Terms like "life planning" and "wealth management" go in an out of vogue, but the need to meet clients' needs is a constant.
Ever notice how trends sweep across the financial
planning landscape-limited partnerships, exotic vacations as sales
rewards, alpha, momentum investing, earnings surprises? And what
happened to the "life planners" we heard so much about five years ago?
Soaked into the fabric of financial planning? Gone? Or were they simply
the advisors who didn't know enough math to handle investments and
Maybe we don't use the label "life planning" so much anymore because everyone got sick of hearing it. And sick of hearing panel members arguing the pros and cons of "life planning" at annual conventions. But the idea-getting to know your clients and helping them cope with whatever money issues crop up in their lives-hasn't disappeared. Today most planners use euphemisms when they talk about life planning. Like "wealth management." Or like "managing a multifamily office," (MFO), which typically means that the planner is looking for clients with 25 million bucks, give or take.
It's easy for "the most of us" to dismiss advisors at that altitude. But the truth is that relationship building is critical to any business. And to clients in all sizes. This healthy trend in financial planning aimed to substitute a more genuine advisor-client relationship for the somewhat hypocritical one where planners told clients "I'm on your side," even though they were not fiduciaries and their employers did not want them to be.
With this in mind-in other words, that relationship building is a good thing-I decided to try to cut through the labels and get some tips on how best to build a relationship from someone who's made a business of it. Teddie Ussery worked in the trust department of Columbus Bank and Trust in Columbus, Ga., when it was owned by the Bradley family, one of the two founding families. In the late 1980s, the patriarch of the Bradley family asked Ussery to concentrate on the Bradley family's affairs and to begin to build a family office. She traveled around the country looking at the family offices of the Cargill family, the Pillsburys and so forth, and then started stewardship training for the Bradley children, wealth-transfer planning and all the other services that good family offices provide.
Columbus Bank acquired other banks across the Southeast and grew and became Synovus Financial in 1989. The new CEO, Jim Blanchard, liked the family office idea and asked Ussery to create a multifamily office, called Synovus Family Asset Management. The MFO had about 50 families when Ussery left on June 1. Ussery has become well known in multifamily office circles and she decided to go out on her own as a consultant, setting up a business she calls Family Office Matters (firstname.lastname@example.org.)
I met Ussery a couple of years ago in New York at a meeting of the Family Wealth Alliance, a group of advisors put together by Thomas R. Livergood in Oak Brook, Ill., to provide custom work for the wealthy, focusing on helping clients to accomplish what they want to accomplish, not just on making more money. Back then, I expressed surprise that Ussery's MFO was owned by a bank because banks normally push products and look for ways to cross-sell to their customers. Ussery agreed, adding that what prevents a client-centered practice from functioning within a bank "is that the bank wants to get referrals from those who deal with ultra-high-net-worth clients." In other words, everyone squeezes the same clients to increase his own department's "wallet share." Whereas serving a multifamily office, or any large family or client, is about improving family communications, enhancing family relationships, perpetuating family values and providing independent advice. I caught up with Teddie in the dog days of August to find out what she's thinking about now.
A lot of financial advisors would like to do what you've done. What kind of goals did you set? I know you studied psychology and mental health in college. Is that at the root of your desire to counsel people rather than sell them things?
I always wanted to be a counselor and work with people on a relationship basis. When I worked as a bank trust officer, I began to see the needs from the family's side and to hear the family talk about their family dynamics. I realized their needs went beyond the financial. Each family had unique needs and they needed help in managing and understanding those needs.
And rich families can afford to pay for that?
Just because a family is wealthy doesn't mean they don't have needs. They are looking to the expert to uncover those needs.
And how does the expert go about that?
Understanding clients is the first thing. Don't go in and try to sell them some investment. That's just a commodity.
What mistakes do you see multifamily office managers, and other advisors, making?
They focus on investment need first, rather than what the family wants and needs.
Well, I guess the advisor's need is to make some money. He can't give clients pro bono advice.
You can't sell on investments instead of needs. That's like telling them you already know what they need when they were asking you to listen to their needs. Investments are way down the line.
Meanwhile, though, how does the advisor make money? How do you make money?
For consulting work, I set retainer fees or daily fees.
And when you were at Synovus you had no pressure to sell product?
Don't get me wrong-there's always a profit target you were trying to reach, but I didn't focus so much on the bottom line as on service to individuals. When I started the MFO, I visited the employees of the banks in the Synovus network and explained that I would use "open architecture." (A variety of products from a variety of vendors rather than just bank products.)
So how does an advisor get to the questions that reveal the family's needs?
I start with a yellow legal pad and write down everything they say when we first meet and then develop my questions from that.
What's the first thing an advisor should do when he meets a new potential client?
Realize that families have unique needs and need help in managing and understanding those needs. They are looking to the expert to help.
So understanding the client is the first thing. Do you have a shorthand method for achieving that?
Families have common needs: Helping the next generation to understand money and to develop values around it; looking at the strengths and weaknesses of the next generation, helping them with college selection, then estate planning, financial planning, charitable planning.
But can anyone be expert in all of that?
You have to think about what standards you want for your (advisory) office. Services could be really broad. Or you could look for other providers to help the family answer some of these questions.
Is this the "advisor-as-quarterback" idea, where the financial advisor just manages the rest of the financial team such as lawyer, accountant and so on?
You must first decide what each client's priorities are. And then decide which of these matters you can help with and where you must find support. The things I've found to be important across my career of working with wealthy families are multigenerational wealth transfer, philanthropy, legacy. Family members sometimes don't know they need to set standards or to work out succession planning. That's one thing you have to help them with. Everyone's heard the phrase "shirtsleeves to shirtsleeves in three generations" (families where the first generation works in shirtsleeves to earn the wealth, the second generation squanders the wealth in their designer duds and the third generation is back in shirtsleeves).
You need to help them decide how the family will be managed. Do they have a patriarch? A matriarch? Do they want to set up a family council? How many generations would be represented? You're trying to get to the desires of their hearts, and not just what wealth will bring. Sometimes you'll work with the fifth or sixth generation of a family and you see that (they've lasted) because they see more to life than just wealth."
Two years ago, you said that the future of wealth management belongs to the multifamily office. Has anything changed since then?
I do still think that individuals want independent advice. But families are moving away from the multifamily office model for all financial tasks and using more outsourcing. MFOs are moving to more outsourcing rather than building everything inside the MFO structure. Everything focuses on how to serve the family best.
So haven't we circled right back to the idea of life planning? And let's think of a new name for it. Suggestions welcome at email@example.com.
Mary Rowland has been a business and personal finance journalist for 30 years, a half dozen of them as weekly columnist for the Sunday New York Times. She wrote a column called "Practice Points" for Bloomberg Wealth Manager for six years. She speaks regularly about money and values. Her six books include two written for financial advisors: Best Practices, and In Search of the Perfect Model.