The Prospect Said What?

You may need to dig and sift for the information you need.

June 19, 2008
by Lewis Schiff

To work with high-net-worth (HNW) and ultra-high-net-worth (UHNW) clients, financial professionals need both a deep understanding of a family's complex emotional dynamics and a comprehensive spreadsheet of the family's assets. These two pools of information fuel the discussions and solution strategies produced by the advanced planning team.

Before your team can start to work, however, CPAs and financial advisors need to dig for the truth that can hide behind the client's responses. You can't proceed to the analysis stage without a complete profile. Yet, for many affluent and ultra-affluent clients, the initial impulse is to speak guardedly to protect their privacy.

I've seen cases of clients intentionally holding back significant financial or personal details from their advisor during initial profiling. Some clients and even more so prospects, develop trust slowly. Much of the wariness comes from an expectation that anyone providing financial advice is merely pushing product. Your job as a true advisor is to take a consultative approach that breaks such an expectation. Your focus must always be on the client's challenges and goals.

While you'll adjust the actual profile questions depending on the prospect, certain topic areas are essential. Russ Alan Prince and Hannah Shaw Grove are two experts who have researched and written extensively about the seven necessary categories of information to create a complete client profile. If nothing else, you need to heed the following categories:

  • Vitals — key demographic information about your prospective client such as age, net worth, annual income
  • Goals — your prospect's achievement agenda (professional aspirations, lifestyle, fulfillment of obligations to family and society)
  • Relationships — who is important to the client and why (family members, organizations, business partners)
  • Assets — list of current and future assets (investments, potential inheritance, future sources of income or reasons for debt)
  • Advisors — professional advisors and trusted friends or relatives (roles of each, history and experience with previous advisors)
  • Process — preferences regarding how to work together (frequency and method of contact, others involved in discussions)
  • Interests — helps create rapport and inform various advanced planning solutions (favorite activities, charitable interests, vacation interests)

Trust Before Answers

UHNW families regard their privacy as one of the most important aspects of their wealth, so when it comes to meeting prospects for the first time, their trust in you is always an issue — even when the referral that put you together was extremely enthusiastic.

As CPAs and financial advisors, confidentiality is the first service we offer clients and prospective clients. Before they'll reveal details about their assets, they must believe in the full confidentiality of the discussion.

If the referral arrives via an attorney, you'll usually have a basic understanding of the prospect's financial profile before the first meeting. A referral from a client or center of influence will force you to work harder to build trust so you can acquire details. You may not learn everything you need in just one meeting. For those folks uneasy about discussing dollar amounts, you can start by asking them to break down their portfolios by percentages in types of investments. Then you can ask what percentage the investments represent of their total net worth. This approach will often ease the way to a fuller discussion of real estate and business ownership.

Prospects who speak easily about their assets and show some understanding of their assests are typically more comfortable talking about the larger issues of affluence, such as legacy, wealth transfer and philanthropy.

Unrealistic Expectations

Many CPAs and other financial professionals have their favorite stories about a prospect who, when questioned about their expectations, state that they believe that their $10 million of investments should give them $1 million annually for living expenses — for life. This kind of unrealistic expectation about investment performance may also indicate a need to cover excessive spending habits.

"I'd warn any advisor to be really careful when you're profiling potential clients to look at expectations," says Ian Weinberg of Woodbury, NY-based Family Wealth & Pension Management, LLC. "Unreasonable expectations are a surefire way to give you a headache.

We've had a few clients over the years who were completely unreasonable about their expectations for different reasons. The last thing I want to do is go home on a Friday afternoon trying to please someone who's unreasonable — knowing that I can't please them, in fact."

During profiling, Weinberg consults with a behavioral finance specialist to help him communicate to his clients the importance of acting responsibly about money and to deal with such emotional issues as taxes, inheritance and succession planning. The advisor discusses client situations on a hypothetical level with the specialist to maintain privacy. Weinberg has seen his clients mature in their attitudes toward their wealth — and he's also helped his firm have a smoother, more productive relationship with them.

By listening carefully to your clients aspirations and expectations, and by taking the time to dig for the truth often hiding behind your client's responses, you can become a true wealth manager and consistently experience the kind of results that Weinberg produces for his clients.

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Lewis Schiff is a private wealth specialist who works with high-net-worth (HNW) clients globally. His collaboration with Russ Alan Prince, the critically acclaimed new book, The Middle-Class Millionaire: The Rise of the New Rich and How They Are Changing America (Currency/Doubleday), was published in February 2008.