Taking experience for granted

Published 11/18/2018 in The Maryland Daily Record 

In the past six weeks alone, I have experienced a series of events that point to a genuine underestimation of the extent of support our clients need as they take over the management of their finances, investments, tax planning, estate planning and beyond.

Consider having never filed a tax return for yourself until age 55. Having been married since you were 22, all things related to professional services have been handled by your spouse. It is an overwhelming set of tasks to learn how to manage these new necessary aspects of your life, and you are dependent on the professionals who have the expertise in each of these areas to guide you.

Now imagine that your professional advisers are new to the experience of working with clients who have never done these things before. Or even more so, that some advisers don’t want to deal with this level of hand-holding and support required. Herein lies the ultimate issue that our clients are encountering.

Two recent examples

A client comes in to my office for a scheduled review meeting. We spend time catching up on life and some upcoming changes she is considering. After we are almost finished with our time, she remembers to hand me some notices from the IRS that she doesn’t realize are past-due notices of unpaid taxes. She says that she is sure her accountant has these, so she is only showing me in case I am interested.

I started by containing my concern, instead focused on sharing some of the essential things to know about the way the IRS communicates and how the process works:

• She is the only one who would receive these notices. Whenever you receive anything from the IRS, it is a good idea to pass it along to your CPA and to us, as your financial advise
• The IRS only communicates in writing sent by regular mail. They never call, email, visit or anything other than send letters through the old fashion U.S. Postal Service.
• The IRS only takes payment in the form of checks, electronic payment from a checking account and in some cases by credit card. Never by gift cards or any other kind of cards.

I keep myself calm and reassure her I will touch base with her accountant to see what is happening.

It turns out that the accountant missed the fact that only one estimated tax payment was made rather than the two that were required. When I asked about this, his response was simply that he couldn’t understand how this happened – his office sent her the forms to fill out and send in.

The client, having never done this before, didn’t know that two payments had to be made. When she reported that only one payment had been made, the CPA’s office missed this important point.

Of course, and understandably, mistakes happen. I am not pointing to this important reality that all of us are susceptible to missing something. This is more about how shocked the accountant was that this could happen. In our work with clients, it isn’t shocking at all. It is expected that very detailed and specific guidance and support are required.

Reportable gifts

Another example that happened in the past few weeks is the nature of a general question that another client has been asked by email from her estate attorney, every year for the past 10 years. Her estate attorney wants to know: Have you made any gifts this year?

This question references the annual gifting limits that allow for non-taxable gifts to other people up to a certain limit before an IRS Form 709 gift tax return is required to be filed. Most people gift to family members, and our client has kept diligent records of these gifts for years.
However, the gift question, being so general, didn’t include any detail, and as a result our client never thought about her annual life insurance premiums that are reportable gifts. Neither did her lawyer, despite having been a part of the planning process years earlier when the policy was purchased. Fortunately, no negative impact resulted from this miss, but it did spark the realization that all of us can do better to serve our clients by simply asking questions beyond the surface. Considering how little experience someone has and providing more guidance is critical.
When I went back to her attorney to inquire about this, it was again a recognition of not considering how specific the question needed to be. The degree of awareness and thought that needs to be applied to a newcomer to the process is significant, and our work needs to be focused on making this experience better all-around. For clients and advisers to better communicate in these circumstances, we need to bring this awareness to all who have the knowledge and know how-to provide a deeper level of support.

—Dorie Fain, founder and CEO of &Wealth