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Advisor Interest In Ultra Wealthy Grows

The ultra-high-net-worth market is drawing greater interest from financial advisors, who flocked to the Investment Management Consultants Association (IMCA) annual Advanced Wealth Management Conference in San Francisco this week.

The ultra-high-net-worth market is drawing greater interest from financial advisors, who flocked to the Investment Management Consultants Association (IMCA) annual Advanced Wealth Management Conference in San Francisco this week.

Not only did the conference sell out, with 515 advisors attending, a 15 percent increase from last year, but more advisors are signing up to get IMCA’s Certified Private Wealth Advisor designation than in past years.

Average class size for advisors taking the CPWA course doubled from 35 last year to about 75 this year, said Sean Walters, chief executive of IMCA, which is based in Colorado and has a membership of over 8,000 advisors. Demand for the CPWA designation has become so strong that IMCA is adding another course next year and one more in 2012, which will bring the total to four classes per year. Today, 351 advisors have a CPWA, up from 268 in 2008.

Advisors around the country are in fact pursuing high and ultra-high net worth clients more aggressively, said Welch. “We’re seeing it among our clients and you’re seeing it in the numbers at the conference,” Welch said. “Advisors are adding clients and assets are going up. The industry is coming out of its fetal defensive crouch.”

The obvious reason for the growing interest in the wealthiest clients is that they are more profitable, says IMCA’s educational consultant James Dodd. Those with $5 million in assets or more tend to be executives in large companies with complex compensation packages and owners of closely-held businesses, said Dodd, who oversees the CPWA program for IMCA.

“Clients with $5 million to $20 million in assets are the sweet spot in terms of services they need, fees they are willing to pay and the nature of the relationship,” said Scott Welch senior managing director at Fortigent, the Rockville, Md.-based wealth management platform providers.

The rising popularity of the designation, whose classes focus on areas such as tax and estate planning, alternative investments, behavioral finance and socially responsible investing, is being driven by three types of advisors, according to Walters.

Wirehouse advisors (and many firms) are moving toward higher net worth clients, and want to broaden their skill set, he said, while advisors who work for banks and trust companies are “high-achieving types” who want a competitive advantage. Independents, meanwhile, want to gain credibility with wealthier clients by augmenting their credentials to include not just the Certified Financial Planner designation, but also the CPWA.

More Sophisticated Clients

But serving ultra-high-net-worth clients requires greater investment and planning expertise, as such clients both know more and have more complex needs.

“Today’s wealthy clients are different than 10 to 20 years ago,” said conference chair John Nersesian, a managing director for Nuveen Investments. “They’re more knowledgeable, much more aware of the choices they have and their concerns are more complex. Advisors are asking themselves how they are responding to that evolution.”

Some advisors sign up for advanced wealth management courses for pro-active reasons to increase their knowledge in areas such as charitable giving and succession planning, he said. Other are attracted to the designation for defensive reasons.

“They’ve been challenged by market returns and sub-optimal performance,” said Nersesian. “Clients are questioning them and advisors need a better understanding of their needs and concerns beyond investments.”

Advisors who believe a CPWA designation will help them capture wallet share of the high – and highly competitive – end of market must pay $7,500 for a six month online course that culminates with an intensive week long series of classes and an examination at the University of Chicago’s Booth School of Business.

Michelle Eldridge, principal for LVM Capital Management in Portage, Michigan, said it was worth it. Many of her clients have over $2 million in investable assets, and Eldridge said she wanted to compliment her portfolio management skills with more sophisticated financial planning techniques such as estate and income tax reduction and asset protection strategies.

“Wealthy clients, especially the younger ones, want more sophisticated advice and they want a fiduciary who will always act on their behalf,” she said. “To be successful in that market you have to recognize this is a knowledge business as well as a relationship business that is built on trust.”

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