Wharton@Work

April 2014 | Wealth Management

Advising Ultra-High Net Worth Clients

Today’s financial advisors are facing tough challenges. Volatility in the stock market, new securities regulations, and a crowded competitive landscape mean keeping current and finding new solutions for existing clients is a must. But there is another variable that must be considered, says Wharton management professor Raphael Amit. “As your traditional clients mature, you have to move from an aging client base to the next generation. It is important now to start making that transition, forming a relationship with the younger generation and becoming a family advisor. To do that, you need to understand the kinds of issues families — especially ultra-high net worth families — are struggling with in terms of wealth management, governance, and decision making.”

Amit will teach in the new Wharton Wealth Management Financial Advisor Online Series, a three-part program (eligible for continuing education credit) led by Wharton adjunct professor of finance Christopher Geczy. Amit recently studied ultra-high net worth families, and his conclusions about what they are thinking and what they expect from a financial advisor might startle some of those advisors. He says with these clients, “You can’t just manage their portfolio. Advisors are typically interested only in managing liquid assets, but my research suggests that family dynamics are equally important in providing value. You have to manage the portfolio in the context of family dynamics, and understand that context completely.”

His study also focused on considerations for advising a family that is operating a company. “You must be sensitive to and account for their exposure to a sector or industry by way of their operating company. You can’t just look at the portfolio in isolation. You need to consider the total balance sheet. If they are running a business in the natural resources sector, for example, much of their wealth is already tied there, so the liquid portfolio should be underweighted in that sector.”

Amit will share his as-yet unpublished findings for the first time with participants in the new three-part online series, which begins in May. Geczy, faculty director of the program, says Amit’s research “gets you into the minds of high net worth investors and what they find valuable in an advisor relationship. Participants will gain insights that no one else has. This knowledge is particularly important as more advisors are turning to the high net worth end of the market for new clients.”

Mario Moussa, co-author of The Art of Woo: Using Strategic Persuasion to Sell Your Ideas, will share strategies for reaching out more effectively to high net worth investors. “Credibility and trust are important in any business situation,” he says, “but they are especially critical in the advisor/investor relationship. What advisors are selling is not the product or instrument or service but trust. Often the actual product may be too complex for the client to understand. The relationship has to be built on trust.”

Moussa continues, “A unique challenge in financial advising is understanding your clients’ goals, which is really like understanding their dreams. Then you need to communicate that you are committed to helping them meet those goals. To do that, you must fine-tune your message. The same conversation or letter or email that works for one client could be insensitive to another. Our research on influence tells us that persuasive communication always takes into account the individual’s preferences and needs. All good advisors know this intuitively, but they might not have an explicit process that helps them use their skills in every conversation. I offer a framework, a checklist that reminds them to focus on certain things during meetings with their clients.”

Moussa, Amit, and Geczy will interact with participants in a virtual classroom, using an online Adobe platform. Each session will include a Q&A period. For financial planners and wealth advisors, this program is eligible for continuing education credit. It meets the requirements of CFP Board, a non-profit organization that fosters professional standards in personal financial planning through its setting and enforcement of the education, examination, experience, ethics, and other requirements for CFP^® certification.

Geczy, who has served on the staff of the Board of Governors of the Federal Reserve and on the Economic Advisory Board of NASDAQ, says the series offers unique advantages to advisors. “Each of the three sessions targets a key component of today’s advisory business, with different perspectives and approaches for client retention and client preparedness — and each is an area in which advisors can gain important competitive advantages. They were designed to work together. It’s a comprehensive look at where we are today. Advisors are fielding a lot of questions from their clients right now, and we have answers.”