It should have been a success story, but the opportunity to pitch the senior management of a major financial company proved otherwise for a successful wirehouse team I know.
Invited to present themselves to a group of potentially lucrative clients, the advisors crashed and burned because their presentation focused almost exclusively on investments — an area the executives felt they already understood. Humbled but fueled by the failure, the wirehouse team leader has refocused his team on addressing the overall wealth needs of their affluent clients.
The mistake he made — playing to his own strengths and focusing on the managed account products that would make the most rain for his team — is understandable. But he learned the hard way that modern wealth management often means taking the long route to real money.
Here are some guidelines to providing a wealth management package that can eventually lead you to big-dollar relationships.
Dig Down Deep
Some advisors do not want to get involved in the complexities and implications of a client's financial life, opting instead to focus only on investments. But the growing needs of the Baby Boomer generation are rendering such a limited business scope dangerous. The Boomers seek help with “life-driven” financial needs, such as disabilities, estate planning and aging parents, and because they will dominate the financial services industry for the next 25 years, embracing their demographic needs is of primary importance to anyone looking for success in the wealth management field.
Wealth is a Balance Sheet; Retirement is an Income Statement
Most high-net-worth clients are businesspeople who already know that assets carry liabilities (both literal and figurative) with them. They do not need help to understand how a balance sheet works. Rather, they need guidance in maximizing net assets and income. This need means that advisory services should focus on how to arrange assets in a way that anticipates probable future liabilities, including the costs of business disasters and retirement costs.
Sometimes the examination of life-driven financial needs must originate with the advisor. One way of broaching the subject is to pose a series of emotionally challenging questions: “What will you do if you become disabled?” “What will your spouse and children do?” “Suppose you suddenly died?” The purpose of these questions is to get clients to address situations that many people refuse to even think about. “Sure, they're upsetting issues,” says one rep who employs this tactic. “But how can you expect to develop a formal plan if you don't understand what the client wants to do in the midst of a devastating event?” These questions also help the rep discover whether the client keeps assets with other advisors.
Address the Fear of Planning
The 2003 Phoenix/Harris Wealth Survey reports that three out of 10 affluent clients have no estate plan, and another 30 percent have a plan that is more than five years old. Talk about opportunity knocking: That adds up to nearly two-thirds of millionaire households in need of a new estate plan. When pursuing these clients, it is important not to get intimidated by the hugeness and complexity of wealth management. Few clients demand an all-knowing expert. Instead, make sure you are conversationally proficient in the needs of the affluent. At the very least, this means having the ability to query clients about their financial needs — and then challenging them to fulfill those needs, most of which provide no short-term satisfaction. But there is a downside to the abundance of estate-planning prospects: They are accelerating the flow of non-traditional competitors, such as insurance companies and trust banks, into the financial planning game.
They Can Handle the Truth
Investor satisfaction with an advisor usually rises and falls with the latter's ability to raise important issues that might otherwise have gone untended. Too many financial advisors are reactive and miss out on opportunities to distinguish themselves by challenging their clients. If you find you don't have enough time to spend on strategic thinking about your clients' needs, farm out some tasks — move some assets into a managed account, for instance — to free up the necessary time.
Don't Go it Alone: The Team Approach
Many advisors find that teaming up with specialists lets them address their clients' needs in ways they could never have otherwise. In addition to traditional partners, such as CPAs, advisors are now working with estate planning attorneys, insurance professionals, business consultants and even “lifestyle experts,” such as psychologists and career counselors. Some are partnering even further afield — with technical analysts, technology specialists and marketing experts. The idea is to find people who complement your skills while filling a defined client need.
Two Things to Do Now
Build a book of wealth-management anecdotes drawn from your personal experience and tell these stories to prospective clients. Whether it's a tale of a tax surprise springing from a poorly planned estate or a yarn about the pitfalls of ignoring long-term care issues, true stories can be the best selling tools you possess.
For each of your top 20 client households, identify the 10 most important people in each client's life. Anticipating the future needs of this group is an important part — perhaps the most important part — of an advisor's planning on behalf of the client. The advisor who demonstrates skills in addressing the needs of the client is probably a long-term winner in the quest for the client's assets.
The Bottom Line is…The Bottom Line
Remember: Wealth management seeks to address all of the client's financial needs, but the primary revenue source for most advisory practices is the fees on assets under management. Other products and services offer one-time commissions or fees, but the managed account typically offers the greatest overall return because of the long-term annuity income stream and the leverage of using the market's growth to increase that income over time. Managed accounts also leverage your time as an overall wealth advisor by freeing you from the daily chore of investment management. By subcontracting the investment duties to professional managers, you will be able to invest more of your time in working with clients and prospecting for new business.
Steve Gresham is executive vice president, chief sales and marketing officer for the private client group of Phoenix Investment Partners, Ltd. He is the author of The Managed Account Handbook: How to Build Your Financial Advisory Practice Using Separately Managed Accounts and Attract and Retain the Affluent Investor: Winning Tactics for Today's Financial Advisor. Contact him at [email protected]