21st June 2024

Better business. Better community

Business Industry and Financial

Financial professionals need collaborative strategies

There’s no shortage of options in financial services today. A digitized and decentralized financial services sector has unlocked a wealth of new services to help individuals and families save, grow, and protect their assets.

However, because of the growing menu of services available, households are managing an increasingly complex web of financial relationships. The rapid evolution of available services and products has spurred an evolution in regulatory frameworks.

Subsequently, the roles of CPAs, lawyers, insurance agents, wealth managers and other financial service providers have also evolved to address the complexity of new products and services. 

The complexity of financial planning today necessitates a collaborative approach among professionals. Still, barriers keep CPAs, attorneys, financial advisors and brokers from communicating effectively for their client’s benefit — and the benefits of collaboration are significant. This article highlights some of those benefits and discusses strategies to help overcome the hurdles that inhibit communication among providers. First, let’s look at the current dilemmas that households are facing. 

Today’s financial planning issues 

Families are under pressure on numerous fronts — inflation in household goods and services, evolving tax policies, economic uncertainty, volatile capital markets, increased liability risks, unaffordable healthcare and rising educational costs. These factors create a complex financial picture without an easy solution.

As costs rise, families face potential shortfalls in retirement savings — the average income shortfall is projected to be $7,000 per year by 2040. Households must manage escalating complexity in financial planning to help secure future retirement income. To help alleviate these burdens for the best potential outcomes, the need for effective professional services has never been greater. Yet, the frequency of in-person meetings with a financial professional is declining. 

The fragmentation of financial services hasn’t helped. Unfortunately, no single financial product on the market offers a comprehensive solution for families on the journey toward financial independence. Households are tasked with assembling their financial vehicle from an expanding list of components manufactured by various providers.  

This expansion of financial products, driven by innovation, has increased the demand for specialized knowledge. This growth necessitates a deeper understanding of various financial instruments and their benefits for the client. Regulatory frameworks continue to evolve in response to economic conditions and new technologies, further limiting knowledge transfer among professionals and increasing breadth of areas professionals must stay current with. 

The case for collaboration

Collaboration among financial professionals can help address these challenges effectively. By working together, professionals can create comprehensive and tailored strategies that align with clients’ goals, meeting complexity with simplicity. When financial service providers collaborate, the outcomes are improved in several ways:

Comprehensive plan construction: Collaborative efforts result in well-thought-out plans that address blind spots, adequately manage the full spectrum of a client’s risks and are feasible for implementation. Instead of service providers trying to capture the largest share of a client’s financial fees and offering conflicting advice, providers can create a plan that addresses the client’s needs comprehensively.

Greater financial literacy: Collaboration encourages knowledge sharing and interdisciplinary learning among professionals, leading to a more informed and educated client base. By pooling expertise from various disciplines, such as tax planning, investment management and estate planning, clients gain access to a broader range of financial insights and strategies. As professionals work together to explain complex concepts, highlight the benefits of financial products, and educate clients about their options, individuals and families can improve their understanding of personal finance, make more informed decisions, and build long-term financial resilience.

Increased client confidence: Clients benefit from a cohesive plan recommended by multiple trusted advisors, enhancing their confidence in the strategy’s soundness and the potential that they may adhere to it over time.

Practical strategies for overcoming collaboration barriers

While collaboration offers substantial benefits to clients and can result in more opportunities for financial services professionals, certain barriers prevent them from engaging with other disciplines. These include the fear of profit erosion, a perceived lack of time, and a lack of confidence in firm-level support for collaborative efforts. Below are some strategies that can be encouraged at a firm level to help move practitioners toward a collaborative approach. 

Education and training: Firms can encourage ongoing education and training for professionals across different financial sectors. This can involve seminars, workshops or online courses on interdisciplinary topics such as tax law changes, investment trends or regulatory updates. 

Interdisciplinary meetings: Firms can organize regular meetings or conferences where professionals from different disciplines can discuss client cases, share insights and brainstorm solutions collaboratively. These meetings provide opportunities for networking, knowledge exchange and relationship building.

Cross-referral agreements: Firms can seek to establish formal agreements or partnerships between trusted and experienced professionals to facilitate referrals and information sharing. For instance, a financial advisor or CPA may refer a client to an insurance agent for risk management and insurance coverage recommendations. In contrast, the insurance agent may refer the client back for comprehensive financial planning services.

Ethical guidelines and compliance standards: Firms can proactively establish ethical guidelines and professional standards that promote collaboration, integrity and accountability with other financial service providers. While encouraging adherence to codes of conduct that prioritize client welfare, confidentiality and professionalism in all interactions, a clear set of guardrails for collaboration can give employees and agents confidence when engaging with other professionals. 

Implementing these collaborative strategies enables service providers to overcome barriers, improve interdisciplinary communication and deliver more comprehensive solutions to meet clients’ increasingly complex needs.