Creating A Wealth Management Team

Team members are competitive, but that shouldn’t hurt their service.

The following is excerpted from the authors’ most recent book, Wealth Management: The New Business Model for Financial Advisors.

In committing to wealth management, advisors are promising clients that they will be able to deliver a full slate of financial products and servicesæbrokerage, investment management and advanced planningæas well as an enhanced and across-the-board consultative capability. But what exactly does that capability entail? What’s on the checklist of wealth management needs? And since they can’t do it all, what criteria should wealth managers use to evaluate the specialists they need to support themselves and their clients?

Based on our research, here’s a checklist of wealth management needs. Keep in mind the fact that it’s not a static list. The desires of affluent clients, the skills of advisors, and the range of products and services are all evolving and have to be regularly reconsidered and accommodated. At the moment, however, the items in Exhibit 1 are the key components of a wealth management platform.

The Team Approach

As noted, the heart of the wealth management platform is the expert support structureæthe network of professionals that has to be in place to fully meet the needs of affluent clients by delivering the above skills, services and products. In the best case, this platform can be the foundation for providing superior service to clients, warding off the competition, growing a business and making money.

So who’s on the team? There’s a wide array of talent and knowledge out there to tap into. Accountants and attorneys are usually part of the network, as are insurance agents and sometimes actuaries. A comprehensive professional network might also include a trusts and estates lawyer, a banker, a money manager or two (or three) and third-party administrators. Increasingly management consultants, family business specialists and even psychologists are on board.

Whatever the constituency, a network that accurately reflects the interests and needs of a wealth manager’s current or targeted clientele should pay dividends over time and reward each team member. Furthermore, as we’ve noted in previous articles, an advisory network is not just a boon to clients; it can also be a source of referrals from fellow advisors (although that’s not a key criterion for selecting a specialistæthe primary motivation is his or her niche expertise).

Any such list of professional resources can be misleading, however. Complementary wealth management skills are not always where you might expect them to be. An accountant might be an expert in advanced planning, for example, and an insurance agent might be an authority on asset protection. In short, don’t be taken in by titles; it’s the skills that must be accumulated.

And knowing who’s in the lineup doesn’t mean the right team is easy to assemble. In fact, each advisor should be able to deliver on each of the following:

• Specific expertise

• Integrity

• Personal chemistry

• Teamwork

Expertise

The field of wealth management often intersects with complex tax issues, regularly requiring the skills of an expert. And a specialist in a given field, asset protection planning to name just one, should have precise and up-to-date knowledge on his or her subject and also be able to convey that information in a credible and comprehensive way. Such expertise does not come cheap, but in our research we’ve repeatedly found that the affluent want the best available advice and are willing to pay for it.

The value of expertise is not just a matter of what a professional knows or how he or she can convey it to the wealth manager and the client, however: that expertise also extends to the information and insights that will rub off. Partnering with a leading expert can have the side benefit of opening a window on the latest industry thinking, a range of risk scenarios, various compensation structures and new marketing ideas. Moreover, by working together on client issues, the wealth manager can become that much more adept at identifying situations where a given specialist should be called in.

The Highest Ethical And Professional Standards

Any partner should also observe the highest ethical standards at all times. The nature of wealth management and the rewards can entice some individuals to push up against legal and ethical boundaries, creating anxiety, compromising everyone involved and quite possibly undermining client relationships. It’s the wealth manager’s job to make sure that doesn’t happen.

Furthermore, since it’s impossible to foresee all of the business opportunities that might come up in advance and negotiate how they’ll be remunerated, advisors must not only trust one another but also be able to articulate and comfortably discuss their ethical standards. In addition, each specialist in a network should be highly professional in every way, whether it’s a matter of promptly returning phone calls, showing up for meetings on time or dressing appropriately when seeing a client.

To that end, each must be thoroughly vetted. This can be done in a number of ways, including checking their credentials with other advisors, with their clients, following up on their references and, if possible, conducting formal background checks.

The Question Of Chemistry

All of the expertise in the world isn’t going to be worth much if there’s no rapport between the wealth manager and the specialist wielding that knowledge. There needs to be chemistry, and the job of recognizing and building it is in the wealth manager’s hands. When we asked independent financial advisors about their biggest challenge when working with other advisors, one-third cited a lack of chemistry (Exhibit 2). Over three-quarters found that the specialists were not as expert as they professed to be, and nine out of ten said that the specialists they brought in tried to steal their clients.

The best way to see if a wealth manager and a specialist are going to hit it off is for the two of them to spend time talking about their approach to business or, better still, working through a real client situation where viable solutions are brainstormed. Choose the acid test wisely, however. Addressing the highly complex issues of a very challenging client may not be much of a proving ground. Instead, choosing an “average” client and an issue that calls upon the specialist’s at-hand knowledge is often a better chemistry test.

Team Players Wanted

For a network to run smoothly, each specialist has to understand his or her role and to know who’s in charge and who “owns” the client—the wealth manager.

All too often an assembly of high-powered professionals can lead to conflict as egos get rubbed raw, especially when there’s only one team leader.

Such turf wars must be avoided because they’ll fracture the network and compromise the quality of client service. Sometimes the fault lies with the wealth manager, who fails to set the ground-rules for the collaborative process (and forgets what it’s like to be part of a network). At other times, the specialist may commit the cardinal sin of trying to cut the wealth manger out by working directly with the client.

This can be avoided by spelling out everyone’s role up front and, again, making it clear who’s in charge and what the protocols are. It’s the wealth manager who should be overseeing all client contact and formal (oral if not written) contracts should cover what’s presented to clients as well as how and when it’s presented.

Caution: Advisors Already On Board

For all of the top resources a wealth manger may be able to muster, many clients will already have a trusted accountant or insurance agent in place and may not be receptive to the idea of seeing their expert shunted aside. That doesn’t mean the resources shouldn’t be lined up, however, as not every client will have every type of specialist on board.

By using the Whole Client Model discussed in a recent column, a wealth manager will find out which other advisors are being used as well as the nature and duration of the relationship. That information will help when it comes to deciding whether or not to bring in an expert and, if one is to be brought in, how to make it happen. Even if a client is completely committed to and satisfied with an advisor, they’re often open to new faces and new ideas. Indeed, the wealth manager’s specialist may have expertise of value even if there’s some overlap; given the breadth of legal scholarship, one lawyer can certainly inform another on certain aspects of the law, for instance.

If a client does have an advisor with whom she or he already has a good working relationship, a wealth manager will have to make that specialist part of the team. Doing so, however, has its own rewards in that it may lead to referrals. Along the way, the wealth manager may have to give up the lead in some cases and act as a team member by bringing his or her select expertise to bear. In any event, the wealth manager should at all times avoid being seen as an interloper trying to wrest a client away.

Exhibit 1: The Wealth Management Checklist

Brokerage

• Bonds

• Equities

• Options

• Derivatives

• Concentrated stock positions

Investment Management

• Cash management

• Corporate retirement plans

• Alternative investments

• Portfolio construction

and maintenance

• Managed accounts

• Mutual funds

• ETFs

• 529 accounts

Advanced Planning

• Estate planning

• Business transition or

succession planning

• Wealth enhancement

• Asset protection

• Charitable giving

Exhibit 2: The Challenges of Advisory Relationships

Experts who were hard to work with 35.8%

Experts who were not “expert” enough 77.8%

Experts who tried to steal, or stole, clients 92.4%

Hannah Shaw Grove is managing director and chief marketing officer of Merrill Lynch Investment Managers. Russ Alan Prince is president of the consulting firm Prince & Associates.