A survey of 421 wealth managers was conducted to see who they believed was the best source of investable assets. These need not be the clients they are presently working with. They are commonly clients the wealth managers want to and strive to have more of.
The unquestionably preferred clients for a third of the wealth managers are business owners who sold their companies. The sale of the company creates a pool of assets that wealth managers can invest. In objectively evaluating the greatest source of potential assets to manage on a per-client basis, these would be the preferred clients. Contributing to the attractiveness of business owners post-sale is that, because of demographics, many business owners will sell over the next few years, and a great deal of money will be available for professional management.
The business owners who sold their companies were followed by real estate owners who sold their real estate holdings. Then came the medical professionals who sold their practices. For more than half the wealth managers, the liquefaction of an illiquid corporate asset—an operating business, a real estate holding, or a medical practice—will likely produce the largest pools of money to invest.
While wealth managers want to work with business owners who sold their companies, they are not particularly adept at connecting with them. Most wealth managers say they are somewhat effective, and a sixth say they are ineffective. More than a fifth report they are effective, but only 4.5% say they are very effective.
There are several proven ways wealth managers can connect with post-sale business owners. There is usually a lot of competition for the assets of these former business owners after the sale. Knowledge of the sale gets around, and numerous professionals come knocking at their doors. Optimally, when the sale becomes public, and the investment professionals flock to the former business owners, they have already decided who to entrust their assets to.
The most effective approach is to provide value to the business owners before the sale. Helping them structure their personal finances and navigate the sale builds trust and allows wealth managers to demonstrate their capabilities.
The most powerful way to meet business owners considering selling is through other professionals, particularly accountants. According to Paul Saganey, founder and President of Integrated Partners and co-author of Optimizing the Financial Lives of Clients: Harness the Power of an Accounting Firm’s Elite Wealth Management Practice, “More than any type of professional, business owners are likely to speak to their accountants when they start to think about exiting or when they get an offer. This does not mean other professionals are not in the loop, but accountants are the most often relied upon. There are various ways to develop a systematic approach wealth managers can implement to build strategic partnerships with accountants, so they are actively looking for business owners thinking about selling that they can introduce to the wealth managers.”
Another potent systematic approach is educating business owners on maximizing their wealth when they sell their companies. For example, presenting at mastermind groups such as YPO, EO and Vistage enables wealth managers to reach the right audiences. Still, the nature of the presentation makes a tremendous difference. Straight-up lectures rarely lead to opportunities, no matter how well delivered or chock full of vital information. Instead, interactivity can be very effective, where the insights empower the business owners.
In conclusion, due to demographics, business owners post-sale will likely become preferred clients for a more significant percentage of all wealth managers. This is more the case for the cohort of wealth managers wanting to work with wealthier clients.
Russ Alan Prince is a strategist for family offices and the ultra-wealthy. He has co-authored 70 books in the field, including Making Smart Decisions: How Ultra-Wealthy Families Get Superior Wealth Planning Results.