How private tax services helped retain a $100 million account

As a result of an impending divorce, a financial advisor (FA) at a global wealth management firm was at risk of seeing $100 million in assets leave the firm once an equitable distribution of the assets was completed between his clients.

As is often the case in such situations, “one spouse wanted to separate themselves completely from anything related to the original professional relationships – including us,” says the FA. So, if the firm was to retain the management of these assets, the responsibility was on the wealth management firm to show – right here and now – a remarkably compelling value proposition.

In assessing the situation, the FA learned that one of the spouses was interested in understanding the tax implications subsequent to the distribution of assets. Divorce proceedings were ongoing, but they realized sophisticated insight was needed. Key issues would include:

• After-tax valuation of the assets – so that this party would obtain a fair and honest deal
• Understanding how to structure the transfer to optimize its tax treatment

The FA surmised that if he could find a way to address these concerns, that might convince the spouse to maintain a standalone private wealth relationship subsequent to receipt of their share of distribution of assets.

The challenge? No one at the firm possessed enough tax-specific knowledge.

There was a clear need for a third party, a group with intimate understanding of the tax implications – the challenges and opportunities of such a large wealth valuation and transfer.

The collaboration: the FA recommended the EY Financial Services Office’s Private Tax Services team. “I called [EY] to step in on the front end,” the FA said.  Having seen EY’s exceptional client service on other accounts, the FA felt confident encouraging the spouse to engage EY. The work required, among other things, evaluations of several years of complex tax returns to assist in determining the tax basis of various assets.

The spouse was immediately impressed with the quality of the insights and recommendations, and EY stood out in paying close attention to the spouse’s goals and listening to the spouse’s questions. The EY Tax representative “was very articulate, understood both the tax and non-tax side of what was going on. Not only did he offer education and guidance, he also silently attended several of the meetings between the spouses and their attorneys to better appreciate the key issues,” the FA said.

The FA, and his firm, believes it was the participation of EY that ultimately secured the divorcing party as a client by displaying the value-added traits of EY’s Private Tax Services team.  These include technical skills but also the softer skills in handling sensitive and delicate personal situations. In addition to tax knowledge, the EY Tax executive displayed professionalism and objectivity which helped reduce any sense of favoring the interests of the spouse who was previously the wealth creator. As a result, the wealth manager has retained $100 million in assets under management that might otherwise have fled the firm.

EY continues to work closely with the FA and this spouse – but this is only a tiny view of an even more compelling big picture.

The FA praised EY in helping address a much larger, long-standing opportunity – and need – that extends to many additional clients. “As clients get wealthier and as we’re [working] to attract ultra-high-net-worth clients, we’ve realized that these clients need a holistic team – a tax adviser included,” says the FA.

Overall, encouraging clients to work with EY, according to the FA, “allows us to bring in a tax adviser we can trust delivering a professional level of service. This support for my practice makes all the difference for my clients, and that makes the difference for my business.”