By now, you may be aware that Creative Planning is the subject of a lawsuit by a client who claims that she did not receive promised tax-planning services. Crist versus Creative Planning will need to unfold in greater detail before we understand what actually happened here, but some of the initial facts do present a picture that may be all too familiar.
A client, Sheryl Crist, hired Creative Planning to perform investment management and, importantly, to offer retirement guidance. The client understood that the retirement guidance would include systematic Roth conversions over a series of several years. The intention was to keep her on the 24% tax bracket, converting about half of her IRA over a 10-year period.
Although Creative Planning did perform a Roth conversion for the first year, they allegedly subsequently performed no further Roth conversions. As a result, the client is claiming that she missed financial opportunities and paid money in unnecessary taxes.
Regardless of the resolution, we can take away two major lessons from this lawsuit.
1. Keep your promises
First, anyone who practices in this space knew that a lawsuit like this was going to occur in a matter of time. Too many broken promises have become part of the sales process with too little accountability.
“Do you do charitable planning?” “Sure, we do.”
“Do you offer tax planning?” “Of course. We can assist with Roth conversions.”
It was just a matter of time before one of those many broken promises gave rise to a lawsuit.
My only surprise is that it took this long to see a lawsuit of this kind.
“Remember: Saying you are going to do something doesn’t equal doing it.”
For firms to compete and protect their fees, they need to provide additional services. We know this anecdotally, and the data supports our experiences. Firms are supposedly offering cash flow management, charitable giving and philanthropy services, tax planning and estate planning. But, are they really?
I have said time and time again that many of these firms are not providing tax-planning services (including Roth conversions) in any meaningful way—they are simply using talismanic phrases in competitive situations. The reply to me is that they “say they are doing it so why wouldn’t we believe them?”
Many of these firms have not built the processes, trained the people or purchased the software to provide advanced tax-planning services. True tax planning is much more than a random Roth conversion here or there. It requires true training, extensive procedures, daily supervision, and team members who are primarily or solely focused on tax planning and the integration of tax planning with the investment and financial-planning departments of the firm.
All of this requires a lot of time and money to build out. Most firms simply do not see it as a worthwhile investment, being that they already have a 97% retention ratio. Why spend the time and money to develop specialties when you don’t have to? Plain and simple.
But when it is all said and done, make sure that you and your team follow the adage: A promise made is a promise kept.
2. Build out your processes to support your specializations
Tax planning, or any specialty for that manner, is not necessarily the easiest thing to execute on. Specializations, by definition, are more technical and require additional training and additional tools. That’s why you are able to attract clients who are generally willing to pay more.
So, approach the development of your specialty with ethics and the goal of being best of breed with your additional service offerings. That means signing up for a Horsesmouth workshop, reading everything you can get your hands on, or buying and training on the appropriate software. Whatever the additional investment of time and money looks like, build out a detailed plan to offer your specialized services.
In addition, build out your service calendar to explain your offerings, and be sure to deliver on those promises. That should entail creating workflows, internal tracking processes and also developing client communications to ensure that everyone is on the same page.
At our firm, we have multiple outreaches throughout the year addressing tax-planning services we are offering (including Roth conversion) reminders, we have an announcement calendar, and we have also created a custom spreadsheet listing every client and their Roth conversion status.
Even more simply, however, it’s important for advisors to keep their promises. Regardless of any processes that were or were not built out, Creative promised to do 10 years of Roth conversions and they allegedly simply forgot to do them. It is unclear whether Creative’s alleged oversight is due to a lack of communication between the intake partner and the servicing advisor, or a CRM failure (which is ultimately a human failure), or a lack of supervision after the account was onboarded.
These are all very avoidable mistakes. But, it doesn’t really matter.
Whatever the reason for the execution gap, too many firms have not built the proper processes and are not offering services “as promised.” View the Crist versus Creative Planning as a cautionary tale.
Where the stakes are high, as they often are with tax planning, make sure you have the documented workflows in place to support your sales and onboarding conversations.
Remember: Saying you are going to do something doesn’t equal doing it.