Integrated Wealth Management Advice for Affluent Canadian Families: Part 3 – Convenience vs. Competency

Welcome back to my ongoing series about the pursuit of integrated wealth management advice for high net worth families (families with investable assets > $1 Million).

Catch up on the past two articles:

• Part 1: A brief history of wealth advice integration in Canada.
• Part 2: Large financial organizations face challenges in serving the complex needs of affluent families.

In this post, I will discuss the tension between convenience and competency in wealth management advice for affluent families.

Achieving Integrated Wealth Advice for the Affluent Family: Convenience vs Competency

I believe that the successful delivery of integrated wealth advice – given the breadth of professional disciplines potentially involved – is best viewed as a trade-off between two opposing factors: convenience and competency.

For example, if a given wealth management organization states that they can service all of my wealth management needs, it is convenient for me; I only have to deal with one organization, and I can rely upon them to pull together the professional resources from within their organization to provide the integrated wealth advice that I require.

I believe the trade-off to this approach, though, is that it is challenging for one single wealth management organization to attract and retain the breadth of competencies required to advise the clients with the most complex needs, such as affluent families.

I call this the “Law of Professional Diworsification”, which means that most organizations can only truly excel in one, maybe two, areas of professional practice. Once you move beyond this (the more you ‘diversify’ your services), the less focused and more ‘diworsified’ you become – and it’s the client with complex needs who typically suffers.

For instance, in my experience, most affluent families have at least six professional advisors/service providers tied to their wealth:

• Investment
• Insurance
• Banking
• Legal
• Tax
• Pension

As a result, affluent families need ‘diverse’ advice. But despite their diverse needs, these affluent families still require their professionals to be highly experienced and competent in their respective areas of expertise. Additionally, these diverse areas of expertise are not simply differing areas of knowledge, but actually distinct professional practices where, in my experience, the best professionals practice and thrive within firms of similar professionals (i.e. lawyers with law firms or accountants with accounting firms).

Over my career, I’ve witnessed examples where legal firms and accounting firms have attempted to integrate their services under one roof, and in every instance, it’s been a failure. The reason is that although the practice of law and accounting are complementary, they are distinct professional practices that, to be fully optimized for the client and avoid conflicts of interest, belong under separate roofs!

For instance, the fact that large wealth management organizations are attempting to increasingly integrate in-house legal and accounting expertise to service their family clients is a brilliant strategy from a wealth management firm perspective, but in my opinion, faces serious hurdles from a client advice perspective.

Or another way to think about it: if your accountant or lawyer decided to offer insurance or investment advice, would you view them as being credible and highly competent in those new areas of professional practice? Probably not.

This is the Law of Professional Diworsification.

In part 4 of this series, I will dive deeper into this topic and outline the top five potential costs for affluent families receiving ‘one-stop-shop’ type advice.

HighView is an experienced boutique wealth management firm for affluent Canadian families and foundations. We would be happy to discuss our goals-based investment approach with you and your professional advisors.

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