follow @MichaelKitces on Twitter, so you get the announcement when the broadcast is starting, at/around 1PM EST every Tuesday! You can also submit your question in advance through our Contact page!)
#OfficeHours with @MichaelKitces Video Transcript
Good afternoon, everyone. My name is Jeffrey Levine, and welcome to Office Hours with Michael Kitces. Obviously, I’m not Michael Kitces, but I am Jeffrey Levine, director of advisor education for the kitces.com platform. And thanks for joining me today as we talk about what could be a potentially touchy subject for some. How do I tell my client’s CPA or attorney that they’re wrong? You know, like any lines of work, there are good CPAs, there are bad CPAs, there are good attorneys, there are bad attorneys, there are good…you know, somewhere in the world is the world’s worst doctor. It’s just a fact of life, right? Somewhere in the world is the world’s worst doctor. And so from time to time, you may run across a situation where you know more, you know a specific fact that the client’s attorney or CPA does not know.
And I’ve run across this a lot of times over the years. For instance, traveling around and talking to financial advisors about IRA trusts. That’s a big one. They might come up after the program and say, “Well, Jeff, that was great, but I think my client’s attorney has this wrong, but how do I go and tell them that when I’m not an attorney? How do I actually address this?” Same thing with complex tax strategies, right? Like, “I’m not a CPA, Jeff, how am I going to go and tell the client’s CPA that they’re wrong?” And so traveling around and speaking to advisors interested in education, naturally, you get to talk to a higher level of advisor. An advisor that is deep into their craft and truly committed to learning. And potentially, they do know more than some of their professional colleagues from time to time.
And so, I’ll even share with you a story. A number of years ago, I was working and talking with an attorney, and she was convinced that the trust that she had prepared was the perfect trust for this client. And as it turns out, it had a fatal flaw in it. Now, again, I’m not an attorney, right? I’m a CPA. I’m a CFP, like many of you, but I’m not an attorney. So how was I going to tell the attorney that their trust language was wrong? And of course, there are all sorts of potential issues when you’re talking to a lawyer or an accountant, someone who is licensed or registered to give tax or legal advice. If you’re going to tell them that they’re incorrect about something, there are all sorts of things that you have to be careful of.
Potential Pitfalls When Addressing The Issue [02:31]
For instance, there are compliance issues. Many of you probably have disclosures on your cards or your website saying, “You know, we don’t give tax advice. We don’t give legal advice.” Well, how do you get around that? Obviously, there’s the potential to tick off that center of influence, right? To tick off that other professional, where they pick up the phone and they say, “What do you mean you’re telling me I’m wrong? Who is the CPA? Who’s the attorney here? How are you going to tell me, the professional, and you’re just a financial advisor, how are you going to tell me that I’m incorrect?” And of course then you might find situations in the worst case where that CPA or attorney referred you the client, then it could be even more awkward. How do you turn around then and say things?
And of course, you can even upset the client. I’ve seen that in some situations, where the client gets upset because they say, “Listen, you’re out of your box. You’re not supposed to be talking to me about taxes or legal advice.” And you’d like to think that the client would just want to get the right answer, but sometimes occasionally, they actually find that the financial advisor is overstepping their bounds.
Communicating For A Win-Win Solution [03:32]
So how do you go about combating this? You know, what’s the best way to move forward where everyone wins? You win, the client wins because they’re getting the right information, and the attorney or CPA potentially saves face. And it’s simply this. You follow what I would call a three-step process. And the first step in that process is reaching out to that center of influence where you believe there is an error or a mistake and talking to them privately. You do not do this with the client in the room. You don’t do this during your meeting and pick up the phone and say, “Hey, let’s take care of this now.” That is a bad idea because what happens there is the CPA or attorney or other professionals in any field, they need to save face, right? They need to somehow cover themselves. And it creates a lot more tension than if you were to somehow do this without the client there.
So my typical advice is to say to the client, “You know, I think we might be interpreting this differently or there might be some miscommunication here, let me reach out to your attorney or your CPA, talk with them and let’s see where this…you know, let’s see what we can come up with together,” right? This way no one is putting down anyone else. And look, let’s face it, we all make mistakes from time to time. None of us are immune from making mistakes. And so with that said, you certainly don’t want to put another professional in a tough situation where, you know, they’re just backed up against the wall because you wouldn’t want to be put in that situation yourself, right? So make sure you reach out without the client on the line.
The second key step in this process, is don’t make this come from you, make it come from someone else. We talked about the fact that you don’t want to be seen as giving legal advice or tax advice. Well, one of the best ways to do that is bring it up from someone else. For instance, say, “You know, I was reading this book.” If I was talking to another attorney, I might say, “You know, I was reading this book by Sy Goldberg or Natalie Choate,” because those attorneys are going to know who those people are, right? “I was reading this book by them and inside this book, hey, it says this, and there’s this passage in there about X, Y, and Z. And that seems to conflict a little bit with what my understanding is of their existing trust or tax plan.” And so, that’s a good way to pass it off to someone else. Or you might say, “You know, I was attending an advanced education workshop the other week and the speaker at the program said blah, blah, blah.” You know, and that’s, again, a way of saying it’s not you. You’re not the smart one. You’re not showing them how smart you are. You’re just relaying information you heard somewhere else.
And then the last and perhaps the most critical part of this process, which may sound like the easiest but it is the most critical part of this process is you must include four words after you go through that. After you say, “I was reading this,” or, “I was listening to this at a workshop,” you must include these magic four words, which are, “What do you think? What do you think?” It is amazing what happens when you include those four words. When you say to that other professional, “What do you think,” all of a sudden, it’s not you telling them that they’re wrong. It’s not you showing that you’re smarter, right? You’re asking for their opinion, and you’re seeking their advice. You’re still putting them on the pedestal as the expert, and so it completely takes their defenses down.
So again, that three-step process, which is the most critical thing here, is first, reach out to the CPA or attorney without the client on the line. Second, make sure you reference someone else’s material, right? “I was reading this,” or, “I heard this from this other expert.” And then the last and most critical part of that process is including those four magic words, “What do you think?” I cannot tell you how many times I’ve been on the line with another professional and use that process, and those four words, as soon as you say them, the whole conversation changes.
Positive Outcomes and Opportunities [07:29]
And if you do this right, there are tremendous benefits that can be reaped by everyone. Obviously, first and foremost, and most importantly, the client gets the right information. They get the right advice. And two heads are better than one. You might see things a little bit differently. There might be some different interpretations. Working together for the client’s best interest is what is the most critical element here. And frankly, CPAs, financial advisors, attorneys, they all share that. They want to do what’s in their client’s best interest the overwhelming majority of the time.
You also, if you do this right, will end up with a very appreciative CPA or attorney because if in fact you’re correct and that there was an error in the drafting or certain language or a tax strategy or interpretation, if there’s some error in that client’s tax or legal plan that you’re able to address or you’re able to improve their outcome, well, it’s going to make the attorney or CPA look that much better, and it will save them from having to deal with the mistake down the road. So the same way you’d want someone to point that mistake out to you if you made it, I know I would, you want to make sure, you know, that CPA or attorney will be appreciative, again, if you do it in the right way.
And lastly, when you do it, it’s an incredible opportunity for you to develop a relationship with that center of influence. You’ve already helped them with something, right? They’re already, if you’ve done this the right way, they’re already somewhat indebted to you, in that you helped them fix a situation that could have gone much worse. So you might say something like, “You know, I’m glad we got this resolved for Mrs. Smith, and, you know, it would be great to be able to shake hands with you in person and, you know, just put a name to the face now that we’ve resolved this.” Or if you just want to be even lighter on the touch, you might say something like, “You know, the only reason I happen to know that is because I specialize in this area. It’s an area I focus on exclusively with clients and helping them with these particular issues.” That CPA or attorney, they’re going to get it. They’re basically saying, “Hey, I’m an expert,” or you’re saying, “I’m an expert in this area, that’s why I know this.” And the fact that I’m not an attorney or not a CPA, you know, I still make sure I want to learn all this information there.
So, again, hopefully, you found this helpful. I get this question a lot after speaking on, you know, again, whether it be trust as IRA beneficiaries or some sort of process that involves legal issues, typically in estate planning, or advanced tax strategies. Where someone will come up at the end of the program and say, “That’s great, but now I realize that there’s a mistake in my client’s legal or tax plan, how do I go about addressing that with my client’s CPA or attorney?” And again, if you follow that three-step process, I think you’ll have a home run there. Again, to summarize, reach out to that individual without the attorney or CPA on the line. Make sure you reference someone else’s material so that it doesn’t come across as you talking down to them. You’re referencing another expert. And then lastly, adding those four magic words, “What do you think?” I think you’ll have great success with that. I know I have.
Thanks so much for joining us for this week’s Office Hours with Michael Kitces. Again, not Michael Kitces but Jeffery Levine, director of advisor education here for the kitces.com platform. Have a great day, everyone, and best of luck for continued success. Bye-bye.