Who you need to call to help manage the proceeds, and what you need to ask them
It’s one thing to trust thousands of dollars to a friendly investment adviser at the bank. It’s quite another to hand over millions. That’s the worry for many family-business owners after selling their life’s work—leaving them with a huge bucket of cash and potentially a paralyzing fear over what to do next, says Cindy David, senior estate planning advisor with Raymond James.
David suggests anyone who comes into significant wealth, either through inheritance or selling a business, consider the following three factors when recruiting experts onto their own advisory dream team.
1. Education and experience
Get to know the various professional designations in the financial services industry (visit advocis.ca for financial planning and ific.ca for investment designations). Find out whether a potential adviser has the right credentials to offer the advice you seek. Experience counts too. Look for advisers with years of experience or who are partnered with more senior advisers. Finally, choose someone you like since you’ll be in regular contact.
2. What’s the get-out plan?
Most investment managers make good buys, says David. The bigger challenge is making good sells. She recommends asking every potential adviser how they plan to protect capital (sometimes called a “stop-loss strategy”) when the market falls. The right answer includes a plan to exit the market in a specific set of circumstances. The adviser (or advisory team) also needs to be disciplined enough to follow through on this plan.
2. A team of specialists is better than one generalist.
Many advisers offer a one-stop shop for investments, insurance, retirement and estate planning. This is okay for smaller sums, but people with high net worth need attention from an expert in every area, says David.
The insurance and investment specialists don’t have to be under the same roof, but they must be willing to co-operate for your benefit. If your insurance adviser isn’t aware of your investment goals, or vice versa, they may be working at cross purposes with your investment adviser. Either take charge of managing communication yourself, or assign one player—usually the financial planner—to act as quarterback.
“The financial planner’s job is to understand enough about each specialist role to know when to bring them in and when to pass the baton,” says David.
3. Your financial planner needs “soft skills” as well as technical ones.
Managing family wealth can be tricky, because decisions are necessarily based on relationships as well as numbers. If there are four adult children, for instance, but only two working in the family business, how should you divide the wealth? What about actively involved in-laws?
An adviser needs sensitivity to the emotions surrounding decisions in order to provide best counsel. While a certificate in planning for family wealth isn’t a requirement, David suggests asking pointed questions about experience. Who is their typical client? What types of advice do they usually give? Ask all the questions you can, says David, even if your financial vocabulary is shaky. Being able to really enjoy the fruits of your life’s work depends on it.
Cindy David is president of Cindy David Financial Group Ltd., representing Raymond James Financial Planning Ltd. The views of the author do not necessarily reflect those of Raymond James. This article is for information only. Raymond James Ltd. is a member of the Canadian Investor Protection Fund. Insurance products and services are offered through Raymond James Financial Planning Ltd., which is not a member of the Canadian Investor Protection Fund.