Wealth managers need to do more than recommend managed accounts.

Wealth management goes deeper than simply recommending separately managed accounts. Who is a wealth manager, and why are there so many overlapping terms? Has the industry marketed its many titles and designations so vigorously that the investor is thoroughly confused?

To answer these questions, Financial Advisor invited these experts to share their opinions on the blurring lines of demarcation in the industry: Christopher Davis, executive director of the Money Management Institute in Washington, D.C.; Dan Bott, CIMC, managing director and investment officer for Wachovia Securities in Scottsdale, Ariz., and chairman emeritus of the Institute for Certified Investment Management Consultants; Curtis Greenlaw, a wealth management consultant in Denver; Rob Rowan, research director of the Family Office Exchange in Oak Park, Ill.; and Lewis Walker, CIMC, CFP, president of Walker Capital Management in Norcross, Ga.

LeBlanc: Increasingly, financial advisors, planners, and investment management consultants are claiming the moniker of "wealth manager" and, in some cases, family office specialists. The lines of demarcation are blurring, as are responsibilities and expertise. Can any of you shed some light on this situation?

Davis: Indeed, right now we are seeing quite a jumble of overlapping terms. In basic terms of identification, wealth managers handle the investment portfolio, presupposing that all of the financial planning, such as insurance needs, estate planning, business succession, etc., has been addressed. Family office specialists cover all of the above plus selecting portfolio wealth managers. Historically, consultants have been retained to determine a portfolio's needs and select appropriate money managers, but now financial planners are renaming themselves "consultants."

Greenlaw: I believe it is necessary to first define the duties and role of a wealth manager. If a wealth manager is charged with selecting, coordinating and monitoring a select team of tax, legal, investment, risk management, philanthropic advisors, etc., they should be familiar with each discipline. Although their backgrounds may vary, their value is not derived from the answers they provide, but in asking the right questions. It was once said that "There is something more valuable than talent, and that is the ability to recognize it"-which aptly describes the qualities of an exceptional wealth manager, regardless of their background.

In the case of "family office specialist," this individual should conform to the following litmus test: do you offer integrated, coordinated and comprehensive services customized to each family's unique needs? Do you employ a multidisciplinary, multigenerational strategy that is clearly elucidated and involves a collaborative network of select advisors? Do you operate in an independent, fee-only format that would mitigate any conflict of interest?

To further define this area, the traditional "family office" structure typically offers services unrelated to financial management and emphasizes a "multigenerational" approach. However, any advisor that utilizes an independent platform of services-and incorporates a team of select multidisciplinary advisors-could justify their role as a "family office" specialist.

Bott: I agree with Curt on the necessity of defining roles. Their qualifications are not really very clear; most have relied on the CFP designation or insurance-related [designations] like CLU or ChFC. As far as the expertise of these various groups goes, I also believe that most planners, wealth managers and family office specialists lack real capital market experience. Those groups also seem to be more product- and insurance-oriented than investment management consultants. On the consultant side, most seem to be more in tune with the capital markets and less involved in product.

Rowan: Terminology has been confusing to clients. For example, it's easy to forget that the phrase "multiple family family office" sounds grammatically incorrect unless you work with one every day. I think that the answer is a combination of two things. On one hand, it is about client education. But on the other hand, the industry needs to do a better job of communicating to clients.

Greenlaw: The distinction among these groups is nebulous and often misleading. Regardless of the designations they affix to their name, it would behoove a client to ask, "Do you provide integrated, coordinated and comprehensive services?"

Lewis: Investors hear the terms, and they interpret them in different ways. Simply put, to define them, holistic financial planning applied to the high-net-worth client is, in fact, wealth management. There is more to wealth management than just money management. Asset management fees are still the engine that drives the business. And part of it is the demographic wave-baby boomers having far more complex financial challenges, and our profession is moving along this demographic wave. We had better be working holistically, though, because if a "wealth manager" is only dealing with the investment issues of managing money, they are vulnerable to being picked off by the holistic financial planner.

LeBlanc: Which category-wealth managers, financial planners, consultants, family office experts-do you believe affluent investors trust and rely on the most, and why?

Greenlaw: In my experience, none of the above-they typically will confer with their CPA for a referral to an advisor with specialized expertise. Specifically regarding the family office, even sophisticated clientele and advisors are either unfamiliar or unaware of the concept. Wealth managers are relatively new and misunderstood; consultants are often perceived as lacking the "holistic" approach that most clients' seek and desire; and some financial planners are often viewed merely as product-pushers disguised as problem-solvers.

Lewis: I don't entirely agree with Curt. Basically, at the end of the day, they just want an advisor who is going to be there. They want holistic advice and guidance. If you as an advisor are only dealing with a piece of it, you are vulnerable, as I said earlier. You can't compartmentalize these areas into consulting, or planning; it's too difficult, and you don't have the opportunity to know the client fully. Comprehensive planning is an increasingly sought-after process.

Bott: I believe certifications carry the most trust-for example, CPA, CFP, CIMC-over self-proclaimed labels such as wealth manager.

Davis: I would assume the wealth manager has more high-net-worth clients with large investable portfolios, but given the jumble of terms, I'm not sure if anyone really knows.

LeBlanc: Does anyone feel the regulatory agencies need to step in and control the many designations-self-proclaimed or not-in order to clear the confusion for investors? What about more education?

Bott: I believe most investors are confused about the titles, and it appears to be getting worse. More consumer education is needed. Quite honestly, our industry has way too many labels, and many individuals in the business lack the in-depth skills to give themselves a label at all. As much as I don't like government intervention, I believe the SEC should create guidelines as to what some professionals can call themselves. Currently, outside of the "certified" designations, it seems to be a free for all, and it is becoming very misleading.

Davis: I believe there always has been confusion about what a client wants and needs and what a service provider delivers. A confused client presents a better prospect in the long run-that's how the insurance industry has thrived-but an unhappy one in the long run. Solving the problem requires continued regulatory enforcement on the sell side and better consumer education on the buy side.

Greenlaw: Clients are not merely confused; they are dazed and frustrated by an industry replete with acronyms and jargon.

Is regulation the answer? There is already too much regulation; today, the greatest issue facing advisors is trust, but it is futile to regulate morality or instill trust through regulation. Advisors who believe that they can hide behind professional designations, lofty titles and awards attesting to their prowess in selling products are also suspect. Increasingly, clients will rely on referrals from friends, family and related professional advisors based upon actual experience with an advisor, regardless of any written claims, titles, designations or awards.

Is consumer education the answer? No-and yes. Each advisor must clearly articulate their philosophy and methodology. Too many advisors are trained in providing answers, but fail to ask the right questions. If advisors don't frame the questions properly-and assist their clients' in doing so-neither are going to derive the correct answers that will lead to a fruitful and productive relationship.

LeBlanc: But in order for financial professionals to understand more about wealth management, they need to be educated. The Family Office Exchange offers, among other things, global state-of-the-art best practices in wealth management, wealth preservation and private philanthropy. Are there any other educational opportunities?

Greenlaw: A new certification program was recently introduced by IMCA designed to address wealth management issues [see IMCA sidebar]. However, there still is no formal designation for the family office specialist. Any advisor who utilizes an independent platform of services-and incorporates a team of select multidisciplinary advisors-could justify their role as a family office specialist.

Rowan: The formal title for family office specialist is "family office executive." There is no professional designation for them, but who knows what the future holds? In the meantime, it's just the school of hard knocks. At our organization [the Family Office Exchange] we have an annual conference, specifically engineered for multi-family offices and firms that are setting one up, where we discuss building a framework for the organization, crafting the right marketing plan and developing a profitable pricing model.

Walker: A lot of CIMA-designated consultants have told me they wanted to learn more about financial planning. They understand that consulting is defined as the investment process, and that life planning and financial issues are more than just tax efficiency and separately managed accounts. Wealth management and holistic financial planning concern such issues as estate planning, disability planning, liability planning, risk management, insurance, business planning, succession planning. For consultants who want to learn more about wealth management and financial planning, they should go through the same process they did while learning the consulting process. They could begin by taking the CFP course or working with a firm that emphasizes holistic financial planning.