"Traditional planning is just table stakes."

There was an interesting development yesterday, April 27th, in the competitive quest to serve affluent clients. U.S. Bank announced the launching of Ascent Private Capital Management, a new wealth-management group for high-net-worth clients with more than $25 million in assets.

In the words of Michael Cole, president of the unit, “These ultra-high-net-worth clients are unique and different. Traditional planning is just table stakes. We are already good at these things. We need to help them do more than just manage their wealth. We need to help them manage the impact of their wealth.”

The bank hopes that, by engaging affluent families in broader discussions about their values and goals, the new unit will help prevent the loss of wealth that often occurs as assets are transferred from one generation to the next. About 70 percent of all estates fail to transfer successfully to the next generation, according to a study by the Williams Group of Stockton, Calif. The primary reasons are poor communication and lack of trust, rather than bad advice or financial mismanagement, according to the study, which included interviews with 3,250 families over four decades.

The competition among banks that are targeting the high-net-worth market is intense. U.S. Trust is the purported leader among the group, all of who are chasing the 36,000 or so persons in North America with investable assets of $25+ million. With this latest move, U.S. Bank is trying to distinguish itself with what it refers to as “wealth impact” services, i.e. sophisticated advice on how the affluent can make a positive impact upon the world (as opposed to ho-hum services like traditional planning and wealth management)

by Chris Holman

Get the Upper Hand on Voicemail

Voicemail is a necessary evil for most of us today.

I wanted to pass along the comments of a Mr. Tibor Shanto, a self-proclaimed voicemail expert. (btw...this image is definitely not of Mr. Shanto.)

Although I would dismiss some of Mr. Shanto's assertions as sheer puffery, e.g. “50% of my voicemails are returned in 72 hours”, I actually like the way he frames up the entire communication environment that has led to the prevalence of the use of voicemail today.

His tips on how to leave a voicemail are on point too. He says his voicemails are just ten seconds long. They include:

• His name and company,
• His phone number (pronounced slowly),
• And a short, somewhat cryptic comment that piques curiosity and compels the recipient to call you back.

In this link (here) is a 10-minute YouTube video where Mr. Shanto talks at length on how to leave a voicemail. It’s definitely worth a listen if you'd like to brush up on your voicemail skills.

All the best!

by Chris Holman

Time, Money, & Happiness

Jennifer Aaker is a social psychologist, author, and professor of marketing at Stanford University's Graduate School of Business. Over the years, her research has focused on three topics of interest to most of us: Money, Time, and Happiness (not necessarily in that order).

Her big interest is in uncovering what actually makes people happy...as opposed to what they think makes them happy.

In this regard, she has recently co-authored an article in the Journal of Consumer Psychology, "If Money Doesn't Make You Happy, Consider Time".

As I read it, her conclusions can be summed up thusly:

1. Happiness is a consequence of the choices we make.
2. Time is a finite resource. We can increase our happiness by spending our time wisely.
3. The more time that we spend with our partners, best friends, and close friends...the happier we are.

Sounds straightforward enough. How does one make this happen?

• Spend time with the right people. Socially connecting activities are responsible for the happiest parts of the day. Work is an essential part of this element in the time-happiness relationship. Two of the biggest predictors of a person's general happiness are whether they have a 'best friend' at work...and whether they like their boss.
• Spend time on the right activities. How much time during the day do we spend on mindless activities, where we never actually make the intentional choice to participate? It is better to ask the question, "Will what I am doing right now become more valuable over time?"
• Enjoy experiences without actually doing them. The part of the brain responsible for feeling pleasure (the mesolimbic dopamine system) can be activated by merely thinking about something pleasurable. A great example: reading a guidebook before a much-anticipated vacation. [I think they call this "daydreaming"]
• Focus on the present. Research has shown that focusing on the present (vs. the future) can slow down the passage of time. [One can do this by simply breathing more deeply.]
  
• Happiness changes over time. Younger people (i.e. Millennials) experience happiness as excitement. Older folks (i.e. Baby Boomers) experience happiness as peacefulness. The implication is, as we age, that we should shift how we spend our time, as our understanding of happiness changes.

For financial advisors, we can draw interesting inferences from all of this. For example, "Spending time with the right people" should definitely include our clients. If we don't enjoy our clients as individuals, the days can become very, very long. Similarly, I also like the mindfulness of "Spending time on the right activities". Sometimes I feel that when I'm really tired, or a bit blue, I can go from activity-to-activity without even thinking about its value. The net result is that my mindlessness seems to exacerbate my ennui.

Cheers!

by Chris Holman

Your (Flawed) Telepathic Powers

Chris Brogan is an author, entrepreneur and thinker. His blog, chrisbrogan.com, is in the Top 5 of the Advertising Age Power150.

In a recent post, “Mind Reading”, he discusses the human tendency to project our thoughts (and fears) of what we perceive someone else is thinking…and make mental presumptions that constrict our behaviors.

Example: You have a good friend who you believe would be a terrific client and one who would greatly benefit from your services...even though you have never actually broached the idea of working together. The voice in your head says, “I’d love to work with them, but I’m sure that they wouldn’t want to discuss this because they are most likely working with someone else.”

The interesting thing about mind-reading is that we all do it...including your good friend!

To follow the above example, it is entirely possible that your friend has a professional issue that they’d like to discuss with you because they really, really trust you. However, they don’t because they have their own voice that is playing in their head saying, “You know, I’d really like to talk to him/her, but I don’t think that I’m the sort of client they’re looking for.”

(This is actually not a far-fetched example. From our research, this happens fairly often where potential clients do not reach out to professionals who they know and trust, because they think that they, i.e. the potential client, does not meet the minimum standards that the professional might require.)

Brogan goes on to say that it's important to stay vigilantly self-aware against "mind-reading". If not, we run the risk of manufacturing these conversations in our head that are more perception than reality. Most likely, these perceptions are incorrect or not wholly true...especially if they are negative.

It would be a shame to live a life of relationships that never happened because of imaginary conversations that convey perceptions that never actually existed.

On another completely unrelated note.

Yesterday, Joan Benoit Samuelson ran in her first Boston Marathon in 18 years. Previously, she had won the race in 1979 and 1983. At 53 years old, Ms. Samuelson had hoped to qualify for the U.S. Olympic trials by finishing in 2:46:00 or better.

She didn't make it. Not this time. However, she finished in 2:51:29...the 45th fastest time among all women who ran the race.

For those of you who have ever run a marathon, you know that 2:51 is a super-quick time. To do this at 53 years old is a stunning and inspirational feat...especially for those of us on the north side of the half-century mark.

Thank you Joan!

by Chris Holman

Decamillionaires Need Your Help!

There’s a famous, and most likely apocryphal, exchange between Ernest Hemingway and F. Scott Fitzgerald:

Fitzgerald: “The rich are very different from you and I.”

Hemingway: “Yes. They have more money.”

They may be different in another way. They have more advisors.

According to recent research from Cerulli Associates, 57% of U.S. households with at least $10 million in investable assets are now working with five, or more, financial advisors.

This is a shocking number! Almost impossible to believe. It's also a quantum leap from previous years. For example, in 2008 only 18% of wealthier households were working with more than one advisor.

What accounts for this increase? For financial advisors here's the bigger question...how might they respond to this trend?

In the first place, the 57% figure is such a mind-blowing number, you wonder if this is a mistake...some egregious polling error. However, I recently saw another report by Cisco Internet Business Solutions Group that indicated 80% of wealthy investors had their assets spread amongst 2 or more firms.

So, let’s assume that the 57% number has some statistical validity.

I’ve blogged about this before, here…and here. However, since the problem seems to be getting worse, not better, continued discussion seems timely.

Let's look at the first question. What accounts for the increase in affluent investors who have moved to working with multiple advisors?

The most obvious answer is that there has been an erosion of trust and confidence. The volatility in the credit, stock markets, US economy has made it more difficult for the wealthy to manage their wealth, maintain their lifestyle, and achieve their goals. Presumably, the move to hire multiple financial advisors is the result of a desire to minimize risk.

The great irony is that, by working with multiple advisors, investors greatly increase portfolio risk...as well as the overall complexity of portfolio oversight.

Take a look at this study for a lengthy discussion of why this is true.

For financial advisors, the bigger question is how to respond, i.e. when you meet an investor who is involved in bad investment behavior that is injurious to their financial health...what do you say or do to get them to listen?

Alternatively, I would think that a non-judgmental, question-based approach that engages the investor in dialogue, and gets them to think about what they're doing...is a good shortcut to building a relationship.

Simple questions like:

• Who is responsible for your asset-allocation strategy?
• How do your advisors coordinate and collaborate with each other?
• What's the communication plan amongst all of your advisors...and you?
• How do you prevent portfolio overlap?

...might go a long way to building a relationship of confidence and trust; and leading to more substantive conversations.

by Chris Holman

"Talkin' 'bout my generation..."

People try to put us d-down (Talkin' 'bout my generation)

Just because we g-g-get around (Talkin' 'bout my generation)

Things they do look awful c-c-cold (Talkin' 'bout my generation)

I hope I die before I get old (Talkin' 'bout my generation)

"My Generation", written by Pete Townshend and performed by The Who, was named the 11th greatest song of all time by Rolling Stone. The song, composed by Townshend at the age of twenty because he was infuriated at the Queen Mother for allegedly having his car towed, was written for rebellious British youths and expressed their feeling that older people "just don't get it".

In a recent study by Cisco Internet Business Solutions Group, "Winning the Battle for the Wealthy Investor", some key findings reveal the same response. However, in this case it's the financial advisors who "just don't get it".

Among the interesting observations of the study was the attention paid to Wealthy Investors Under the Age of 50, a client segment that many financial advisors tend to ignore. Key characteristics of the Wealthy Under-50's demographic include:

• Hold 28% of the wealth in the US,
• Have higher incomes than older investors, and more likely to own their own business,
• 67% expect a substantial windfall/inheritance within the next ten years.

However, the study also reveals a "Generation Gap" when comparing how the Wealthy Under-50's expect to be served by their financial advisor:

1. Wealthy Under-50's are looking for a "custom fit", including financial services tailored to their specific investment needs, and a range of options for interacting with their financial advisor,
2. Wealthy Under-50's spend more time managing their investments and want to interact more frequently with their advisors,
3. Wealthy Under 50's appear to be "restless" with their financial services firms that cannot deliver they type of client interactions that they want, e.g. they desire faster and more convenient options for interacting with their advisors and firms...beyond in-person meetings, phone conversations, and email.

It is this last point, the % of wealth US investors interested in using different technologies, where the Generation Gap is most apparent:

• 54% of Wealthy Under-50's are interested in webcam conferencing vs. 21% of Wealthy Baby Boomers,
• 59% of Wealthy Under-50's are interested in screen sharing vs. 32% of Wealthy Baby Boomers,
• 56% of Wealthy Under-50's are interested in HD video from home/office vs. 24% of Wealthy Baby Boomers.
  

Switch Advisors?
Indeed, one of the somewhat shocking revelations of the study was that a full 63% of Wealthy Under-50's would seriously consider moving their assets to another firm in order to gain access to these new communication technologies.

We are always a little suspicious of study results that indicate an investor's hypothetical intention to move their assets. (We recall a post-meltdown study in 2008 or so, where 70%+ of investors said they were so hacked-off at their advisor that they planned to switch firms. Never happened!)

Nonetheless, many of the findings of this study ring true concerning the generational difference that exists among the Wealthy Under-50's Investor, especially with regard to technology, and how they expect their financial advisor to connect with them with newer, high-touch, faster, interactive, and more collaborative mediums.

The industry is forewarned.

PS: The study also highlighted another opportunity for financial advisors, i.e. wealthy investors of all ages who have their assets with multiple advisors. In the next day or so, we'll address this too. Stay tuned...

by Chris Holman