Not everyone uses financial advisors and wealth services, as managing our own finances doesn’t seem that hard on the surface. For instance, you can plug away at your job, set modest financial goals, and maybe pay for a robo-advisor if need be. You’ll grow your wealth, figure out taxes as you go, and just plan on everything nicely falling into place when it comes to estate planning.
That approach might work if you’re a financial wizard and maybe a probate lawyer for good measure. For everyone else in higher income brackets, retaining a wealth advisor’s services is essential. This is especially true if they want to minimize tax expenses, hit financial goals, and plan for the future.
However, not all wealth service providers are created equal. Some firms try to leverage technology advancements such as AI and other software offerings to increase advisors’ client loads. This means that if human eyes review a client (at all), they compete with hundreds or sometimes thousands of other people for that advisor’s time. With this model, it is nearly impossible for advisors to customize recommendations and communication methods for each client.
Other firms have chosen to go in the opposite direction. This involves lowering advisors’ client rosters, providing personalized strategies, and placing a higher value on client relationships. It’s an arrangement that leads to success for clients and advisors alike.
Excellence Vs. Growth
Barry Glassman, founder of Glassman Wealth Services, has seen the power of strong client relationships in action. He describes the all-too-common “honeymoon phase” where a new wealth services client might receive valuable attention from their advisor when first signing, but that hands-on relationship is short-lived.
“The client is promised the world on the advisor’s website and in the sales meetings. Yet within a few quarters, the honeymoon period ends, and the client becomes a number. This is financial advisor asset gathering 101.”
When advisors are spread too thin across a large client load, the wealth management firm gains revenue. The downside is that those advisors are unable to spend the necessary time getting to know their clients. What’s worse, they also can’t perform the necessary research to deliver the highest-quality service.
One simple test for clients to ask is how often their wealth advisors request their tax returns. Surprisingly, many advisors don’t ask for these. They don’t ask for returns is because they don’t have the time or curiosity to look at them. That’s not the case at Glassman Wealth Services.
“Our goal is to lay our eyes on every client’s tax returns,” Glassman says. “Without doing so, it’s like performing surgery without doing x-rays or an MRI. That’s the litmus test, which is: do we care, do we have the knowledge, and do we have the time to offer comprehensive and holistic advice?”
This emphasis on business excellence versus growth requires some deviations from industry norms. Building and prioritizing client relationships takes a great deal of time, which is one of a business’s most important assets.
Glassman Wealth Services chose to drastically reduce the number of clients per advisor. They went from a family-to-advisor ratio of 100 to around 35.
Making Better Advisors
By decreasing client loads and building client relationships, it seems like only clients are reaping the benefits. However, there are multiple ways in which wealth services providers prosper as well.
First, the extra time available for advisors allows them to educate their clients on matters before they begin discussions with other professionals. The client is able to enter those meetings with a better understanding of the concepts, making conversations easier for all parties. Also, it opens up the opportunity for the wealth advisor to collaborate with other players in their clients’ financial arrangements. It’s a situation that Glassman welcomes.
“As opposed to only referring them to an estate planning attorney, what if we took the time to educate them on the decisions they need to make in an estate planning meeting?” he explains. “Let’s talk through the advanced strategies so they’re knowledgeable going in. Of course, we’ll attend those meetings as well.”
When wealth advisors take a more active and involved role in their client’s life and finances, it opens up communication. It allows the advisors to find opportunities that otherwise would have gone unnoticed.
The Importance of Being Detail-Oriented
Eric Dunner, Partner and Client Advisor with Glassman Wealth Services, notes the importance of advisors performing intensive analysis of their client’s information rather than just checking boxes.
“We genuinely want to know what’s going on that the client hasn’t thought about, that we haven’t thought about. We’re only going to be able to learn and provide those ideas by really taking a deep dive and challenging ourselves further.”
One trait Glassman Wealth Services focuses on in the advisor hiring process is curiosity. The firm encourages advisors to take the time necessary to research and learn about new investment and financial planning strategies. Motivating advisors to be creative and perform research is important because it gives them the knowledge they need to introduce new techniques and strategies to their entire roster.
Dunner notes that advisors who are overworked and stretched for time might be tempted to brush aside anything they’re not familiar with. This can lead to missed opportunities and overlooked strategies that could benefit clients.
“When we see something that we’re unsure of, we’ll invest the necessary time and resources to find any available benefits and hopefully bring them to other clients in the future,” Dunner says.
Serving and Keeping the Few
When Glassman talks about serving the few, it’s not a matter of only accepting the highest net-worth individuals and families as clients. The firm has had a $2 million minimum since its inception.
He said, “Our offering is more about bringing the sophistication of what is typically offered at the highest levels of wealth down to those who might be considered ‘mass affluent’ with eight or ten million dollars.”
Bringing that caliber of care to a smaller roster of clients will go a long way toward client retention. There are numerous reasons clients might be looking to leave their wealth services provider. Firms that focus on quality may lose some clients looking to save a few hundred dollars a year on fees. In those circumstances, the firm would prefer to open up its limited capacity for a client who values service over minimal fee differences.
Prioritizing Client Relationships
And speaking of retention, prioritizing client relationships can also impact retention across generations. Wealth service providers can build strong relationships with both clients and their children. It can even be something as simple as suggesting clients’ teenage children set up a Roth IRA and educating them on the future impact of this action. Taking the time to lay out a solid financial foundation for children to build upon later will establish a strong level of trust.
Consider 10 or 20 years from now, when those children are adults. They will likely be starting to build their wealth and setting financial goals. If they already have a solid relationship with an advisor who has provided excellent service for themselves and their parents, it’s likely that they’ll continue as long-term clients.
Advisors not only benefit financially from the high multi-generational retention, but they also have years of history and data to work with. They have a better grasp of their clients’ personalities, comfort with risk, lifestyle, and wealth philosophies. Those factors allow the advisors to ask the right questions and execute the right strategies for their clients.
Ditch the Client Mill
Wealth management firms will always run their herd of clients through the same few strategies. These firms might also spend a few handful of hours on their accounts each year in addition to calling it a win when they collect their fees.
However, prioritizing client relationships and building strong levels of trust is essential for providers looking to move from volume to value. Both clients and wealth advisors thrive by delivering sophisticated advice to the few.
