It’s been repeatedly shown that wealth management is the most profitable business model for financial advisors, one economically superior to investment management. And it’s possible that investment advisors who convert to a well-managed wealth management practice could increase their incomes by 40% or more without adding any new clients.
What’s critical to any definition of high-quality wealth management is that it is consultative, and the processes involved are essential for success. There are three operational necessities for such a practice. They are:
1. A comprehensive platform of services and products,
2. A process to maximize client relationships, and
3. A process that generates a meaningful number of new wealthy clients.
A Comprehensive Platform
Wealth management includes a broad array of services and expertise. The platform is conceptual in nature, comprising both financial products and access to experts capable of addressing the needs and wants of affluent clients beyond the wealth manager’s expertise.
Access to financial products is fairly straightforward and relatively easy to achieve, though it’s important that less common financial products, such as private equity funds, can be made available for wealthy clients. Products like private placement life insurance and private placement variable annuities are also in growing demand, and high-caliber wealth managers must be able to offer them.
But you must also have access to expertise outside of financial products—to professionals such as lawyers and accountants who can provide integral non-product services. Such people come with expertise in asset protection planning or international tax planning, for example.
There are often a lot of moving pieces in a comprehensive platform. Sometimes the wealth manager’s employer has the platform. Other times, he or she has to go outside the firm.
Nonetheless, the platform is the easiest of the operational necessities. It is the other two things many advisors have serious trouble with.
Maximizing Client Relationships
A wealth manager with a comprehensive platform is in a better position to maximize relationships. But it rarely happens. What is required is a systematic process that connects affluent clients to products and services. One such process is the “whole client model.”
The model is based on the best practices of leading professionals, buttressed by the insights and actions of self-made millionaires and aligned with the psychology of the wealthy. It allows wealth managers to do two things:
• Recognize opportunities: With extensive intelligence on his or her affluent clients, the wealth manager can now discern and evaluate patterns and create opportunities to provide new services and products in alignment with what clients want.
• Effectively position solutions: Once the wealth manager has learned how to be more responsive, it will be possible for him or her to more effectively position products and services. That means knowing who has to be present during the presentations and how to be responsive to influential people in the background.