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Going the Distance

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How many of your clients refer to you as their “advisor for life?” Probably not as many as you would like. Acting as a financial advisor to affluent families, especially those in the baby boom generation, is more complex now than it ever has been before. It’s now necessary to offer guidance that is insightful, thorough and valuable — making the financial advisor a trusted and integral part of the family’s future planning.

Industry insider Stephen Gresham, executive vice president of Phoenix Investment Partners, offers his insight from years of experience in his new book, Advisor for Life. The book reveals the nuts and bolts of a practice aimed toward affluent families, noting the advisor should “protect, motivate, and educate clients over the course of the relationship.”

The primary test of the Advisor for Life, says Gresham, is the ability to empathize. “Can you be truly concerned for your clients as they confront life’s real challenges?” He quotes a colleague, Don Berryman, who summed up the four most important principles to being a good financial advisor:

1. Be available — and willing to give your time, your most valuable source. He notes that some 35 percent of millionaires leave their advisors because they were not proactive enough and that 20 percent of clients working with a primary advisor are actively looking for a new one or thinking about doing so.

2. Be concerned. What could happen that would derail a household’s ability to achieve its goals; and when are risks or fears most likely to occur.

3. Be informed. Affluent clients seek advisors who know how to take care of people like themselves. FAs should have case studies depicting issues already confronted and resolved.

4. Have an opinion. No affluent client will tolerate an advisor who asks what the client wants to do. “Top advisors have an opinion because they are informed, whether through experience or training or both,” writes Gresham.

Gresham writes that it’s important to develop an investment philosophy, and then to follow that up with an investment process. However, a boilerplate process would be unworkable, so most advisor “process statements” should take into account several elements. For instance, for cost, Gresham points out various options: fees based on a percentage of assets; fee-only; percentage of the capital appreciation; or annual retainer and hourly fees.

Gresham tells readers to work with clients to calculate how much money they’ll need in order to fund a comfortable retirement, a situation that surprisingly few affluent people have done so far. This means figuring out the location and style in which they will live during the early stages of retirement. Secondly, Gresham recommends delving into potential healthcare costs, including the hidden expense of caring for others. He recommends discussing the potential role of long-term care (LTC) coverage. “The No. 1 reason why clients do not acquire LTC insurance is that they believe they have enough resources to protect themselves,” he writes. But the reality is that studies show a couple in their sixties could spend $200,000 in long-term healthcare if they age into their eighties. It reaches to over $750,000 for those approaching 100.

Gresham believes it’s important that advisors define their value by answering such questions as, “What makes you different?” and “Why should clients do business with you?” Gresham makes a great point about credibility: “Most advisors have spent inordinate amounts of time and money getting accredited to provide advice, yet few clients understand what the designations mean, let alone how to distinguish one from another.” Secondly Gresham writes it’s important to present a full picture of your background. “A well-considered, organized answer to the passing question, ‘Who are you?’ will set you apart immediately in a conversation.” Gresham provides checklists of what to include in an introductory paragraph as well as examples.

At almost 400 pages, Advisor for Life is thorough, and thoughtful, and if you’re targeting affluent families as clients, it is essential.

Mary Scott is the co-author of Companies with a Conscience and can be reached at [email protected].


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