I originally wrote this article in 2009, but in re-reading it I still get hot under the collar thinking about the advice that was given.
Let’s face it; no one can know everything there is to know about financial planning. There’s just too much that covers extremely diverse topics going from behavioral finance to tax and estate law. One of the biggest dangers that many planners face is overstepping their expertise when working with a client, putting the advisor at risk of at best losing the client and at worst a costly lawsuit or regulatory action.
I saw this recently when my in-laws were working with a planner that told them they could use the alternate valuation date for their recently deceased father’s assets to choose any date between the date of death and 6 months out on any asset they wanted, and without having to sell anything. In addition to this, using the date of death values there was no estate tax owed and no losses experienced on most of the assets.
If you don’t immediately see at least two things wrong with the statement the advisor made above, consider if you should be suggesting the use of alternate valuation date for any of your clients. As a quick reminder in case you forgot, you can only use the alternate valuation if it reduces the value of the gross estate AND reduces the estate tax due. Also, if you use the alternate valuation date you MUST use it for all assets EXCEPT for those sold during the six month period and wasting assets that lost value because of the lapse of time (such as patents, annuitized annuities, etc.).
So what do you do? Admit when you don’t know something. Yes you are the expert in the room and you may be challenged for not knowing an answer right away. However you don’t leave it there, tell the client that you’ll find the answer and get back to them. In my case I have all of my textbooks from studying for the CFP, as well as friends that I have made that specialize in different areas. If I run into something and I’m not sure that I have it right I’ll run it by them first, let them look in their reference books (because they don’t know it all either) and when I have a consensus go back to the client with the answer and how it affects them.
Donnie Carpenter, CFP(r)
