Multi-Disciplinary Networking

– Gary A. Loftsgard, CFP®

Financial professionals, like everyone else, are being impacted by a 21st century information blitz few could have imagined not long ago.  Among other things, this new information era has enabled the general public to become more informed/aware of their personal estate planning needs.  You may have already noticed clients taking a “knowing” attitude with them as they go into meetings to discuss investment suitability, risk management, and estate planning issues with their advisors.  Obviously, it would be wise to be prepared unless you don’t mind working at a disadvantage.

The One-Stop Shop

What does all this mean for you, the client’s agent/advisor?  Simply stated, if you want to stay competitive and grow, you need to be informed.  But information alone is not enough; you also need to be connected with proven service providers.  Today’s clients are looking for someone to put it all together, to bundle granular products and services into a meaningful/usable plan.  In other words, clients are looking for a one-stop shop to help them with all of their planning concerns and objectives – whether simple or complex.  That is good news for any planner willing to take advantage of the opportunity in the estate-planning marketplace.  If you know where to find help, you can operate at a decisive advantage.

Although a Revocable Living Trust should be the foundation of essentially every family plan, there can be other issues that may need consideration.  If you are an agent who primarily sells fixed-income products, what will you propose as a financial and estate plan for Mr. & Mrs. Goodfellow having a net worth of 1.5 million dollars – comprised of a $350,000 home, a $400,000 IRA, $500,000 worth of appreciated investment real estate (Blackacre), and a $250,000 C/D equity fund?  With the help of your associations, you should be able to recognize (and even address) certain planning needs* when they cross your path, such as in the Goodfellows’ case.

Fitting Your Products into Your Clients’ Estate Plans

If you are an agent who sells fixed income annuities, for example, can you be of help to your clients in advising how an annuity can best fit into their living trust estate plan?  That may be of great importance to your clients.  Is long-term care insurance the only solution you have concerning a lengthy nursing-home stay and resulting estate asset spend-down?  What about the concerns of those who have an incapacitated child receiving SSI benefits?  What information can you offer to your client about being able to benefit his incapacitated child (after the client’s decease) with a certain type of living trust format that will not disqualify that incapacitated child’s subsistence benefits?

Networking with Other Professionals

Optimal estate planning implementations are best accomplished through the use of multiple counselors networking together to help meet clientele estate planning goals and objectives.

Roy Adams said as much in his article – Forecast 2002: Estate Planning After EGTRRA And Sept. 11 – in the January 2002 issue of “Trusts & Estates”, an industry-standard monthly magazine publication, widely read among estate planning attorneys (Roy Adams is free-lance writer for the magazine and is a nationally known estate-planning attorney); viz:

“Meanwhile, there’s another major trend for our profession to watch in 2002: Multidisciplinary estate planning is emerging with great speed and force [emphasis added].  The State of New York now allows affiliation among lawyers and non-lawyers, with lawyers sharing in the non-lawyer fees… I see the New York ethical change on fee sharing as, in part, a wise and insightful attempt to help put our profession on a strong financial footing…the trend is clear: [many] other states have already announced that they will follow New York’s lead.”

The American Bar Association Concurs

The American Bar Association (ABA) recognized their constituency’s confused reluctance to work with “other” entities in the financial and insurance related fields and took notable steps to address these matters by sanctioning a commission to study the problem and make recommendations.  The ABA Commission on Multidisciplinary Practices established in 1999 duly recommended that “lawyers be allowed to partner with professionals from other disciplines with whom fees would be shared”.  Changes to the model rules of ethics to allow multidisciplinary practice were then proposed.  (Many State Bars have already embraced and applied the recommendations.) The ABA obviously believes that clients and lawyers would be better served through multidisciplinary practices.

Karen J.  Mathis, Secretary of the ABA General Practice, Solo and Small Firm Section and also Chair of the ABA Commission on Women, reports: "The issues presented by multidisciplinary practice may be the most important issues facing the profession today… Our members have valid interests and concerns about these issues, which will affect the legal profession and the public for the foreseeable future.  General practitioners are looking for alternatives to the traditional forms of law practice, which will allow them to serve clients and protect client rights to confidentiality and conflict-free legal representation… and (meet) the public’s desire for ‘one-stop-shopping’ when it comes to financial and estate planning."

In a special paper prepared for the American Bar Association Center for Professional Responsibility Symposium on Multi-jurisdictional Practice held in March of 2000, Anthony Davis wrote: “I wish to convince those attending the program of four propositions: (1) the restrictions on multi-jurisdictional practice by transactional lawyers are ubiquitous (wide-spread); (2) these restrictions seriously harm the public; (3) these restrictions harm the legal profession - to the point where the profession is likely, if it fails to cure the problem, to lose the ability to regulate itself; and (4) it is already five minutes to midnight - the wolf is at the door; the sky is about to fall”.

Many practitioners already side with Mr. Davis’ views.  For example, elder law attorney Charles F.  Robinson, former chair of the ABA Law Practice Management Section, said: "I would like to form a consortium with a CPA and a money manager, and provide comprehensive service(s) on a fee basis that is split among the members of the consortium”.  Clearly, many in the legal profession see the need and the emerging necessity to create working alliances with members of the financial and insurance profession.

Planners & Agents are Already Involved!

Because of the nature of their profession and accompanying job descriptions, financial planners and insurance agents are already directly involved with their clients in the area of estate planning.  Has an insurance agent ever sold a death-benefit product such as life insurance or certain annuities without helping their client choose a beneficiary?  The answer is quite obvious.  Consider the bank representative helping a client purchase and install a payable-on-death (POD) account.  The job descriptions of such people require their direct involvement in the estate-planning process.  It is common ground all such practitioners.

What About Unauthorized Practice of Law (UPL) Issues?

When we take a closer look at the issues involving certain unauthorized practice of law (UPL) statutes in some states, we uncover some interesting facts.  Respective to the timeline of common law history, UPL statutory placements are a recent phenomenon – first appearing in 1930.  Prior to the introduction of UPL statutes, lawyers and non-lawyers alike regularly performed legal services together in a free market benefiting the general public essentially without incident (at least in comparison to the number of legal-service problems occurring in today’s environment).

Many of today’s UPL statutes are quite difficult to interpret in a meaningful way when they are applied to the real world.  Perhaps the most curious of such code comes from Illinois under the “Consumer Fraud and Deceptive Business Practices Act” – viz:

“The assembly, drafting, execution, and funding (emphasis added) of a living trust document or any of those acts by a corporation or a non-lawyer is an unlawful practice within the meaning of this Act...”

Let’s try to examine how real life applications of this peculiar law fits into the operating paradigm / legal doctrine of it serving the general public – which is what all common law is supposed to do.

To begin with, many assumptions have to be made by the reader to derive any meaningful interpretation of that particular statute.  We will have to assume that it is referencing living trusts being established for clients living (only) in Illinois.  If interpreted literally, an (Illinois) attorney could not then have any “non-lawyer” assist him with living trust documents in any fashion whatsoever(?).  (Question: Would it be okay if a non-lawyer is involved with an Illinois lawyer in the assembly, drafting, execution, and funding of anything other than a living trust such as a charitable trust, a life insurance trust, a family limited partnership, an offshore trust, or a corporation?)

Does that statute also mean that an Illinois-based financial planner or CPA who handles all of his clients’ financial matters would have to send his living trust (estate planning) clients to an Illinois attorney each and every time a new financial account was created in order to transfer that account to the trust?  What if the planner did not hire an attorney to create the account transfer for his client?  Would he be guilty of fraud and deception according to Illinois law, and be subject to punitive damages?  If that is the case, how then could an Illinois court enforce such an imposition without disregarding the fundamental right-to-contract as guaranteed under the U.S. Constitution to every citizen?

Legal Interpretations of UPL Statutes are Not Congruent

Alas, there are many conflicting opinions about the issues of UPL even within the legal community itself.  Surface comparisons of most UPL definitions from various jurisdictions would indicate that such kind of ambiguous law is not only vague, but also unenforceable.  For example, in comparison to the Illinois statute, here are a few other (contradictory) jurisdictional opinions/rulings:

A 1992 Florida Bar Advisory Opinion stated (in part) as follows:

Gathering the necessary information for a living trust is not (emphasis added) the practice of law and may be performed by nonlawyers...

The Florida Supreme Court issued criteria in their determination of what does and does not constitute the unlicensed practice of law, and how certain parallel issues may apply:

The (true) definition of the practice of law "must necessarily change (emphasis added) with the ever changing business (climate) and social order."

"The unauthorized practice of law and the practice of law by nonlawyers are not synonymous." Florida Bar v.  Brumbaugh, 355 So.  2d 1186, 1191-92 (Fla.  1978).  (NOTE: In other words, the Florida Supreme Court ruled that just because a non-lawyer is actually “practicing law” by performing certain “legal” tasks or services, such activities do not necessarily constitute the “unauthorized” practice of law.)

Non-lawyers are authorized (emphasis added) to practice law in the following instances… “provide, either orally or in writing, definitions… without advising whether or not a particular definition is applicable…”

It should be noted that financial advisors do not have to advise anyone as to the direct applicability or non-applicability of estate planning law for their clients.  However, any advisor can certainly discuss all the issues and options with his client to the extent of that advisor’s experience and knowledge base.  In other words, you (as the advisor) are to simply leave the ultimate applicability and suitability determinations up to the client’s legal counsel.  As a financial advisor, you do not have to make those legal determinations.  Notwithstanding, you can and should always bring your client’s data, applicable information, personal opinions and professional suggestions to the conference table.  In fact, that’s part of your job description.

Who is Filing UPL Complaints?

Recent studies indicate that ninety-eight percent (98%) of all UPL complaints are initiated by lawyers.  In other words, it is the lawyers, themselves, who file 49 out of every 50 UPL complaints.  Yet, those in the legal profession who promote these rigorous UPL restrictions want everyone to believe that such kind of statutory law exists only to protect the general public.  A discriminating evaluation of UPL statutes reveals that a much different overall effect is created by this type of law making, rather than that of protecting the public.  If fact, it seems that (many) UPL statutes serve only to define “privileged activities” that may only be performed by members of a (legal) cartel, who customarily discount the damage that such “protectionism” imposes on average Americans.

Although Arizona in the only state without UPL statutes (since 1986) – and California lawmakers ruled (in 1985) that California UPL statutes are no longer in effect and will not be applied against anyone since only lawyers were filing UPL complaints – many other states have UPL statutes that are rarely, if ever, enforced.  They may be on the books in a given state, but there is often no meaningful applicability record or related court case.

A Law Professor’s Candid Opinion About UPL Statutes

George C.  Leef, adjunct Professor of Law and Economics at Northwood University, stated in his treatise The Case for a Free Market in Legal Services: “We start with the fact that no U.S.  Supreme Court case has, after first identifying speech as fully protected, acquiesced in a regulatory system that forbade that speech to all but a handful of individuals who were licensed by the government to engage in it.  But this is precisely how UPL laws operate.  They (UPL laws) (attempt to) forbid everyone except licensed lawyers from imparting information about the law and about how to use and access a branch of government.  In this respect, current UPL laws achieve the exact opposite of narrow tailoring.  In fact UPL laws are specifically tailored to have all the subtlety of a blunderbuss”.

The Legitimacy/Lawfulness of Marketing

Another misdirected legal argument states that when a non-lawyer talks publicly about the benefits of estate planning with trusts, he is pursuing an unacceptable ulterior motive (and is also giving unauthorized legal advice at the same time) in trying to get in front of clients solely to sell more securities and/or insurance products.  Well, if someone is trying to use estate planning (or any other subject of interest) to get in front of a client to sell a non-suitable, high commission product without substantive regard to the welfare of the client, then that is obviously a problem.  But non-lawyer CFPs, for example, are held to a standard that includes examining and discussing all planning issues with the client, including estate planning.  ChFCs, CLUs, CPAs (etc.) who hold themselves out as “planners” would seem to have the same responsibilities.  Everyone has a right to pursue the development of his own legitimate business in a free market.  If someone is doing a bad job then the marketplace itself will ultimately discard that person’s services; it works every time.

How about an insurance agent who believes in the benefits of life insurance?  Is talking to his clients about the benefits of irrevocable insurance trusts, for example, to be defined as unauthorized activity?  Is the information-gathering interview by that agent, or any other non-lawyer professional, concerning a client’s family planning goals and objectives permissible only if it has nothing to do with - and if there is no discussion about - estate planning?  Again, the attempt to impose a broad-based definition to the “practice of law” is unrealistic in the real world.

There are many lawyers quite active in the “estate planning market” these days.  Part of that activity constitutes the lawyer presenting a free seminar on living trusts and then inviting all interested attendees to take advantage of a free, one-hour consultation (with the lawyer) to help determine if a client wants or needs a trust.  The laws of economics indicate that there must be an “ulterior” motive on the part of the lawyer since he or she cannot possibly operate a law practice for very long by providing only free seminars and interviews.  Notwithstanding, the seminar-giving lawyer’s ulterior motive in this case is neither wrong nor unethical (ever since the Supreme Court’s ruling allowing attorneys to market their own personal legal services) as long as he is performing proper due diligence is fitting his client with a proper and fully funded estate plan.

Clients Do Need Legal Representation

The underlying concerns involving UPL arguments accorded to activities within the circle and influence of estate planning professionals can reduced to only a few important doctrines – (i) proper disclosure and (ii) legal recourse.  If a lawyer is involved at some point in the process of providing the client a legal opinion as to the applicability and feasibility of the plan, then it would seem clear that the client has obtained legal representation.  Proper legal representation is an important component in multi-disciplinary transactions involving asset-disposition and contracts such as trusts.

Professionals of various disciplines can and should work together for the common good of the estate planning public.  Let’s maintain common courtesy and respect for the client’s ability to use his own personal discretion concerning whom he chooses to rely on; let’s show the same respect for one another.  If someone – lawyer or non-lawyer alike – has slanted and/or misrepresented a particular product or service then, by all means, let’s correct the problem.  A colloquium on the benefits of particular estate-planning products and/or options is not a pre-planned oratory of deception unless misrepresentations are being made intentionally.

Attorneys Often Need Your Assistance

Today there are many different types of assets that clients may possess in their financial portfolio.  These assets can vary in their specific uses and taxable characteristics.  Therefore, the matter of how to properly manage and transfer certain assets may well be beyond the scope of the common lawyer’s experience.  The issue of estate planning has little meaning if the client had not first worked a plan to (a) accumulate property (investments) and then (b) preserve the property (risk management etc.); now he wants to set up a plan to (c) transfer the property.  These worthwhile planning objectives usually create the need for using a multi-faceted task force.

Most of the living-trust estate plans that this author has reviewed which were not funded, or at least not fully funded, originated from law firms.  That pattern can be exemplified by the following quote from a publication offered several years ago by the Board of Regents of the California Continuing Education of the Bar (Second Edition, 1984); the book is titled Drafting California Revocable Living Trusts; viz:

“The attorney will have to charge for his or her time in funding the trust and should encourage (emphasis added) the client to use the services of a stockbroker, an insurance agent, and bank personnel to help transfer property to the trust, unless the client is prepared to incur additional (emphasis added) legal costs .  .  .  the attorney may either personally oversee the transfer of assets to the trust or instruct .  .  .  on how to accomplish the transfer of each asset.”

Most lawyers do not have a vested interest in getting the plan funded unless they charge a larger (sometimes much larger) fee to provide that service.  Therefore, the living trust plans provided by law firms often do not get funded.  Lawyers usually don’t sell residual products such as insurance or securities, and therefore “don’t have the extra time” to work with the plan (funding etc.) any further.  So, they never learn to properly fund the trust.  The problem is that a non-funded living trust is of little value to the client.  So, you see, the bottom line is that your estate planning clients truly need your help and assistance.

Final Thoughts

The estate-planning arena is a vast marketplace that absolutely requires the use of various professionals and multiple services to do the job of meeting the overall planning needs of the general public.  Therefore, as a advisor, it would be to your great benefit to seek out a systematic, professional networking system or a group of focused professionals to work with you in your estate planning activities.  If you ally with the right people, you can operate in this arena safely and very effectively.  Multidisciplinary networking is a proven concept whose time has come; in fact, it is already here in full operation.  Without question, those who acknowledge the situation, prepare themselves, and take appropriate action will be promoted in the marketplace and increase their base of business.



For various reasons, clients may agree to convert a portion or even the entire C/D fund to a fixed income product.  A fixed-income product purchased from the equity account may well fit into their retirement goals.  But, hopefully, you are not going to try talking them into liquidating everything they have to purchase a million dollar annuity (you could lose your license that way).  If you are selling only fixed-income products, you will have to leave everything else on the table unless you are connected to other competent intermediaries.

Let’s assume in our example that Mr. Goodfellow purchased Blackacre for $150,000 that is now worth $500,000.  He wants to sell and turn the proceeds into an interest bearing equity account but is concerned about the capital gains tax, and other tax-related issues.  Can you provide any guidance for Mr. Goodfellow?  By taking advantage of special tax-savings planning options, Mr. Goodfellow, a taxpayer, can sell Blackacre without incurring any capital gains tax liability, and the $500,000 sale proceeds MUST ultimately be turned into an investment account (or even an annuity fund); moreover, the transaction will likely lead to a $500,000 life insurance sale.

If you do not have an alliance with other professionals to assist you, you are placing yourself outside the circle of significant opportunities.  If you are unable to help a Mr. Goodfellow type, someone else who can will be happy to take your place.  If Mr. Goodfellow found another agent able to assist him with his other concerns – such as estate planning – before he purchased that annuity he wanted, the new agent will likely end up as his trusted advisor replacing you.  Don’t let that happen; get involved.