Actors Or Experts?

"Wealth Managers." But has anything truly changed in what we are providing our clients?
Traditionally, wealthy clients have sought financial advice from a variety of sources: bank trust departments, brokerage firms, insurance agents, as well as personal attorneys, accountants, and then advisors. As the term "wealth management" entered the financial services vernacular, virtually all of these providers adapted the word "wealth" into their business names and titles. Many planners have also successfully shifted the focus of their practice entirely to wealthy individuals and enjoy the tremendous benefit of serving fewer clients with more assets. With the remarkable increase in wealth, it is easy to see why so many firms and advisors have taken steps to attract this compelling and ever-growing market.  
What is most critical today is that the marketing message matches the expertise and capabilities. Just hanging the tag "wealth manager" on a business card does not instantly qualify one to address the complex and changing needs of a wealthy client. The industry must set higher standards for wealth managers and be clearer in its definition of who it aims to serve or run the risk of having the term "wealth management" dismissed by potential clients as mere marketing.  

So what is wealth management and what should we be delivering to clients?  

Many "wealth managers" have evolved into their current roles over the course of their careers, having started in the financial services industry as specialists in a specific product such as investments or insurance. A firm or individuals holding themselves out as wealth managers should be certain that they have the resources and capabilities to deliver fully integrated, customized solutions that address each client's or family's specific needs.  

Sustaining wealth beyond one generation is a challenge-especially when a family and its interests have a global, multigenerational reach and possibly divergent goals and aspirations. Income taxes, gift taxes, estate taxes, generation skipping transfer taxes, prolonged illness, claims of creditors and others can erode a family's assets.  

Offering objective advice and strategic solutions can help keep assets working from one generation to the next and mitigate the biggest risks to a clients' wealth, now and in the future.

Keys to Success

Here are four important characteristics that wealth management firms should have:

A direct and in-depth understanding of a client's needs, both financial and nonfinancial-no detail should be viewed as insignificant. Complete knowledge of a client's situation-from professional goals, risk tolerance, and existing structures and tax circumstances to family considerations, personal hobbies and aspirations for future generations-needs to be a vital part of the planning process. This information is critical to building an integrated plan that considers a client's full set of needs over time. For example, families often want to better control gifts to children or grandchildren to ensure family wealth is protected from one generation to the next. Other individuals may have aspirations to create a family legacy, using various charitable giving vehicles such as family foundations or donor-advised funds. Understanding these goals and how to create and execute strategies that address these very unique needs is the foundation of the wealth management practice.  

The ability to combine structure with flexibility based on the changing needs of a client so that a formulaic one-size-fits-all approach is avoided. No two clients are alike and the complex needs of affluent clients require customized solutions rather than product-lead strategies. Model portfolios don't account for such variables as a client's tax consideration, preferences, concentrated positions, timing and other assets. Customizing a client's portfolio addresses their evolving needs and provides them with a tax-effective solution based on their specific situation. It should incorporate a holistic view of all of the client's assets. The wealth manager should have access to and an understanding of global investment capabilities. Everything from individual stock selection to appropriate asset allocation and alternative investments must be carefully evaluated and monitored in order to be responsive to clients' individual needs and circumstances.