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

In the Know

You are a wealth manager, involved in the community for years. You've done it for all the right reasons. You haven't tried to "run the show" and have been invited onto boards and into social circles. You are considered a peer by successful business owners and HNW individuals. They see you as successful and competent. Some even ask your advice on the market. Is this a perfect world? No.

Your successful peers know where you work and what you do. Yet they have never approached you to do business. And you are extremely reluctant to approach them: You might come across as a "pushy broker" and ruin the relationship you have cultivated.

Why are HNW individuals reluctant to do business with people they know? Interviews with successful financial planners, advisors and consultants around the country identified 10 reasons why this occurs. Nine can be overcome; one cannot.

Confidentiality: HNW individuals are concerned you will tell others their personal information. Wall Street has suffered scandals concerning "inside information." They assume you talk about your clients, either dropping their names when prospecting other community leaders or revealing their financial information when the hospital's development committee is identifying prospects for the upcoming capital campaign. How can you overcome this? A successful advisor in Napa, Calif., used a tactful strategy. He had binders with client statements and financial plans. His binders had code numbers on the sides. Friends often visited the office and registered surprise when they saw code numbers. He explained "In an area like ours, everyone wants to know each other's business. That's why when you visit my office you will never see the name of a client on a binder or piece of paper on my desk." Next he completed the circle. "And if we ever worked together, and a friend of yours visited my office, they would never see a binder or piece of paper with your name on it."

Risk to Friendship: People say: "I never do business with friends." It's a paradox: Based on that rule, physicians, CPAs, lawyers and financial professionals would be friendless! You probably have close friends you first met through a personal relationship. Why is it difficult to initiate in reverse order? A senior advisor in Manhattan was often approached by friends to "Get me into the market." Years ago he did the same as many of us: He gave his "best picks." The portfolio was a "done deal." But the client had no sense of ownership. If something went wrong the client complained that the stocks were the advisor's ideas. Today this advisor starts to build the equity component over time by suggesting large-cap value and growth managers or individual stocks in those categories. He waits for additional assets to transfer. At that point, the client often asks, "Why aren't we in the technology sector?" or "Why don't we have small-cap stocks?" The advisor adds the component in the proportional amount appropriate for the portfolio (as he intended to do anyway). He has done something subtle. By waiting for the client to initiate the request, the client has accepted some responsibility for the new additions. If the market runs into a rough spot, the large-cap core holdings often outperform the higher risk components. A rational client realizes the advisor's initial recommendations did well; performance was damaged by the client's suggestions.

What Size Accounts Do You Take? It's a paradox: You talk "Wealth Management" at a party; they ask: "What's your minimum?" You remember the expression, "If you have to ask the price of a yacht, then you can't afford one." Some advisors give a number: "$500,000 is my minimum." It limits your options. Consider expressions such as: "We find we can be of the most value to clients with investable assets of $500,000 and above for the following reasons..." You made the case for exclusivity but didn't shut the door. People who ask may be thinking "How big a check do I need to write?" Change the rules: "We find we can be of the most value to clients with a combined net worth of $2 million or more ..." They mentally tally the value of real estate, retirement plans, company stock options and insurance in addition to traditional investment assets. They feel "wealthier." You subtly introduced non-traditional investment areas.

I Already Work With Someone: People confuse marriage, a monogamous relationship, with investing and assume the same rule applies: "Each client has one advisor. If you like another advisor better, you must leave the first advisor." The reality is different. In their book The Millionaire's Advisor (2003, Private Asset Management, Institutional Investor News) co-authors Russ Alan Prince and Brett Van Bortel explain "Millionaires Have Multiple Advisors." They provide a table indicating the average number of investment advisors for a client with $1 million to $5 million is 2.9, rising to 5.7 advisors for the client with more than $10 million. They diversify. You could reply: "Successful people usually have multiple advisory relationships. You are successful--How many do you have?" This opens the door.

Are They Comfortable With Your Experience? You are well educated and handle relationships of $2-plus million, but friends ask: "How long have you been doing it?" We've been taught to sell ourselves. In these situations you want to sell the firm first. They are becoming clients of the firm; you will bring the resources of the firm into their living room. You are the relationship manager, the nozzle on the end of the fire hose. You are their friend. They will be an important client to you, and everyone wants to be an important client.

Is This The Right Time? Do They Have Money Now? Tom Stanley, author of The Millionaire Next Door and other books, explains you need to be in front of [potential clients] when they are ready to make decisions. If you know they work with another investment advisor, ask when they review their money managers' performance. You are interested in winning some of the business. Are they open to presentations about other money managers at that time? Find out when they are scheduled for their next review and secure permission to present privately. They may re-allocate among managers with their current advisor. Who says the money that comes away from certain managers must stay at that financial services firm? Why can't some make its way across the street to you?

Do They Know and Understand What You Do? In a fast paced world we put people into buckets. Accountants are bean counters, you think, but if your friend is a forensic accountant, your quick assessment is way off. They may think of you "as a broker," regardless of the circles in which you travel. Have that conversation. Start by taking an interest in what they actually do.

Do They Know You Are Still Adding Clients? You give off signals. You are seen as successful within your social circle. You talk about long hours, downsizing of support staff and working at home on weekends. They may assume you have all the clients you can handle, that it would be an imposition for them to ask you to handle their accounts. Clear up this misconception. Friends are important.

Have They Been Asked to Be Clients? Relationships evolve through several stages: Stranger, acquaintance, identifying common interests, friendship, trust, learning needs, and discussing business based on needs. We think people consider business only in the last stage, when we ask for it. They may actually make that decision in the "trust" stage and consider, "Would I do business with him?" If they tell themselves "yes," they are probably just waiting for you to make the first move.

One final obstacle is almost always insurmountable. Unfortunately, we rarely think so and tend to waste an enormous amount of time on it.

Do They Prefer to Do Business With Someone Else? You married their sister. They never warmed to you. They think their sister "married down." They suspect your fidelity. They doubt your credentials. They dislike the industry. In short, they hate you! When we marry into families, in-laws come with the package. Optimistically we strive to "turn them around." It rarely works. The "karma" is wrong. Focus your efforts on the other nine categories.

Obstacles to doing business with friends may seem real. Often they are preconceptions you may be able to eliminate through casual conversations. You probably have many good friends who started as clients. The relationship can work the other way too.

Bryce Sanders ( is a former Financial Advisor and President of Perceptive Business Solutions Inc. which provides HNW client acquisition training for the financial services industry. His book, Captivating the Wealthy Investor, is available at


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