Oral Testimony of L. Kent Abney, AXA Advisors LLC,
Before The American Bar Association
Commission on Multidisciplinary Practice Hearing
Saturday October 9, 1999
The hearing was convened before Commission Chair Sherwin P. Simmons at 9 a.m.
The first witness was L. Kent Abney, manager of Austin, Texas operations of AXA Advisors LLC. He thanked the Chair for the opportunity to weigh in on this important issue and presented his written remarks.
The Chair presented Mr. Abney with one of the criticisms directed at the Commission, that they have presented no empirical data that the public wants one-stop shopping in an MDP or any other configuration, and asked how he would respond. Mr. Abney said ‘one stop shopping’, as is often the case with terms, may initially have had one meaning and now has taken on many meanings, used oftentimes either to defend or to prosecute an argument depending on which side of that particular argument one may be. Having spent the last ten years dealing directly with the public on its financial matters and remaining licensed in the accounting and legal profession (but not practicing or charging fees as an attorney or CPA ), he gets asked about these types of issues by his clients. Oftentimes he doesn’t have to bring up the issue because the clients are already fully aware that to engage in financial planning, a broad-based term that can include retirement planning and estate planning, one inevitably needs the services of an attorney and typically that of a CPA. He wanted to focus on attorneys because he strongly believes attorneys are the quarterback in these kinds of client relationships; one strongly needs the services of an attorney. He has found in his ten years of practice that he usually is afforded the opportunity to identify that attorney and to incorporate that attorney into the planning situation. It goes without saying there is very little he may do for the client in the retirement, financial, estate planning area that would ultimately be effective under U.S. laws unless some sorts of legal documents were properly crafted to ensure that the client’s desires were carried out - both during the client’s lifetime and ultimately at the client’s demise. He would say, almost without exception, that clients have asked for the opportunity to have the work done for them include legal services. He thinks the more that attorneys become involved in one-on-one AXA client arrangements the more clients will follow through on these types of services. He recalled a comment Richard Miller, AICPA General Counsel, made yesterday afternoon at the "MDPs Choosing Your Partner – Will It Be a Lawyer?" program . Mr. Miller had said oftentimes the client would talk to the accountant about the need to have a will; the client would leave; the client would come back a year later; the accountant would ask about the will; the client had not executed a will; the accountant would remind the client again of the need to have a will. Mr. Abney said he thought it was understood by the related professionals, and it had become clear to him in his 20+ years of practice, that in the planning process clients respect the attorney most. Statistics today say that the CPA is considered the most trusted professional, but he submits that those statistics speak to the group as a whole not to the individual professional. As to the individual professional it was pretty clear to him that it is the attorney that is in the quarterback role in planning situations. If the attorney is involved early in the process there isn’t the situation that M r. Miller described where the client comes back perennially year in and year out, not having done the necessary legal work that had been anticipated to complete the planning.
Jeffrey Fetter from Syracuse, New York, took the microphone to ask a question. Mr. Fetter’s practice works closely and on a team basis with insurance agents and accountants. He clarified that he works in a loose, nonexclusive alliance, based on referral. The MDP issue he struggles with is the situation where the accountant would bring in the attorney, that is, where the accountant, the attorney and possibly the insurance agent all work for the same employer. He struggles with how he is to maintain his independence because if the insurance agent is recommending a policy to fund an insurance trust that the attorney drafted, the attorney ends up selling a product too. As an attorney he loses his independent thought because if he doesn’t agree with the insurance agent that agent goes back to their common employee, and the attorney gets pushed aside because he is not going along with the plan. Mr. Abney mentioned that in the Commission’s MDP proposal the term ‘professional’ has not been clearly defined. He said that those engaged in the estate planning practice envision the term to encompass financial professionals, more likely than not, credentialed - certified or licensed - and regulated. The benefit to the client of the arrangement where professionals operate under one roof as opposed to operating at individual locations in an alliance, is that the client arrives at one location and finds the Harvard lawyer, the Stanford CPA and the Wharton financial planner all operating together with the intent to represent the client’s best interest. The client can hold each and every one of them collectively accountable because they operate in the same firm. When they render bills to the client it is done on a coordinated basis because they are all in one firm. He finds the concern regarding loss of ethics to be without very much merit. He referenced Richard Miller’s remarks of yesterday to say that ethics are something that most of us learn in the first ten years of life; it’s not something that comes equipped with a point and click switch or that one turns on and off depending on the size of the dollars involved. At age 50, having had the privilege to operate in three very well-respected professions (he said he might be somewhat of an anomaly although younger lawyers will follow his path rather then the traditional path of 30 years in a law firm), he said he at no time has felt pressured or forced in any way to allow his ethics to suffer in a given situation. What he has to sell first and foremost is his reputation; though he thinks his experience and expertise count for something he doesn’t get the opportunity to use them if he doesn’t have a reputation that draws clients to him. The minute he puts his ethics at risk to make a dollar here or a dollar there he assured the questioner that the financial professionals in the business would quickly let the marketplace know of his occasional ethics. If others get wind that a professional has made recommendations based on gain for him or herself that professional’s reputation will not stand up and he or she will not get the kind of clients he or she wants. When looking at the MDP issue ethically he said everyone needs to recognize that CPAs are very ethical people and yet they have found a way, within their ethical credos, to maintain their independence and autonomy. This is true as well for other financial professionals with other professional degrees. What lawyers are now faced with as a profession is the opportunity to lead this process. They are inevitably going to get dragged onto the team, he submits that they should lead the team. And they should set the tone for the process for their clients and lead the team in an ethical way. Mr. Fetter followed up by noting that in asking the firm’s clients their opinion, in more cases than not, there was a great appreciation for the independence among the three professionals and the fact that none was being paid through the same paycheck.. The client appreciated the fact that there were disagreements at the table as the team was formulating the plan that worked best for that particular client. From his perspective it’s a ‘it’s not broke, don’t fix it’ situation. Mr. Abney said that if the client feels it is important to have that independence the client can always bring an independent professional to the table to look over the team’s recommendations. He said this type of practice has morphed into many specializations and very few professionals are equipped to handle the specializations.
Chris Barrett of Akron then asked a question in response to the House of Delegate’s rejection of the Commission’s proposals in August. He asked, since when does providing more choice to a consumer require proof by empirical evidence? Isn’t it intuitive that it is inherently better in a free enterprise system for the consumer, in addition to firm A, to also have the choice of firm B and firm C? The Chair responded that the questioner, as a lawyer, knew that to attack the other side’s position one should ask for something that cannot be proved, but sounds logical. It’s a pretty good attack unless someone recognizes that what is being asked for is something that cannot be proved. What kind of data could the Commission give to the House of Delegates to prove that the public wants an MDP? The Commission considered surveys or focus groups, but it’s impossible to provide empirical data beyond the intuitive, beyond logic, beyond some groups saying they would like it. Mr. Abney added a short footnote to say that the strongest empirical evidence has been provided by the accounting profession. Nowhere in an accountant’s description does it talk about auditing, accounting or tax anymore as they’ve moved their entire profession over to professional services. Prefaced by careful study, that change ought to be pretty strong empirical evidence.