What could be more important now, what with the loss in confidence in the markets, the high unemployment-52.5% among young adults-and the scary unemployment of those nearing retirement. A recent survey by benefit consultants Watson Wyatt Worldwide found that 44% of those aged 50 or older planned to delay retirement. At the same time, nearly a quarter of those looking for work were 55 to 64 years old. I see in stories online saying some employers cannot find new hires with the creative thinking and creativity skills they need. Another story talks about how Americans are turning more to the Internet and to financial advisors to help them get through the economic slump.
We have much more control over human capital than financial capital. We can open new windows, gain experience and skills, deepen our knowledge and, by the way, our sense of satisfaction with our lives. This will become the new/old frontier in financial planning. This will help cement the ties between generations, between your firm and your clients. Could you put together some resources to help the children of your clients get started on a career path? Could you build a resource center to help broaden client skills and networking savvy?
No matter what their wealth, this search for human capital will be something that all clients will need help with going forward. "If we don't find a way to build that human capital, if we don't have success on the human side, we can't find financial success," Ussery says. For Ussery, that means working with a client family to "discover their value set and work on how you will continue to support that through the next generation." For some families, financial assets may be their core value, Ussery says. "There's only so much you can do with that."
While Ussery says she firmly believes the key to better client relationships is in the human growth side, she says that one of her colleagues on the panel might think differently. He is H.F. "Rick" Pitcairn II, a CFA and chief investment officer of the Pitcairn family office in suburban Philadelphia. Though Pitcairn is on the financial side of the business, he completely agrees with Ussery about the primary importance of human capital.
Pitcairn Company, the multifamily office of the heirs of John Pitcairn, founder of Pittsburgh Plate Glass Company (PPG) in 1883, followed in the footsteps of offices like Bessemer Trust and the Rockefeller Family Office in converting the family manufacturing business into a family trust that eventually opened to other wealthy families. Pitcairn did that in 1986 and today serves 35 multigenerational families with about $3 billion in assets.
Rick Pitcairn says that what gives his company an advantage over competitors like UBS "is our ability to work with second and third generations. "Pitcairn is in the fifth and sixth generation of the family. "I like to say we've got the scar tissue," Pitcairn says. He also believes it's important to clients to know that the Pitcairn family is in the same business they are and that they have trusted their financial management to the same group of people.
I also spoke with Gary Shunk, a Chicago psychologist whose company, Wealth Psychology, helps wealthy people deal with money problems and also helps advisors find solutions for their clients. Shunk says he compares the economic trauma of the last year to 9/11. "The trauma is that the rug gets pulled out from under us from the way we've experienced life in the past," he said. "We've had an acute sense of loss. A lot of trust has been injured, damaged. A lot of it is irreversible."
Shunk says that many financial advisors are left-brained, which is to say that they are logical, linear, rational thinkers. Many of the e-mails and phone calls these rational planners have received over the past year were filled with fear and anger. Shunk said the firms that did well were those where advisors had developed deep, collaborative relationships with clients. "The firms that did not do well were the institutions," he says, where, he could add, the planners were worrying about their own jobs.
Shunk, who has had a clinical practice since 1992, suggests to advisory firms that they hire advisors who are in the peer group of the second generation of client families. Wealth psychology, he says, is about helping families and individuals integrate a sense of identity and wealth no matter how much money they have. Or don't. Shunk's comments reminded me of a time eight or ten years ago when some financial advisors were hiring psychologists to deal with their right-brain clients. Many top firms now outsource this "right-brain" need.
Surely there's nothing new in this emphasis on "relationships." Car dealers value them. So do dentists. Even banks refer to their salespeople as "RMs" or relationship managers. But what is the relationship? That's the question. Is it, "I will look after your human and financial capital needs"? Or is it: "I will shove this product down your throat"?
Mary Rowland can be reached at [email protected]. She has been a business and personal finance journalist for 30 years and has written two books for financial advisors: Best Practices and In Search of the Perfect Model.