January 3, 2017 • Russ Alan Prince, Brett Van Bortel
Many financial professionals refer to themselves as wealth managers, and for a number of reasons. For instance, it allows them to increase their revenues as much as 20% to 40% if they make the transition from investment management to wealth management. The increases are even greater when they expand and become “elite wealth managers,” who find more affluent clients and generate much greater revenues. These evolutions allow them to better differentiate themselves in a highly crowded, competitive market. Yet few provide the kind of services elite managers are expected to—even if, in principle, the services are available to all professionals. Consider private placement life insurance. With advances in technology and changes in the insurance industry, a financial professional can manage the premium dollars. And such a product will offer better returns than a taxable account over time. By age 55, an investor will have accumulated 13.5% more, and by age 85, 82.4% more, in PPLI vs. a traditional investment account. Many financial professionals say they are familiar with private placement life insurance, but only a small percentage of them use it with their wealthy clients. Elite wealth managers will not only be able to provide it, but be able to incorporate it into plans. For example, they will combine it with charitable trusts to minimize taxes on large bonuses. Otherwise, they are shortchanging their affluent clients (and themselves). This clientele also wants things such as captive insurance companies, certain defined benefit retirement plans and various domestic and international asset protection trusts. These services and products are not unique. It’s just that only a small percentage of financial professionals are able to deliver them. To deliver elite wealth management solutions, financial professionals must integrate three essential components: • The platform; • Processes to connect wealthy clients with the offerings of the platform; and • Methodologies to find new and wealthier clients. The Platform The common starting point on the platform is investment management, including various investments such as ETFs, individual securities and mutual funds, as well as alternative investments such as hedge funds, private equity funds and direct investments. The platform should also support this investment management with asset allocation and rebalancing. Furthermore, it should offer advanced planning services such as estate planning, asset protection planning, income tax planning, charitable planning and cross-border planning. And, of course, there’s life insurance. In order to deliver this array of services and products, the platform must incorporate the expertise of specialists. In effect, there has to be an elite wealth management team. It can be structured in a number of different ways: • The parent company as team: Here, the firm employing the elite wealth manager has the experts in-house who are available to the financial professional. • The self-contained team: In this case, the financial professional has the needed specialists as employees of his or her practice. • The virtual team: In this scenario, the financial professional connects with outside specialists and uses their expertise. Though we present these as three discrete options, most teams actually incorporate elements of all three. There is no “best” way to make a team. Connecting The Platform To Clients There are myriad opportunities that exist with each wealthy client. When trying to connect the platform to clients, one time-tested process is the “whole client model”—a way to evaluate the needs, wants, preferences and concerns of clients. There are seven things involved in this type of model: • Advisors should use affluent client demographics to identify individual clients. • Advisors should consider the client’s goals and critical concerns. • Advisors should know the personal and professional relationships that are important to the client. • The advisor should understand the client’s financials—the details of the client’s complete economic picture, including his or her assets and liabilities. • The advisor should know the various professionals the client currently uses. • The advisor should know the way the client prefers to work with professionals. • The advisor should know the client’s interests—including the passions the client pursues when he or she is not working. With this information in hand, elite wealth managers and their teams of specialists are able to identify opportunities to deliver various services and products. If, for example, a wealthy individual wants to ensure she has more money when she retires, a number of options are available. If she is charitably inclined, one option is to integrate private placement variable annuities with a charitable trust, which creates considerable additional monies whenever she chooses to retire. With an elite wealth management platform, coupled with processes like the whole client model, financial professionals are well positioned to maximize their client relationships. Not only are they better serving their clients, but they are going to find much more loyal and profitable ones. Sourcing New and Wealthier Clients The final component to creating an elite wealth management practice is the ability to move upscale and work with a greater number of wealthier clients. This is the most difficult part. Although there are many different ways to get access to the wealthy, two approaches are demonstrably most effective—thought leadership and street-smart networking. If you’re a thought leader, you’re perceived as an authority on financial advice and—very important—you can monetize this. Thought leaders hold considerable advantage over other professionals when it comes to getting referrals, closing business faster and expanding relationships with their current clientele. Elite wealth management enables financial professionals to more easily and effectively become thought leaders. For example, advisors can stand out from the crowd if they are adept and experienced at delivering private placement life insurance, and making it part of their various planning processes. One part of thought leadership is developing intellectual capital. If you can show clients how to use private placement life insurance, you have that capital—the ability to “package” the ideas, insights and concepts. The second part is being able to distribute the packaged intellectual content to desired audiences—commonly the wealthy and other professionals who can refer you. The other high-value approach to sourcing new, wealthier clients is street-smart networking. Here, financial professionals build strategic relationships with other non-competing professionals. This way, you can create a steady stream of new high-net-worth clients for elite wealth management. Street-smart networking means properly evaluating potential centers of influence—deciding whom you are going to work with, not the other way around. The elite wealth management approach helps because it can also generate greater revenues for lawyers, accountants, and other types of professionals you might want to work with. Thus, all the professionals involved are better serving the client and also profiting. Conclusions Elite wealth managers are more and more likely going to dominate the ranks of financial professionals working with the rich and super-rich. They can deliver a wider array of high-caliber services and products than their competitors. It is important to realize that any intelligent, motivated and client-centered financial professional can create an elite wealth management practice. It is not only about delivering unique services and products. It’s also about the processes of becoming a thought leader and a street-smart networker. The key to success is putting it all together. Russ Alan Prince is president of R.A. Prince & Associates. Brett Van Bortel is director of consulting services for Invesco Consulting.
Many financial professionals refer to themselves as wealth managers, and for a number of reasons. For instance, it allows them to increase their revenues as much as 20% to 40% if they make the transition from investment management to wealth management. The increases are even greater when they expand and become “elite wealth managers,” who find more affluent clients and generate much greater revenues. These evolutions allow them to better differentiate themselves in a highly crowded, competitive market. Yet few provide the kind of services elite managers are expected to—even if, in principle, the services are available to all professionals. Consider private placement life insurance. With advances in technology and changes in the insurance industry, a financial professional can manage the premium dollars. And such a product will offer better returns than a taxable account over time. By age 55, an investor will have accumulated 13.5% more, and by age 85, 82.4% more, in PPLI vs. a traditional investment account. Many financial professionals say they are familiar with private placement life insurance, but only a small percentage of them use it with their wealthy clients. Elite wealth managers will not only be able to provide it, but be able to incorporate it into plans. For example, they will combine it with charitable trusts to minimize taxes on large bonuses. Otherwise, they are shortchanging their affluent clients (and themselves). This clientele also wants things such as captive insurance companies, certain defined benefit retirement plans and various domestic and international asset protection trusts. These services and products are not unique. It’s just that only a small percentage of financial professionals are able to deliver them. To deliver elite wealth management solutions, financial professionals must integrate three essential components: • The platform; • Processes to connect wealthy clients with the offerings of the platform; and • Methodologies to find new and wealthier clients.
The Platform The common starting point on the platform is investment management, including various investments such as ETFs, individual securities and mutual funds, as well as alternative investments such as hedge funds, private equity funds and direct investments. The platform should also support this investment management with asset allocation and rebalancing. Furthermore, it should offer advanced planning services such as estate planning, asset protection planning, income tax planning, charitable planning and cross-border planning. And, of course, there’s life insurance. In order to deliver this array of services and products, the platform must incorporate the expertise of specialists. In effect, there has to be an elite wealth management team. It can be structured in a number of different ways: • The parent company as team: Here, the firm employing the elite wealth manager has the experts in-house who are available to the financial professional. • The self-contained team: In this case, the financial professional has the needed specialists as employees of his or her practice. • The virtual team: In this scenario, the financial professional connects with outside specialists and uses their expertise. Though we present these as three discrete options, most teams actually incorporate elements of all three. There is no “best” way to make a team.
Connecting The Platform To Clients There are myriad opportunities that exist with each wealthy client. When trying to connect the platform to clients, one time-tested process is the “whole client model”—a way to evaluate the needs, wants, preferences and concerns of clients. There are seven things involved in this type of model: • Advisors should use affluent client demographics to identify individual clients. • Advisors should consider the client’s goals and critical concerns. • Advisors should know the personal and professional relationships that are important to the client. • The advisor should understand the client’s financials—the details of the client’s complete economic picture, including his or her assets and liabilities. • The advisor should know the various professionals the client currently uses. • The advisor should know the way the client prefers to work with professionals. • The advisor should know the client’s interests—including the passions the client pursues when he or she is not working. With this information in hand, elite wealth managers and their teams of specialists are able to identify opportunities to deliver various services and products. If, for example, a wealthy individual wants to ensure she has more money when she retires, a number of options are available. If she is charitably inclined, one option is to integrate private placement variable annuities with a charitable trust, which creates considerable additional monies whenever she chooses to retire. With an elite wealth management platform, coupled with processes like the whole client model, financial professionals are well positioned to maximize their client relationships. Not only are they better serving their clients, but they are going to find much more loyal and profitable ones.
Sourcing New and Wealthier Clients The final component to creating an elite wealth management practice is the ability to move upscale and work with a greater number of wealthier clients. This is the most difficult part. Although there are many different ways to get access to the wealthy, two approaches are demonstrably most effective—thought leadership and street-smart networking. If you’re a thought leader, you’re perceived as an authority on financial advice and—very important—you can monetize this. Thought leaders hold considerable advantage over other professionals when it comes to getting referrals, closing business faster and expanding relationships with their current clientele. Elite wealth management enables financial professionals to more easily and effectively become thought leaders. For example, advisors can stand out from the crowd if they are adept and experienced at delivering private placement life insurance, and making it part of their various planning processes. One part of thought leadership is developing intellectual capital. If you can show clients how to use private placement life insurance, you have that capital—the ability to “package” the ideas, insights and concepts. The second part is being able to distribute the packaged intellectual content to desired audiences—commonly the wealthy and other professionals who can refer you. The other high-value approach to sourcing new, wealthier clients is street-smart networking. Here, financial professionals build strategic relationships with other non-competing professionals. This way, you can create a steady stream of new high-net-worth clients for elite wealth management. Street-smart networking means properly evaluating potential centers of influence—deciding whom you are going to work with, not the other way around. The elite wealth management approach helps because it can also generate greater revenues for lawyers, accountants, and other types of professionals you might want to work with. Thus, all the professionals involved are better serving the client and also profiting.
Conclusions Elite wealth managers are more and more likely going to dominate the ranks of financial professionals working with the rich and super-rich. They can deliver a wider array of high-caliber services and products than their competitors. It is important to realize that any intelligent, motivated and client-centered financial professional can create an elite wealth management practice. It is not only about delivering unique services and products. It’s also about the processes of becoming a thought leader and a street-smart networker. The key to success is putting it all together.
Russ Alan Prince is president of R.A. Prince & Associates. Brett Van Bortel is director of consulting services for Invesco Consulting.
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