Summertime brings thoughts of vacation and leisure activities for financial advisors and their clients. But it might not occur to financial advisors for wealthier clients—especially individuals who are highly driven and self-made professionals—that summertime frequently brings an internal struggle over whether to sacrifice their quality of life out of devotion to fiscal responsibility.
So the thinking goes, if the first generation “millionaires next door” in the $2 million to $20 million net worth range adhered to clichés such as “stop and smell the flowers” and “money can’t buy you happiness,” how would these people have gotten to where they currently are in life now?
But the truth is that successful, highly motivated individuals such as these are less at risk of losing their ambition than they are of losing their way due to poor decision-making.
There is an opportunity for financial advisors who can evolve towards a democratized family office model that aligns the high touch solutions that such clients need, without all of the overhead and structural costs that come with the traditional family office space, to drive significant value in the lives of these individuals and their loved ones.
The Money Myth
One of the biggest causes of poor decision-making for ambitious clients is buying into the money myth. Because the high-net-worth advisors for this segment of the wealth management space are ideally both strategic consultants and personal confidantes, part of the job involves dispelling that myth for clients.
Most high-net-worth advisors have seen the money myth in action. Clients who believe there’s some fictitious dollar amount they can achieve that will grant them everlasting happiness may torture themselves with grueling workloads or engage in risky investments in hopes of getting there. These clients may cast aside friendships and family connections in single-minded pursuit of promotions or raises. Other clients have gambled with market-timing or high-risk investments to hit that magic number.
What they don’t realize is that real wealth and happiness comes from fulfilling their unique dreams and goals. As hard as it might be for the financial advice industry to accept, advisors who knowingly allow their clients to remain trapped by the money myth are not doing all they can to help clients lead better, richer and fuller lives.
Needs And Wants
Showing your clients how to break free of the money myth demands that you get real with them about distinguishing their needs from their wants, so they can strike a balance. This necessarily involves discussing numbers—lots of numbers.
You must get your clients to open up, in full, about the sums on their credit cards, bank accounts, pay stubs, mortgage statements and any other documents that reveal income and expenses. Wealthy clients have a tendency to keep certain assets hidden away, or managed elsewhere, in the process leaving their advisors in the dark about their complete financial picture. Overcoming that obstacle allows advisors to provide informed guidance about each client’s particular needs and wants.
Your objective should not be to tell clients what they’re spending too much money on, or the luxuries they ought to abandon, in order to retire comfortably. (Of course you might have to do that once in a while, if the client reveals major problems.) Instead, your goal should be to show clients those perks of life they can enjoy and still behave responsibly. Some clients may need to purchase four huge cups of gourmet coffee a day, while other clients might need to take a lavish two-week summer vacation with their family.
Richer Lives
Clients who gain a new understanding of what they can allow themselves, while remaining on target with their financial plans, are better positioned to achieve their full financial potential. With such a change comes clarity and optimism that can produce positive life decisions. Career moves and investments based on long-term holistic strategy crafted by the advisor, for instance.
Yet there is perhaps a more practical reason that advisors should take this approach with clients: It’s what the most prestigious institutions have long done for their most desirable clients. Family offices know that a wealthy client values perspective on how money can be used to appreciate life, as opposed to fixation on what the client cannot do with money.
Good advisors could do much more for clients, by freeing them of the money myth while simultaneously offering solutions that so-called elite institutions have reserved for their clients. In fact, once an advisor helps a client let go of the money myth, that client will be more inclined to trust the advisor with further services, such as managing external financial professionals and optimizing sources of illiquid wealth.
When all of this occurs, advisors can take pride in knowing they have helped clients lead better, richer and fuller lives.
Greg Powell is president and CEO of Fi Plan Partners, a wealth management and financial planning firm based in Birmingham, Ala.
