Stand and Deliver

It’s late morning, and the summer sun is shining on Mt. Kearsarge in central New Hampshire. Ross Gott, president of Kearsarge Capital Advisors in nearby New London, stands on the front porch of his 100-year-old office building in sandals, shorts, and a white shirt as he and his associate Robin wave goodbye to a departing client couple. Jeff and Michelle had dropped by to say hello and pick up a CD copy of Ross’s presentation to them the previous week.

The story began a month earlier, when Ross sat down with the couple (both in their mid 50s) to review their portfolio. He told them, “You are at a point where we really don’t need anything vague or unknown out there” (the “out there” meaning retirement). “How do you envision your retirement?” he asked. “What are you happy with right now? What’s in your way? Where do you see yourself during retirement?”

For the next several hours, Ross listened–intently–as his clients talked about their future. What began as a scheduled 45-minute portfolio review extended to three hours, the foundation of what I call the “re-fact process.” Wealth managers use this process to delve into “fact facts” and “feeling facts.” Fact facts are quantitative data, such as savings, savings rates, investments, insurance, annuities, and insurance–the information a wealth manager needs to complete a financial plan. Feeling facts are the softer, qualitative issues that give meaning and life to the fact facts. What are the clients’ goals, wishes, and aspirations? Do they want to travel? Save for a grandchild’s education? Leave a legacy for a charity? Build their dream home?

Wealth Management: Goals and a System

Spending this much time with a client or client couple wasn’t always Ross’s plan. Twenty years ago, he moved his tax accountancy practice to New London and the idyllic Dartmouth-Lake Sunapee Region, where the town’s population swells from 4,000 in the winter to more than 15,000 in the summer. Recreational visitors who like the laid-back lifestyle began returning to New London and its environs to retire, among them self-made professionals and what Ross likes to call “sudden-wealth victims.”

Seeing new opportunity, Ross began an RIA consultancy to complement his tax practice. There was only one problem. He had far too many tax clients to concentrate his attention on wealthier clients and effectively deliver a higher service level. Like many who have faced this situation, Ross took the plunge and referred away two-thirds of his tax practice, keeping about 60 high-net-worth clients (for more on how to do this, see the September 2008 Investment Advisor, “Less Is More“). Today, Ross focuses on clients with $750,000 or more in investable assets, those capable of generating at least $5,000 in recurring annual income.

Ross realized that effective wealth management means efficient coordination of his time and resources. Becoming a wealth manager entails an intense focus on goals that require planning, money and time, and the ongoing coordination of a “financial ecosystem” to accomplish them.

As Jeff and Michelle prepared to leave that first meeting, Ross set up the next appointment and told them what the subsequent steps would be. He said he would take what he had heard and develop a “Discovery Agreement” that would become the foundation for a “Client Engagement Road Map.”

In Their Own Words

Though these tools may sound daunting, Ross and other financial advisors I’ve coached find that most people don’t want a three-inch binder with a heavy, technical financial plan. They prefer the condensed version, and they want evidence that you understand their most important needs.

That is why the Discovery Agreement is so valuable. The purpose of the Discovery Agreement is more than a deliverable to your client. It’s an articulation of your clients’ vision for the future–a document you and your clients will return to again and again. It’s generally brief, consisting of three to five richly written paragraphs. In them, you outline in your clients’ own words their goals and aspirations for the future.

This combination of re-facting to develop a Discovery Agreement, and using quantitative and qualitative data to update the financial plan, is the basis for creating the “Client Engagement Road Map.” The Road Map is to the Discovery Agreement what a travel map is to the destination. It describes how you and your clients will get to the destination–by what means, at what cost, and over how long a period of time.

Several weeks prior to meeting with your clients a second time, I recommend sending a follow-up letter thanking them for the opportunity to serve them and enclosing a draft Discovery Agreement. Ask your clients whether the draft captures their vision of the future. Follow up by phone to see if they have any changes or additions. Two weeks before the meeting, follow up with another letter containing an agenda and updated Discovery Agreement. Invite them to review and add to the agenda if they wish.

By taking these steps, your clients will see you first as a good listener, and secondly as the coordinator of their financial needs–instead of merely a planner, insurance expert, or investment specialist. Try it one time, and you will be surprised how easy it is to reconfigure your deliverables so they meet client needs.