Lifting the Lid

Lifting the Lid

What wealthy investors think when working with advisors

What are your clients really thinking about you?  Surely it’s crossed your mind, perhaps more than a few times. Much can be learned about strengthening and building relationships with the ultra-affluent by understanding where you fit in your clients’ advisor framework and how they evaluate what it is they want from advisors.  By gaining such knowledge, it will also give you insight into how they actually view their relationships with advisors.

Ascertaining where you fit in the mix of your clients’ advisor stables is a good first step. Close to 60 percent of high-net-worth clients concentrate over half of their investments with a primary advisor, according to a survey conducted last year by the Institute for Private Investors (IPI).  Additionally, private investors have on average two to five advisor relationships.  They keep multiple relationships to help diversify risk, to ensure they’re staying on top of the latest thinking as a check to the services provided by their primary advisor and for niche services.

The next step is to understand how existing and potential clients approach hiring, vetting, monitoring and working with advisors.  Below is a fly-on-the-wall vantage point of what the ultra-affluent think about working with advisors.

Six Best-Practice Tips

Here are tips from affluent family members:

  1. “When hiring an advisor, ask multiple questions to a number of different advisors and then go back to ensure everyone has been asked the same thing.  This will provide solid grounding on the differences between providers whether you choose to make a hire or not.”

As an advisor, this means you should be prepared to answer all questions and to be aware of the fact that you may be compared to other types of providers, as well as similar ones.  Be able to articulate your core strengths and what differentiates you from direct competitors and other types of providers.  Be specific as to how you execute services, but also provide your general philosophy and approach to working with families of affluence.  Remember, the affluent use a number of advisors.  Find out what services they feel they view as core to determine where you fit and where they seek niche specialists.

  1. “Think about hiring your own advisor as opposed to using only those others in your family have hired and are using.”

As family members gain greater responsibility over their wealth, it’s only natural that they may want to add an additional advisor to their family’s advisor group.  Sometimes this is done as a preliminary move toward shifting the wealth under their control to the new advisor.  Other times it’s not. If you haven’t already established a relationship with the wealth holder, it’s highly likely the time has past.  But if you do have a relationship, continue to nurture it.  Try not to take the move personally and be as helpful to the new advisor and the family member as possible.

  1. “Remember and remind your advisors that the account is yours, not theirs.”
  2. “Ask questions and ensure they’re answered.  Challenge your advisors.”

Points three and four sharply underscore that advisors too often discount their clients’ views or arent attentive in soliciting information from them or in providing real answers to questions. No question should ever be sidestepped or pushed aside no matter how busy you may be or how simple or irrelevant you find the inquiry to be. If youre not being fully attentive to your clients or dismissive in some manner, your behavior is being dually noted, discussed with others and remembered.

Take Responsibility

  1. “Don’t abdicate responsibilities or give away your power to an advisor.  Get involved, understand issues and watch your advisors.”

Post the Great Recession, it became ever more clear that investors need to take responsibility for their wealth. While they dont necessarily need to understand their wealth plan on a micro level, they do need to know what their advisors do and have increasingly sought discretion. According to the 2012 Both Sides Now survey conducted by the IPI, only 32 percent of clients with under $50 million in investable assets were comfortable giving their managers full discretion to make changes as they see fit. That number dropped as assets increased.

  1. “Have your advisors present information consistently and in a digestible executive summary.  You can always go back for a deeper dive.”

Here lies an opportunity.  Clients want to understand their wealth plans, but that doesn’t mean they need a novel or a massive book of numbers presented to them each quarter.  What they want is an easy and consistent report that allows them to see how they’re doing and compare apples to apples each time.  Anything of note should be highlighted with clear guidelines for what a material event might be.  Full details should also be available and a clear manner in which to follow up questions would be considered highly helpful.

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