It's A Wonderful Time To Get Wealthy!

December 2008

It's A Wonderful Time To Get Wealthy! - By Russ Alan Prince , Hannah Shaw Grove - 12/4/2008

The economy is cracked and it will likely get worse-a lot worse-before it gets any better. The financial world seems to be in freefall. A train wreck might be a better description. Our recent empirical analyses of the wealthy show they are in open rebellion and angry with their advisors. Consequently, more and more advisors are seeking shelter, with many probably hiding under their beds.

What's most interesting is that for a solid segment of the very well heeled, this convolution of events is proving to be an exceptional time to capitalize on the misfortune of others and meaningfully expand reach and wealth. Along the same lines, for a select segment of advisors, it is a perfect time to move practices to a new level and increase personal wealth geometrically.

Let's consider some of the key trends and the opportunities they are providing astute motivated advisors. To begin with, the wealthy are getting wealthier. Increasingly we find the affluent market to be bifurcated. While middle-class millionaires are under intense pressure, the very wealthy-in the aggregate-are becoming ever more successful. The corollary is that access to this level of wealth is critical. The ability to source the wealthiest clients under preferential terms is absolutely essential to success. There are a few core processes, such as RainMaker (see "Sourcing Private Wealth," PW August/September 2007), that translate into a steady stream of highly affluent prospects when properly implemented. Moreover, these wealthy prospects are prepped and eager to talk to advisors.

Along these lines, we consistently find in survey after survey that the wealthy want high-quality financial solutions instead of products. Those advisors that can understand the higher-end affluent and provide state-of-the-art solutions will excel. This generally requires a holistic approach to develop a comprehensive assessment of a wealthy client. For this, we recommend the Whole Client Model (see "Wealth Mapping," PW June/July 2007).

The corollary here is that being "smart" counts more then ever. It's not enough to just take off-the-shelf answers and tell the wealthy, "Here you go." In this hyper-competitive environment, it's important to be able to deliver cutting-edge solutions, but without going over the edge. For instance, expertise with self-settled trusts is essential in asset protection, but so is the ability to deliver Floating Islands. While relatively few of the very wealthy will need or be seriously interested in the more esoteric and complicated solutions, advisors need be able to deliver them when appropriate. Failing to do so, more than ever, means losing clients to your competition.

Advisors and the organizations they work within have to remember there are business models that translate into "take home" money and many, many business models that don't. In the industry, there's too much emphasis on top-line numbers when it's bottom-line numbers that count. We have always found that relatively few professionals-from those controlling the larger financial institutions to managing partners at leading law firms and from boutique investment firms to individual advisors-think in terms of the business they're in and there's no question they're businesses. We're always "entertained" when advisors don't know the cost of acquiring wealthy clients and maintaining their loyalty. Just consider that the majority of advisory practices cannot detail the comparative costs of their clientele-who is profitable and who is a financial drain. For advisors to achieve significant personal wealth, the ability to "run numbers" is crucial.

Those firms and those advisors who effectively think and act in these terms-like some of the very wealthy-will be able to capitalize on the systemic dislocation that is permeating the advisory universe. Personally, starting financially with a million dollars or so, it's never been a better time for those advisors who want jet plane money (a net worth of $20 million or more) to reach this pecuniary level. It will take a while... let's say five years give or take a year or two. Still, without question, it's a wonderful time to get wealthy!