The wealthy—like most everyone else—are looking to work with great advisors who are experts in their field and can deliver outstanding results. In this category of potential great advisors are wealth managers who can help them optimize their financial worlds. The complication is: “What makes a great wealth manager?”
Technical Expertise And Process
When searching for wealth managers, a large majority of the wealthy focus intently on one characteristic. They often—mistakenly conclude— that a wealth manager is great based solely on his or her technical skill. Certainly, the wealthy expect their wealth managers to be technically knowledgable and able to deliver the full range of appropriate products and services.
According to Homer Smith, Executive Director of the Integrated Family Office Practice and Founder of Konvergent Wealth Partners, “By just considering the technical capabilities of a wealth manager, there’s a good chance affluent clients will be disappointed. Of course, technical skills are extremely important. The affluent want to work with the smartest and most proficient advisors around. Sill, some wealth managers who may be extremely technically capable are not necessarily the best advisors.”
“Just as important as technical skill is the ability to understand the self-interests of the wealthy, what we call the human element,” says Vince Annable, CEO and Founder of VFO Advisory Group and author of The Household Endowment Model: Wealth Planning for Affluent Families. “The human element involves the personal and emotional components of wealth management. It includes understanding everything and everyone important to a client, as well as everything and everyone that could be affected by the financial decisions, and using that understanding as the basis for making financial recommendations.”
Case study: At the request of an ultra-wealthy entrepreneur, I was engaged to evaluate his existing succession plan. The aim was to determine if the plan would still likely deliver the expected outcomes. I put together a cohesive team of specialists to help dissect the succession plan.
As part of the human element component of the process, questions were asked that revealed a hidden issue. In the existing plan, the patriarch went with “even” instead of “fair.” Each child was to receive an equal share of the estate, including the company—even though only one of the four kids was involved in the business at all. The entrepreneur described two of his children as “do nothing” and “worthless.”
Because of some changes in the family dynamics from the time the estate and succession plan was signed until the present day, the new likely outcome after the business owner’s death would be an all-out war among his four children. The family conflict could also cause the 200+-year-old family business to go under.
Helping the entrepreneur think through the situation with an intense focus on the human element resulted in a new estate plan and well-structured succession and asset protection plans.
In this instance, the actual wealth planning—the technical aspects of the original plan—was extremely well done. That’s mainly because the wealth manager and legal professional who crafted the plan were very technically skilled. The problem was that some key interpersonal family relationships and related circumstances had changed—a fact that was only learned by focusing on the human element side of the planning.
The result is that the child involved in the company will inherit the company. The other children are slated to get comparable amounts of wealth but in different forms.
Implications
According to Anthony Glomski, Principal and Founder of AG Asset Advisory Family Office and author of Liquidity and You: A Personal Guide for Tech and Business Entrepreneurs Approaching an Exit, “Great wealth managers are highly technically skilled. But, that is usually rarely enough if the aim is to optimize the financial worlds of the wealthy. What also is required of a great wealth manager is the ability to discover the needs and wants, wishes of concerns of the wealthy. Great wealth managers are proficient technically and when it comes to the human element.”
Russ Alan Prince is the executive director of Private Wealth magazine and one of the leading authorities in the private wealth industry. He consults with family offices, the wealthy, fast-tracking entrepreneurs and select professionals. Connect with him on LinkedIn.com.
