CEO, INC ADVISORS | International Keynote Speaker | Author of The Growth Mindset | Adjunct Professor
As the term wealth management has become mainstream, more advisors are moving toward a model that is holistic and consultative. Many advisors refer interchangeably to investment management and wealth management, but they are not the same. The HNW care deeply about three things; health, family and having enough assets to enjoy retirement on their terms. Therefore, they will value a discussion around family needs and goals, planning for increased longevity, strategic philanthropy and legacy. Working with a talented team will help create the right priorities and align those priorities with the client’s values. This process will result in tangible value; creating greater peace of mind. Therefore, the HNW conversation about wealth management should consist of investments, retirement planning, insurance planning, tax planning and estate planning. Based on my 35 years of experience working with HNW clients and advisors from around the world, delivering wealth management requires the following; Strong leadership, an outstanding team, a disciplined and consistent process, and constantly evolving.
Here are my 9 steps to succeeding in the HNW space:
1. Create a comprehensive life plan. Helping clients determine if they need $5 million for a comfortable retirement is not a plan. The majority of HNW clients don’t have an actual life plan. Some firms charge $15,000 for a comprehensive plan while others include it as part of their services. The purpose of this plan is to help your clients define their vision and overall goals and create a strategic and tactical plan that will be executed over time. This plan must be dynamic, just like our lives. This discovery meeting is by far the most important meeting in the process. Asking the right questions is key. My three favorite questions are: What’s important to you over the next 5 years? What’s your vision for these assets? What do you worry most about?
2. If the client is still working, encourage them to deposit money directly into a retirement account. Taking advantage of corporate retirement plans can be a significant contributor to one’s overall assets. However, how many clients keep these assets in fixed income or money market securities is astonishing to me.
3. Wealth management is not only about asset growth but also about asset preservation and asset transfer. Work with your clients to create a workable budget, whether they have $2 million or $20 million. I have witnessed people spend $10 million in 5 years following retirement, and then run out of money because of poor planning and being emotionally off balance. Some people don’t have financial discipline, which is why a budget is so critical. Determine what money means to the client; behavior toward money can be a key indicator in determining an appropriate plan.”
4. In my book, I discuss why it’s always better to be debt‐free. Include ways in which the client can reduce their taxes into their comprehensive plan and review them annually. As the primary advisor to the client relationship, it’s your responsibility to build and maintain solid relationships with all the client’s advisors, including the CPA, attorney, estate planner, insurance advisor, trust advisor, banker etc.
5. Help your clients decide an appropriate plan for their real estate assets. Is having three homes the right long‐term plan? Do they own too much house now? The average home size has increased by more than 1,000 square feet in the past 40 years, from an average size of 1,660 square feet in 1973 to 2,670 in 2018. Ask questions to help the client be realistic about what will suit his/her needs and budget. Most wealthy people will downsize often from a 7,000 square feet home to 4,000 square feet, however just like everything, these are personal decisions. You can help them become clear on what truly brings them joy.
6. Be boring (it’s not, really) and play the long game. Managing expectations is key. Overall, an equity portfolio can be expected to perform well in the long run. In fact history has shown us that over the past 200 years investing in equities and reinvesting divides created wealth. I learned this lesson as a young advisor from my clients that would dollar cost average every quarter and always reinvest. Having a comprehensive conversation about the client’s risk tolerance is one of the most important steps in the wealth management process and one that should not be rushed. My two favorite money masters have been John Templeton and Warren Buffett. They taught me to; invest for maximum total real return; invest – don’t trade or speculate; remain flexible and open minded about all types of investments; diversify; market predictions are a waste of time; don’t panic – learn from your mistakes; and the investor who has all the answers doesn’t even understand all the questions.
7. Helping clients retire successfully is something that will separate great advisors from the mediocre herd. I’m not talking about just helping them hit a specific dollar number. I mean helping them map out what they will do after retirement. Make contingencies for when plans get derailed by an illness, job loss, or some life‐changing event. Many ease into retirement by transitioning into part‐time work. In fact, most HNW clients will work or volunteer to stay active and engaged. Being that confidant is a privilege, responsibility and an honor.
8. Get the whole family involved from the beginning. Generally, one person is usually responsible for managing the nest egg. That’s a mistake, however, because if or when this person dies, the rest of the family may be in the dark and the learning curve to get up to speed could take years. I have seen this happen repeatedly over the past 35. Make sure your client’s children are included in the discussions. With over $20 trillion being passed down to the next generation it is a missed opportunity for both the client and the advisor if these conversations don’t take place.
9. Finally, in order to help clients reach their goals, do one thing exceptionally well, in fact so well that you will gain a great reputation for it. This one thing, is to LISTEN, listen to not only what the client is telling you, but what they are not telling you. This active, intuitive listening helps you not only differentiate yourself from the 300,000 advisors, but most importantly deliver what the client values most. Anyone can have words come out of their mouth, but it’s the true professional that can ask thought-provoking questions and listen. I call this wisdom and humility.
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