No wealth manager is an island. Successful wealth managers are both internally supported by competent, dedicated, and well-trained staff, and externally supported by a network of top-flight experts who can deliver the diverse knowledge and services that affluent clients need, want and expect. Proactively developing, managing and upgrading this expert network is one of the wealth manager's paramount tasks.
A true wealth manager--not one in name or title only--is dedicated to establishing long-term consultative relationships with affluent clients in order to comprehensively serve the unique and diverse needs of those clients, their families and their businesses. For most affluent clients, wealth preservation--and not wealth creation--is most critical. So, for example, a comprehensive review of each new client's personal and business assets, risks and liabilities is required in order to put an appropriate umbrella liability insurance policy into place.
If a new client initially approaches you for investment advice, you should be able to provide such advice expertly and seamlessly, since that's your ticket in. But most affluent clients will also expect--and virtually all will need--expert knowledge and services addressing a broad array of advanced planning concerns including asset protection, wealth enhancement and wealth transfer. Realistically speaking, this can be achieved only through creating and coordinating an outside network of top-notch professionals.
Three 'Whys' to the Wise
A network of expert professionals is a kind of amorphous--but very real, capable, and effective--think-tank. It is created through a set of strategic alliances held together by mutual expectations and various kinds of economic glue and continuously managed by the wealth manager. Notwithstanding modern communications capabilities, constructing and maintaining such a network takes a lot of work. There are three very good reasons to make the necessary effort.
First: It's what your clients need in order for you to do the best possible job of managing their wealth. You (and your clients) must have total confidence in the credentials and the capabilities of the experts in your network. You may have previously considered yourself an expert on estate planning or tax issues, but as a true wealth manager, you simply don't have the capability to provide the level of expertise affluent clients require. Even if you are arguably qualified in a certain area (other than investment advice), your clients won't see you that way because they will be expecting advice from a true expert.
Second: Situated in the center of the expert network, only you can play the role of client advocate. No one knows your clients' needs, goals and challenges--and how to effectively express and address them-- better than you. It's your job to use this knowledge to ensure that your experts are deployed to your clients' maximum advantage. The experts will offer opinions, strategies and choices, but you serve as both filter and general manager, making sure your client's ultimate interests are protected and goals served. You are (or should be) rock-solid certain about your clients' preferences, problems and concerns, and you know how to best present your clients' goals and challenges. In short, your presence as advocate vastly increases the likelihood of your clients' deriving the best possible outcome.
Third: Even if this isn't what they were originally expecting or looking for, providing a broad range of expert knowledge and services is correlated with much more highly satisfied clients. CEG Worldwide research shows that, on average, affluent clients receiving three or more services from their advisors had a 96.1 percent satisfaction level. For those receiving two services, the satisfaction level was 73.6 percent, and for those receiving just one, it was only 39.9 percent. Giving clients more than they might have expected produces more highly satisfied clients, who in turn generate additional niche referrals, give you more investable assets, and stick with you for the long-run.
Who You Gonna' Call?
Who should constitute your expert network? Simply ask yourself which skill sets you need to comprehensively serve your clients. For starters, every expert network should include these professionals:
o A CPA
o An estate-planning attorney
o An insurance specialist
The other members of your network will be determined by the needs of the clients in your target niche. (Perhaps the surest way to fail as a wealth manager is to not choose a niche market to specialize in.)
If, for example, corporate executives are your niche, then your network might include a derivatives specialist, a concentrated portfolio specialist, and a specialist in restricted stock and Rule 144. But if your niche is wealthy widows, in addition to a high-end estate planning attorney (ideally a member of the ACTEC, the American College of Trust and Estate Counsel), you'll want a grief counselor and a trust company representative on board.
The wealth manager must always remain the client's key contact--the relationship manager who makes all decisions with respect to client access. The wealth manager should be present at all initial meetings and when any major actions, strategies or implementations are being proposed or finalized. Down the line, there may be fairly mundane meetings where the wealth manager chooses not to be present, but that's a decision for the wealth manager--not other experts or the client--to make. (Of course, there may be certain kinds of privileged discussions with attorneys where the wealth manager is not present.)
It's critical for the wealth manager to come to a clear understanding with each expert about any mutual referral, business development or economic expectations. Only 10 percent of attorneys expect to share in fees, but virtually 100 percent of CPAs expect formal written revenue-sharing agreements for referred clients. It's equally critical for each expert to agree to the principle that the client always remains the client of the wealth manager, and that the wealth manager operates as the center of the network. For example, if there are significant estate law changes, the estate law attorney first communicates these to the wealth manager, who then informs affected clients. This is more efficient for everyone involved--including the attorney--and ensures that no client is left out of the loop.
Once again, the single most important driver behind creating and maintaining an expert network is the wealth manager's desire to provide clients with the best possible service. It's not uncommon for advisors to complain that while they give referrals to other experts, they don't get any back. Well, the main purpose of creating the expert network is not to get more business referrals from other experts, but to serve the clients in your niche so well that they will generate more referrals and give you more business.
However, if you are clear about your expectations and assumptions in forming strategic alliances with various experts, it's likely that in the medium- to long-run they will, in fact, generate more referral business for you. This is especially true if you don't just tell, but actually show these other experts how you, as a true wealth manager, operate your business in a profoundly different way than the stockbroker down the street. When they come to understand your consultative and comprehensive approach, they'll be eager to send their clients to you, and that's how you'll ultimately move from a better network to a better net worth.
Patricia J. Abram is a senior managing principal with CEG Worldwide (www.cegworldwide.com), an industry research, training and consulting firm.