From the February 2009 issue of Research Magazine • Subscribe!

February 1, 2009

A Model for Success

"Breaking Through: Building a World-Class Wealth Management Business"

Three principals of CEG Worldwide, John J. Bowen Jr., Patricia J. Abram and Jonathan Powell, present the key strategies top advisors rely on to succeed in their new book, Breaking Through. The authors note that competition is keen: There are approximately 765,000 registered financial advisors in the U.S., with about 400,000 of these working with individuals. "If these 400,000 advisors are chasing 2.7 million wealthy households -- those with more than $1 million in investable assets -- then simple math shows that there are fewer than seven such wealthy households per advisor," they write.

Bowen, Abram and Powell write that it's not wise for advisors simply to seek out as many clients as they can and sell them as much product as possible. Rather, it's better to work with fewer but wealthier clients. The authors suggest not only defining a niche (self-employed professionals, for instance), but also creating an ideal client profile, "a detailed description of the clients within your niche with whom you want to work." Advisors then should position themselves as an expert and create a compelling value proposition, a positioning statement and an elevator speech -- "a brief, persuasive speech that motivates prospective clients to explore doing business with you."

A recent CEG Worldwide study of more than 2,000 financial advisors showed that almost half identified themselves as wealth managers, even though only 6.6 percent actually are wealth managers. Wealth managers, they write, tend to have fewer clients than investment generalists do. "Even more revealing is the fact that wealth managers, on average, earn more than three times as much as investment generalists ($881,000/year vs. $279,000)." However, the greater wealth of the clients, the more they expect from their advisors. "Client-relationship management...means forging in-depth collaborative and consultative client relationships," write the authors. Relationship management involves three key tasks:

- Understanding the clients' most important financial challenges and dreams.

- Assembling and managing a network of experts (including lawyers, insurance experts, and so on).

- Working with advisors that the affluent clients already have (including attorneys and accountants).

Bowen, Abram and Powell recommend carefully selecting core team members. They must embody four key traits, they write, including specific expertise, integrity, professionalism and chemistry. Once the wealth manager assembles a top team, it's important to work together as a team. These include establishing a common vision, formalizing how and when team members communicate and agreeing on who is in charge. "It must be clear that the clients are yours and that you are ultimately the one responsible for making decisions about what's best for the client," they write.

Since the clients belong to the wealth manager, these advisors can expect to receive a portion of each specialist's fee. (Though the authors note the clear exception is lawyer's fees. In every case, clients hire the lawyer directly). However, for insurance products, the wealth managers can expect to receive a 50-50 split of commissions. When the wealth manager executes strategies that have no products involved, he or she can charge a project-execution fee. They note that all fees should be disclosed and transparent to the client.

The book is filled with other road-tested approaches that readers will find illuminating and inspirational given the economic downturn. Breaking Through is a valuable guide for today's new model of wealth management.

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