Critical to the success of most investment advisory practices is the sourcing of new and wealthier clients. And one of the most effective ways to accomplish this goal is to create strategic partnerships with private client lawyers.
And when properly motivated—when the financial advisors are providing the economic glue—private client lawyers validate the expertise of their chosen financial advisors, emphasize a personal fit, and “push” their wealthy clients to take action.
A proven methodology for advisors who want to create strategic partnerships with private client lawyers contains two core components:
1. Advisors must ascertain what the professional “style” of a private client lawyer is.
2. The advisor must then provide the economic glue to bind the partnership.
Professional Styles
Based on our research, we have found that private client lawyers serving wealthy clients use one of three professional styles: they can be “technicians,” “rainmakers” or “entrepreneurs.”
These styles suggest the types of legal services these lawyers will provide, the way they provide them and the way their practices operate.
The styles also dictate the types of affluent clients these lawyers work with and the networks of other professionals they partner with.
Most important, these approaches have a direct bearing on how financially successful private client lawyers can be. The average compensation for some styles is significantly greater than it is for others.
Entrepreneurs tend to be fairly creative. They principally use retainer and project-based fees as opposed to the time-plus-expenses compensation model. They work very hard to be the go-to advisor for legal answers as well as many business answers. In this regard, they act as personal advisors to the ultra-wealthy.
Entrepreneurs are the ones leading the charge to create law firm-based multi-family offices. Thus, they are highly inclined to “team up” with high-quality financial advisors who can do a very good job managing money and add value.
Rainmakers are able fairly consistently to bring in new business from current and new high-net-worth clients. They might not personally have all the technical answers or capabilities, but their job is to bring in wealthy clients, and, if appropriate, their partners and associates can do the work. Rainmakers are very motivated to align with financial advisors who can help them increase law firm revenues.
Technicians, which is what most private client lawyers are, may be legally competent but tend to not be particularly adept at business development. Some of them are more inclined to work with financial advisors. On the other hand, a solid percentage of them tend to get wrapped up in what they do, so they are bad candidates for strategic partnerships with financial advisors.
To easily determine the professional style of a private client lawyer, financial advisors can ask them to describe their practices and what their role is with their high-net-worth clients. Rainmakers, for example, will usually explain that they rely on the knowledge and skills of their partners in addressing legal matters. Entrepreneurs, in contrast, will often talk about the close relationships they have with their ultra-wealthy clients and the fact that they are likely to be involved beyond traditional legal work.
Having determined the professional style of a private client lawyer, a financial advisor needs to build a business connection to create a strategic partnership.
The Economic Glue
Financial advisors then need to provide the economic glue that cements the business relationships with private client lawyers. They can do that in a number of ways. First, let’s first address what doesn’t work:
• Sharing revenue: In almost all situations, private client lawyers cannot share investment management fees. Also, it’s very unlikely for them to share commissions.
• Trading wealthy clients: One-for-one trading of wealthy clients between financial advisors and private client lawyers is rarely possible beyond a handful of clients at most. This doesn’t mean financial advisors should not refer business to private client lawyers, but such an approach is limiting in creating strategic partnerships.
Other approaches, meanwhile, have proved more effective in the field:
• Give private client lawyers a steady stream of ideas, concepts and strategies: By making lawyers aware of the solutions they can deliver to their high-net-worth clients, financial advisors are likely to be on the top of the lawyers’ minds when client opportunities arise.
There are two basic ways to deliver cutting-edge content. One way is for financial advisors to develop the material. This might entail doing primary research or intricate concept expansion. An equally effective but much simpler approach is to curate insights and distribute them to the private client lawyers.
• Help them generate more business from their high-net-worth clients: A small but significant investment-based advanced planning solution can be beneficial to all parties—the wealthy investor, the private client lawyers and the financial advisor.
For instance, advisors can show their expertise with things such as charitable instruments, including trusts and private foundations, or captive insurance companies. Private placement life insurance in particular has become increasingly appealing to wealthier investors.
Different professional styles require different approaches. Entrepreneurs, for instance, are very interested in your ability to effectively use project and retainer fees. Rainmakers like any viable ideas leading to improved networking.
Entrepreneurs are looking for concepts and strategies that address legal matters and non-legal matters such as concierge medicine.
Rainmakers are often seeking creative ways to communicate legal solutions, including products that can produce legal fees. Technicians are many times attracted to new concepts with the potential to get into the nuances.
The way you frame it is important. Consider private placement life insurance. For entrepreneurs, this type of insurance allows you to address a keen interest of the ultra-wealthy, which is investment-related tax mitigation—and that’s often the attraction as this can translate into a closer advisory relationship. Rainmakers, in contrast, find this type of insurance to be an efficacious way to create new potential opportunities for legal work. Technicians recognize it as something that allows them to be proficient and show off the requisite expertise.
If you can help private client lawyers generate more revenues for their existing high-net-worth clients, that’s a powerful way to fairly rapidly increase referrals and your own assets under management for financial advisors.
Russ Alan Prince is president of R.A. Prince & Associates.
Brett Van Bortel is director of consulting services for Invesco Consulting.