Knowing what to do is one thing; knowing how to do it-and to keep it done-is where the advisor shines.

Note: This is the second in a three-part series on the growing area of affluent wealth protection services.

    In last month's article we discussed the growing demand for integrated asset protection planning and personal security services as part of an overall wealth management platform, and the role a wealth manager plays in coordinating and delivering wealth protection. In this month's article, we review the six-step wealth protection process that enables wealth managers and other specialists to assess the human and capital assets at risk and take the appropriate measures to secure them against harm on behalf of an affluent client.
    As with many complex services, the use of a process can facilitate a smoother client experience and satisfactory results. The wealth protection process by itself is not unique, but the resulting solutions and implementation can create a significant amount of goodwill between a high-net-worth individual and their wealth manager. And many shrewd advisors can leverage their proficiency with the process to expand the range of services they offer and to attract other wealthy clients with similar objectives.
    Operationally, the wealth protection process is comprised of the following six phases, but should not be treated as an incontrovertible process. Most successful wealth managers have managed to put a personal spin on everything they do-which is often one way they distinguish themselves from their competitors and connect with their clients-and the same should be true with wealth protection. If utilized as a broad conceptual model, it can guide the wealth manager and the client as protection objectives are established and met. The six phases are:
    Phase 1: The At Risk Assessment
    Phase 2: Evaluate Alternative Solutions
    Phase 3: Select Solutions
    Phase 4: The Action Plan   
    Phase 5: Implementation
    Phase 6: Follow Through 
    As with many wealth management offerings, wealth protection will invariably require the use of outside experts throughout the process. The specialists will provide an extraordinarily deep level of technical knowledge in their area of expertise, which leaves the wealth manager to act as a generalist and to provide coordination and oversight of the overall effort. In this central role, the wealth manager should have a broad understanding of the service area and be conversant in the most common strategies and pitfalls.

Phase 1: The At Risk Assessment
    During this phase the basic protection concerns and needs of affluent clients are identified. Our research indicates that one of the most important tools is a comprehensive profiling technique that will assist the wealth manager in acquiring the financial and lifestyle details of the client and those within their inner circle. In the past, we have introduced the Whole Client Model (more information can be found in the Financial Advisor March 2005 column, "Know Thy Clients") as a proven method of gathering the basic data a wealth manager needs to understand clients and begin to formulate strategic recommendations. This methodology is also central to the risk assessment process; its seven sections will guide an advisor through discussions that will uncover important information and provide sufficient details that will provide the wealth manager with the bird's-eye perspective necessary to oversee wealth protection planning and implementation.
    Success in each of the subsequent phases of the wealth protection process is reliant on the risk assessment being as complete, thorough and accurate as possible. It may take several meetings before all the client's wealth protection issues are identified, even if there is a pre-existing relationship between the advisor and the client. The less mature the relationship, the more time it will take to complete this phase.

Phase 2: Evaluate
Alternative Solutions
    Both asset protection and physical security will have an array of solutions and these must be considered and screened in the context of the individual or household they have been proposed for. Many affluent families have specific requirements or boundaries that place constraints on a wealth protection plan and its implementation. An important method for evaluating wealth protection solutions is the following conceptual algorithm-the net value of a security solution:

Net Value of a Security Solution =   
Intensity x Duration
Lifestyle Issues x Financial Issues

    Every wealth protection solution has four variables that can be modified within set parameters. One is intensity: How concentrated should the security solution be? Another variable is duration: How long will the solution be active? These two variables are the numerators of our conceptual algorithm. The denominators are lifestyle considerations-the extent to which a wealth protection solution is an impediment to your client's lifestyle-and financial considerations, or the costs of using a particular wealth protection solution.
    This evaluation technique will help the wealth manager, the specialists and the client narrow the list of possibilities to a workable number. For the most part, every solution will be specific to the asset in question, but there may be instances in which several solutions will need to work in concert and this phase provides an opportunity to assess whether that is either viable or effective.

Phase 3: Select Solutions
    Once the most appropriate and effective solutions have been identified, it is time for the wealth manager and the client to select those that best fit their needs and overall wealth protection goals. Using hypothetical scenarios can often help a client identify those issues that are of greatest personal concern and those areas with the greatest risk exposure.
    Some of the questions wealth managers can use during this phase include:
    What if someone kidnapped your daughter?
    What if you were being followed everywhere by an obsessive fan?
    What if a teenager claimed to be your illegal offspring?
    What if someone is listening in on all your phone calls and is reading all your e-mails?
    What if a stranger knows how much money you have and where it all is?
    What if someone steals your identity and empties all your accounts?
    What if someone filed a frivolous but very real lawsuit against you for $50 million?
    What if you found your private jet trashed the next time you boarded it?
    While these types of scenarios are unlikely, they are still possible. The following algorithm can be useful when evaluating a potential incident and its solution, as it can help affluent clients perceive each within the confines of their personal circumstances.

Need for a Wealth Protection Solution =
Probability of Incident x Severity of Incident

    Once complete, the wealth manager and the client should work together to rank the incidents by the degree of negative impact. And finally, as a generalist, the wealth manager should maintain focus on the client's overall goals and not be persuaded by the zeal or enthusiasm of a specialist to adopt a strategy that is not the right fit.

Phase 4: The Action Plan
    This phase provides an opportunity for the wealth manager to confirm the clients' goals and match them to the wealth protection solutions that have been selected. Once the advisor, specialists and client agree, each solution is customized for the client and a detailed proposal and blueprint for implementation is drafted. The overriding goal of the action plan is to give the client a clear sense of the steps required to secure their financial and personal property.
    Bear in mind that life is fluid and it is not uncommon for significant and materials changes to occur between each phase of the wealth protection process. Any number of things, such as burglaries, marital separations, overseas travel, car accidents and missing medical records can prompt unexpected modifications to an action plan.

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