By now, you've heard all the arguments for becoming a wealth manager. But transforming yourself from a transaction-based broker to a more consultative — and potentially more profitable — financial advisor is easier said than done. How, for instance, do you suddenly change your mindset? How do you tell clients you have been reborn as a wealth manager? And how do you convince prospects that you have what it takes to be a wealth manager?
There are no shortcuts. You can't become a wealth manager by taking a correspondence course, printing new business cards or reading the back of a cereal box. But there are some natural starting points, and we are going to look at two of them: assembling the right resources and learning to think like a wealth manager.
The Right Resources
A wealth manager differs from a financial advisor in being able to offer affluent clients a complete menu of products and services and incorporating them into an ongoing investment plan. Investment expertise is important, but so is advice about advanced planning, insurance and charitable giving. Wealth managers have to build a professional network of specialists — CPAs, estate attorneys — that they can bring in to answer questions and shape solutions.
For reps working for large firms, most of those resources will be close at hand. That doesn't mean there is no work to be done, however. A wealth manager still has to oversee the network, knowing whom to bring in and when. In fact, running the network is in many ways more challenging than putting the plan together.
For reps who are on their own, it will take more time to assemble the right resources. The best way to build the team is by asking fellow reps and clients for recommendations and by attending seminars and conferences. Again, it's essential to find specialists who are not only good at what they do but who are also comfortable being team players. It's also worth remembering that one of the side benefits of having specialists on call is being summoned to help when their clients need investment advice.
Think Wealth Management
To succeed in wealth management, reps need to acquire a different mindset. The most important change is to focus on creating an ongoing relationship that presents a variety of avenues for profit. And it entails thinking about each client as a person, not just an investor. For instance, where a financial advisor would be busy trying to uncover a client's every investable asset, a wealth manager would, over time, come to understand the client's goals and assets — as well as other opportunities.
Say, for example, an advisor has a client worth $10 million, but almost all of that wealth is in works of art and only about $200,000 is in investable assets. The client calls and wants to start generating a steady stream of income that exceeds what he's making off the $200,000. A financial advisor might try to tweak the investment strategy or recommend selling the art — which would result in a massive capital gain.
A wealth manager, on the other hand, would have the right resources to come up with a better solution. For instance, a charitable trust could be set up to sell the art, incurring no capital gains tax, and the desired income stream could be generated by the trust. Therefore, the wealth manager would be in charge of the money in the trust as well as the trust's income, far more than the $200,000 that was there at the outset.
A wealth manager finds a solution that not only meets the client's long-term need for income but also dramatically increases the amount of assets under management. In short, by thinking like a wealth manager instead of an investment advisor, a registered rep could actually end up with more money to manage.
Next month we'll address the issue of how reps can communicate that they are wealth managers to their clients, prospects and the professional contacts that they need to line up.
Writers' BIOS:
Hannah Shaw Grove is a managing director at Merrill Lynch Investment Managers.
Russ Alan Prince is president of Prince & Associates.
