The results from a recent poll conducted by Fidelity’s RIA group were both encouraging and challenging for investment advisors working with high-net-worth clients. Thirty percent of millionaires surveyed don’t have an established relationship with a financial advisor, but of those who do seek professional advice, 34% report having two or more professionals. For average investment advisors, this means they’re not managing a significant portion of their top clients’ assets. To move beyond average, an advisor needs to view his clients as more than chunks of assets to be invested.
According to surveys conducted by Prince & Associates, Inc., which the Fidelity findings confirmed, wealthy clients want a trusted advisor who can help them address a multitude of financial concerns. Prince & Associates’ study of individuals with investable assets of between $500,000 and $6 million revealed that most view advisors as product pushers and not as objective consultants. Even within the group who said they were satisfied with their advisors, almost 25% stated that they were likely to transfer assets from their primary advisors in the coming year. They’re also seeking more advanced products, such as managed accounts, and services, such as estate planning.
Wealthy individuals and families need a variety of advanced financial, tax, and legal solutions that require several types of expertise. Rather than just referring them to an attorney, for example, you can resolve these challenges and boost your value to clients by coordinating their advanced planning needs.
Advanced planning builds on your investment management practice. You augment what you do well with outside experts to help your biggest clients solve their most pressing financial problems. As a problem-solver, you’re paid–usually by sharing in the revenues generated from fees and transactions–to coordinate the work of attorneys, CPAs, business value assessors, and insurance experts. If you don’t have your own network of experts or don’t want to build one, you can bring in a private wealth specialist who works with this level of clientele to help you find solutions. Either way, you enhance your value to your client.
An Advanced Planning Model
The implications for your practice are significant. Advanced planning clients are an underleveraged source of profit and income. Working with them, though, requires education and a new role for you as project manager for a team project (or working with a specialist who operates in that role on your behalf). Either way, advanced planning requires a very different mindset–instead of the traditional one-advisor-to-one-client interaction, it becomes team-with-project-manager-to-one-client.
Regardless of your particular expertise, you need to present yourself as an advisor who uses a holistic approach to solving a high-net-worth client’s needs. Products are only the tools. Understanding the client’s motivations comes first, then analysis of the situation, and last a strategy that matches the client’s level of commitment. These clients are more concerned about working with the right advisor than they are about the best investments. Building a strong relationship is the key to garnering their loyalty and additional business.
If an investment client with a $500,000 account mentioned that he wanted to sell his successful contracting business worth $5 million to his daughter and a group of employees–and then retire–how would you respond? Would you ask the right follow-up questions or would you suggest he come back to you once he sold the business and had cash to invest? This client is a prime candidate for advanced planning.
Here are some examples of highly successful advisors looking outside of their practice to solve the advanced planning concerns of clients:
Knowing the Client
“The reality you see in the first meeting isn’t the reality you see later,” observed Bruce Coldsmith of Coldsmith, Lee and Associates, a financial advisory practice affiliated with Ameriprise Financial Services in Mobile, Alabama. He recently recounted an experience with a new high-net-worth client who had a particularly complex family and business situation. As he got more and more information, he realized the solutions he envisioned wouldn’t solve the client’s concerns. “It was like peeling back the layers of an onion, trying to see all the parts,” he said.
For this client and for others with advanced planning needs, he had to look for expertise outside of his practice. He’s assembled a network that includes business and real estate valuation experts, physicians, and attorneys with multiple specialties. Given his location near the Gulf Coast and the trails of Hurricane Katrina and other devastating storms, Coldsmith has found that his network of outside advisors now includes P&C claims adjusters–a “problem-solving” role that clients who have had unresolved damage claims against insurers truly appreciate.