In my previous article I asked lawyers about their wealth strategies, so the next logical question had to be about execution. The proof, after all, is in the pudding, not the recipe. I wanted to determine the ideal process or level of personal involvement for lawyers in managing their wealth.

Formulating a strategy is one issue. But the execution in implementing, monitoring and augmenting that strategy requires an ongoing level of focus and commitment.

As predominantly Family Stewards, lawyers have an important responsibility to take control of their own financial destiny and that of their families. This can be daunting, but doesn’t necessarily rule out delegation. I often liken my clients to the CEO in the driving seat, making the decisions, and I am the CFO, providing the necessary tools.

In an article for The Washington Post, financial journalist Barry Ritholtz discussed the difference between outcome and process, noting that gamblers, many sports fans and speculators are focused on outcomes, while pilots, professional sports coaches and long-term investors are concerned with process.

Ritholtz further noted that by focusing on outcomes, investors engaged in a “brilliant bait-and-switch”, since they had no idea whether such outcomes were the result of luck or skill, much less whether they would repeat in the following year.

I asked interviewees to choose one of three options as their ideal level of involvement in managing their finances – a preference to delegate management to someone they trust, to want to be engaged in managing and monitoring or to have a comprehensive framework in which to make decisions. The ideal could, of course, be very different from their current situation, given that 15% admitted to having no wealth strategy at all. Responses are summarised in the following pie chart.

Prefer a comprehensive framework in which to make decisions (52%)

A clear majority of 52% would prefer to make financial decisions within a comprehensive framework. They want to make the ultimate decisions without having to deal with the minutiae – an understandable choice, since lawyers work long hours and prefer to spend their limited down time with friends and family, rather than monitoring their finances. While wanting to maintain an element of control, delegating day-to-day monitoring to a trusted adviser would be their ideal model.

Many acknowledged a lack of competence and knowledge in the financial field. Others, currently managing their own finances, believed their asset level did not yet warrant the use of a financial adviser. However, projecting ahead to the benefits of future progression and asset building, they would prefer to be able to delegate day-to-day financial management and monitoring.

Prefer to delegate management to someone I trust (25%)

Some viewed financial management as a “chore” to the extent of saying “I hate finance”, and, in typical phobic fashion: “Money of itself has no interest for me – it doesn’t give me a kick”. Of the 25% who chose this option, some were mindful of potential insider-trading breaches, believing it ethically critical to create a “Chinese wall” between their legal practices and personal finances.

Prefer to be engaged in managing and monitoring (23%)

Just under a quarter chose engagement in the daily management and monitoring of their finances. Most were involved in the wealth business in one form or another (either as advisers/lawyers or fund managers/professional investors) and considered this their core skill and area of competency. Several keen to up-skill in finance said they did not currently have the time to do so.

How time-poor are lawyers?

The time-consuming wealth management process requires an ability to act and react at a moment’s notice. The average time spent by lawyers in managing personal finances during a regular seven-day week was 2% (as against that spent working, with family and friends, and recharging batteries). Apart from paying bills, not much can be achieved in one to two hours each week, let alone designing, managing and monitoring a comprehensive plan to take care of your finances over a lifetime.

What could a comprehensive framework look like?

I recommend exploring a consultative client management process, which typically involves a series of client meetings with set time frames and deliverables. Clients are given the tools to make informed decisions at each step. Again, I repeat the importance of having the client in the driving seat as the CEO, with the navigating wealth manager as the CFO. Let’s look at a typical consultative process.

Discovery meeting

Here, the client is guided through a comprehensive discovery process covering seven key areas. The first two concern the client’s values and goals, at which time it becomes clear whether adviser and client are a “good fit”. Information gathered helps develop a total client profile or mind map. This is the gateway to formulating a core document for future reference and most clients find it rewarding to drill down to what is most important to them financially.

Investment plan meeting

Two weeks later, the client reviews a comprehensive investment plan and investment policy statement. A further two weeks are recommended before signing up to ensure the plan reflects values and goals initially outlined. While typically a little nervous at the outset, clients generally feel reassured by seeing in black and white how they can achieve the things most important to them.

Mutual commitment meeting

Here, the client signs up to work with their adviser on their wealth management plan and will be typically cautioned against “buyer’s remorse”. Do not be tempted to rely on the financial media to reinforce prudent investment decisions. Did you know that the highest proportion of readers of car advertisements are recent purchasers, wanting to confirm they made the right decision? Clients should ignore the media (or view it as entertainment) and focus on making wise financial decisions and adhering to a long-term plan.

45-day follow-up meeting

This routine review of all relevant paperwork ensures that documentation is complete.

Regular progress meetings

These begin 90 days later. Clients initially like to touch base quarterly. The adviser typically checks whether any changes in the client’s life may have an impact on planning. Advanced wealth management plans also begin here, focusing on recommendations in areas outside investment consulting, designed in co-operation with a panel of experts. This core group of expert advisers can include a trust or personal lawyer, tax accountant and personal or life insurance specialist.

Defining wealth management

For the mathematically inclined, this simple formula defines wealth management.

WM = IC + AP + RM

Investment consulting (IC) involves managing investments over time to help clients achieve their financial goals.

Advanced planning (AP) looks beyond investments at four sub areas: wealth enhancement, wealth protection, wealth transfer, and charitable giving.

Relationship management (RM) is the final element in the wealth equation. Good financial advisers balance and maintain relationships with the other professionals involved in their clients’ individual wealth management plans.

I asked lawyers to rank the following five financial concerns in order of importance:

• Investing wisely to preserve capital (wealth preservation);
• Protecting assets (wealth protection)
• Paying less in taxation (wealth enhancement);
• Transferring wealth in the future (wealth transfer); and
• Contributing to the community (charitable giving).

Responses are summarised in the following charts.

Wealth preservation

In line with global findings, investing wisely was rated the prime financial concern by 77% and the second priority by 16% of the 61 lawyers surveyed.

Wealth protection

Rated the second priority by 73% and the prime financial concern by 22%, wealth protection is designed to protect your wealth from creditors, ex-partners and factors beyond your control, such as disasters or illness. This kind of protection is mainly achieved through legal structures, including trusts, and insurance.

Wealth transfer

Wealth transfer or “looking after your heirs” was ranked third highest by 42% and fourth highest by 43%. While leaving an estate for children was clearly important, it did not receive top ranking, despite the Family Steward predisposition in the survey. As highlighted in the previous article, inheritance did not feature highly as a wealth creation strategy in the survey results. Recommendations in this area typically require input from a trust or personal lawyer on the panel of experts.

Charitable giving

I was surprised at the high ranking of charitable giving or contributing to the community – the third highest priority for 28% and the fourth and fifth choices for 35%. While reluctant to highlight community contributions, lawyers agreed that charitable giving makes up a significant part of their work and private lives. They tend to give their time generously to pro bono causes and are often approached to be trustees on charitable or school boards. Their skills are highly sought after by such organisations, which could often otherwise not afford quality legal advice. Recommendations in this area also typically require input from a trust or personal lawyer on the experts panel.

Wealth enhancement

Wealth enhancement (tax mitigation or paying less in taxation) was ranked the lowest priority by 57%, with just 20% ranking this area as their third or fourth priority. This rather refreshing finding reflected a general view that New Zealand’s taxation system is fair. However, some felt those views might differ with a change in government, given the opposition’s proposed increase in the marginal tax rate and introduction of a capital gains tax. Wealth enhancement strategies again typically require input from a trust or personal lawyer and tax accountant on the experts panel.

We all remember the childhood tale of the elves and the shoemaker. The beleaguered shoemaker couldn’t pay his rent, but awoke each day to find his work done, thanks to his supernatural friends. Replace shoemaker with lawyer, and poor for time-poor, and the corollary is simple. Financial management and wealth creation take time, requiring daily attention, consideration and often action. It is simply not possible for the time-poor. Developing an ongoing relationship with a financial adviser not only saves time, but also brings peace of mind. For many interviewees, it was not a question of how could they afford it, but rather, how could they afford not to. Once your financial planning is under way, you will have your own trusted network of advisory “elves” working away on your behalf. You just have to check in now and again to review progress.

Laetitia Peterson is a personal wealth adviser and is married to competition barrister Andrew Peterson. She has worked with companies such as Goldman Sachs and boutique funds management firm Liontamer, which she co-founded with Janine Starks. She is now the CEO (and founder) of The Private Office, helping successful lawyers achieve financial goals.