Warren Buffett’s Playbook: Six Lessons for Top Wealth Managers

It may surprise many Top Wealth Managers to believe that they have much in common with Berkshire Hathaway (BRK) CEO Warren Buffett. As stewards of clients’ money the commonalities start there. But there is one area in which some Top Wealth Managers lag, and resolving to catch up this year may go a long way to ensuring that your clients are well served over the long term.

Perusing the following six lessons from Buffett, which one jumps out as the most challenging?

From the BRK Annual Report and Letter to Shareholders:

1. Buffett is a long-term thinker, undeterred by short-term market issues, a trait he shares with many Top Wealth Managers. But it is, admittedly, harder to sit across the table from a client when markets are difficult and get them to continue to stay on course than it is to manage billions from afar. In this respect, a wealth manager’s job is much harder, but the long- term perspective is just as important and serves clients just as well.
2. Buffett takes advantage of market dislocation to buy companies when their valuation makes sense to him
3. Berkshire Hathaway leaders “keep our cash largely in U.S. Treasury billsand avoid other short-term securities yielding a few more basis points.” While it may be challenging to help clients understand that preservation of principal may be the most important goal for their most liquid bucket, it is a worthwhile endeavor to educate them about this.   
4. Buffett is “cautious in respect to leverage.” Does any more need to be said?
5. Buffett is risk averse, with “no interest in any activity that could pose the slightest threat.”
6. Buffett has a succession plan for BRK and is asking all of his directors for confidential input about their individual businesses: “I need your help in respect to the question of succession. I’m not looking for any of you to retire and I hope you all live to 100. (In Charlie’s case, 110.) But just in case you don’t, please send me a letter (at home if you wish) giving your recommendation as who should take over tomorrow if you should become incapacitated overnight.”

Yes, it’s number six, the ‘succession” planning aspect of Buffett’s letter and long-term thinking that jumps out at me as one of the most challenging business or practice management aspects of being a Top Wealth Manager. It is astounding to me in talking to Top Wealth Managers how many don’t have a real succession plan in place. After all, as a steward of your clients’ financial well-being, who is better than you to choose your successors, and ensure the longevity of your firm for your clients?