From the April 2006 issue of Wealth Manager Web • Subscribe!

Behind the Name

Wealth management is all the rage these days ... and deservedly so. Affluent clients benefit from an in-depth consultative relationship that provides a variety of services to meet their individualized needs and goals. Meanwhile, successful wealth managers - an elite group to be sure - reap the rewards of a lucrative and emotionally satisfying practice.

But every upside has a downside, and the downside of the almost faddish popularity and magnetic lure of wealth management is that far too many advisors represent themselves as being wealth managers when, in fact, they are not. Their titles and business cards may have changed, but their business models and the services they provide remain fundamentally the same.

Consider recent research conducted by CEG Worldwide senior managing principal Russ Alan Prince and David A. Geracioti. As the first chart below shows, their study of 1,417 affluent individuals found that 77.1 percent preferred to work with a wealth manager, while a total of 22.9 percent preferred to work with a financial advisor or planner or an investment advisor or planner. Clearly, wealthy clients are very attracted to the notion of wealth management; this may explain why Prince and Geracioti further found that of 512 advisors surveyed, a whopping 77.9 percent described themselves as being wealth managers, while only 22.1 percent described themselves as being something other than a wealth manager.

Preference for Type of Advisor

Wealth manager, 77.1%Investment advisor/planner, 4.1%Financial advisor/planner, 18.8%










N = 1,417 affluent individuals.

Source: Russ Alan Prince and David A. Geracioti, Cultivating the Middle-Class Millionaire, 2005.

But are there really this many wealth managers? As the second chart below shows, Prince and Geracioti found that of 1,177 advisors surveyed, fewer than one in ten could fairly be described as following a true wealth management business model. Most of the rest are investment generalists, traditional financial advisors who offer a broad range of investment products but who do not comprehensively address their clients' overall needs and goals.

Few Advisors Are Actually Wealth Managers

Investment generalists, 79.1%Product specialists, 12.4%Wealth managers, 8.4%










N = 1,177 financial advisors.

Source: Russ Alan Prince and David A. Geracioti, Cultivating the Middle-Class Millionaire, 2005.

This mismatch between reality-as-marketed and reality-as-manifested negatively impacts both clients and advisors. Many clients are led to believe that they are getting something new and different, something that will comprehensively meet their needs. Not surprisingly, when they experience that little has changed - that they've essentially been sold a fresh paint of coat - they are disappointed and unhappy. Disappointed and unhappy clients are bad for business: they give their advisors fewer assets to manage, make fewer quality referrals, and sometimes leave their advisors entirely.

When an advisor promotes himself or herself as a wealth manager, the advisor is making a promise. If that promise isn't kept, then not only will the advisor's practice (and eventually reputation) suffer, but the advisor will simply fail to reap the rewards that come from effectively offering genuine wealth management services. It is, then, to everyone's advantage for advisors to really understand - and deliver on - what wealth management is all about. With such an understanding in hand, advisors are far more likely to fairly represent themselves to their clients, and they can also make better decisions about whether or not to undertake the substantial time and effort needed to transition to a profitable wealth management practice.

What, then, is true wealth management? It is a long-term, broad and deep consultative relationship with affluent clients delivering customized solutions for their unique needs and goals.

A few things are worth noting here. First, a broad and deep consultative relationship takes time to develop and maintain. A wealth manager must not only come up with customized solutions, but must deliver, review, and over time revise these solutions vis-?-vis ongoing in-depth consultations with each client.

Second, a wealth manager must be able to provide affluent clients with a broad range of financial and financial-related services and expertise, whether through in-house personnel, an outside strategic network, or both. The services most desired by affluent clients include the following:

Top-end investment management (while an advisor with considerable investment management expertise may still serve that function for clients, that alone does not qualify the advisor to call himself or herself a wealth manager)

Financial and estate planning (the affluent, wishing to pass their money on to future generations, are very concerned about estate planning)

Tax planning

Charitable giving and philanthropy

In addition, there are many other types of expertise and services that individual clients need and expect from a wealth manager, from business succession planning to medical contingency advice. Once again, the wealth manager is not expected to be an expert in all these fields, but is expected to know where to turn to expertly satisfy clients' needs. In effect, true wealth managers are primarily managers of relationships: first, relationships with clients, and second, relationships with other providers of desired expertise and services.

Third, wealth managers need affluent clients. Like it or not, someone with just a few hundred thousand dollars of investable assets is not going to be able to afford--and often will not need--the kind of customized solutions that wealth management is all about. Every time our industry attempts to take something that is designed for the high end of the market and "mass customize" it, we fail. There are only twenty-four hours in a day, and notwithstanding certain television commercials, it simply isn't possible to deliver customized solutions to large numbers of clients without an enormous--and economically unsupportable--overhead and infrastructure. Bottom line: you can't be a successful wealth manager and give in-depth attention to more than one hundred or so clients, and that means you will need to do what it takes to identify, satisfy, retain, and generate more business and referrals from fewer, more affluent clients.

Is wealth management worth pursuing? It's certainly true that successful wealth managers make more money and probably, on the whole, have more enjoyable practices. But establishing a successful wealth management practice takes a great deal of time, focus, and commitment. Every aspect of a wealth management practice - from prospecting to client acquisition to ongoing in-depth client meetings to the establishment of a broad strategic network of experts - must be designed to meet the needs of affluent clients. You will have to let go of existing ways of doing things, and in all likelihood, you will have to let go of a good deal of your existing client base.

Simply changing your title to entice wealthier clients is a recipe for disaster. Make your word your bond (and your stock in trade) by delivering exactly what you promise. As for committing yourself to establishing a profitable wealth management practice? If you're called to do so, then go for it. If not, deliver truth in labeling and find another title to describe who you are and the real value that you can actually deliver to your existing and potential clientele.

Patricia J. Abram is a senior managing principal with CEG Worldwide (, an industry research, training and consulting firm.

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