A lack of clarity in our industry about "Wealth Management" continues to make it difficult to develop, communicate and implement effective strategies for this market. Although there will likely never be a universal definition of wealth management or one approach to address it, this article will discuss wealth management in a way that will help sales managers and other executives better define and ultimately execute their relative roles in meeting the needs of "people with significant money."

The "New Wealth"
When speaking of "wealth" in our industry, there tends to be a focus on "investable assets." In addition to historic sources of inherited and/or accumulated wealth, changes in the "retirement paradigm" have created a new "source of wealth" and new issues in managing it. With the trend away from defined benefit to defined contribution plans, and with many 401(k) plans now existing for 20 years or more, there are increasing numbers of people with very significant wealth accumulated in their retirement plans. This growing number of potential "wealth management" clients will need to manage their funds differently since they now have, in essence, a "personal pension their own control.

Who are Wealthy People?
Organizations are increasingly recognizing that one size does not fit all, and it is necessary to match products/services and distribution to specific customer segments. The use of investable assets ("liquid wealth") is one means of segmentation that can indicate both likely customer needs and the "value" of the customer. This then impacts how we can (afford to) serve them. The following segmentation scheme reflects what we often see in the industry.

• Mass Market: up to a few hundred thousand in investable assets.
• Mass Affluent: a few hundred thousand to around one million.
• High Net Worth: generally a few million of investable assets ($1 to $3-$5 million).
• Ultra High Net Worth: over $5 million in investable assets.

Generally speaking, when institutions talk about the "wealth management market," they are talk-ing about the two highest categories above.

Wealth Management
With the background outlined above, we will define "wealth management" as providing appropriate financial products and services to meet the needs of people with significant investable assets. Broadly speaking this can include:

• Continued growth of wealth — by appreciation of existing assets as well as continued accumulation of new assets.
• Protection of assets from inappropriate investment risk and unnecessary taxes.
• Appropriate use of assets to support a desired lifestyle. This may include development of a structured income stream, periodically liquidating assets as needed, etc.
• Transfer of assets. This includes determining when, how and to whom assets are to be transferred.

Institutions that can most effectively fulfill these needs on a coordinated basis will be the winners in the wealth management market space.

Organizing for the "Wealth Management Market"
Historically, financial organizations have organized along traditional corporate boundaries. Today, it is important for organizations to step back and look at the range of products, services and delivery options available; match these with customer needs and desires; determine where various required skill sets reside in the organization; and then organize so as to optimally deliver what the customer needs. Following is a starting point for breaking down products and services:

Financial Planning
This is often the cornerstone of any solid relationship. Depending upon a client’s position it may include: accumulation for college funding or retirement, income and asset management in retirement, tax management, and wealth transfer (before or after death).

Financial Products
These include "bank" products, individual stocks and bonds, mutual funds, more specialized asset management accounts, annuities and life, health and disability insurance.

Asset Management
The actual managing of individual or pooled assets. Historically, this was accomplished through some sort of "wealth management" account or via mutual funds for the mass market. Today, a wide range of third party asset managers is increasingly accessible and technology is making it possible to bring sophisticated asset/investment allocation and risk management to a much broader audience.

Administrative Services
These have historically been performed in bank trust departments for their clients and included collecting documentation and allocation of income ("clipping coupons," etc.), sending regular payments to the client (income management), account status reporting, preparations of tax related documents, etc. At the high end, "family offices" offer a holistic approach that provides a variety of services that go well beyond managing and administering investments. Technology has changed how much of this is done today, but the need for client liaison continues.

Related Services
As the environment and our industry become increasingly complex, the need for specialized expertise grows. In many cases, wealth management clients will require the services of specialized attorneys and/or accounts, for example. Many organizations will not have these people on staff, but should have a network available for consultation. This network can also become a source of referrals.

Client Liaison and Relationship Management
As the range of products and services being brought to bear for a given client may expand, and dedicated support individuals will change, it is important to maintain a consistent relationship.One person must be charged with regular liaison with the client, regular updating of the client’s situation and needs, and "quarterbacking" the relationship to coordinate the delivery of all products and services provided by the company. This requires strong customer relationship and (customer needs focused) "sales" skills as well as a solid high level understanding of the full range of products and services available.

The higher the net worth, the greater the expectation and demand for continuity. It is most important that the "quarterback" be in place for the long haul. He/she must also have a strong understanding of and empathy with clients as well as have a strong product competence.

Once an organization has defined all of the products/services it has to offer and evaluated the skill sets of individuals and teams, it can then begin to assign roles.

Preparing Advisors for the Wealth Management Market
As institutions begin to reorganize to optimally reach the wealth management market, many are finding that their reps/financial advisors can play an important role — particularly related to client liaison. It is important that the advisors be prepared to step up to this role which requires a deep understanding of organizational and resource issues; client needs, goals, and perspectives; and appropriate product choices.

Working with wealthy clients requires new perspectives and approaches. Financial advisors must move from a transaction orientation to becoming a long term financial partner with their clients. Other key issues include understanding changes in perspective, thinking and actions as people age and the difference between an advisor’s perspective and client’s perspective on the same issue or event.

Summary
In summary, addressing the wealth management market requires changes in the way institutions organize and operate internally as well as how their financial advisors work with their clients. Truly addressing the wealth management market may require a significant, long term commitment. Technology and products are constantly evolving and changing what is possible and practical. Successful advisors and their institutions must find their appropriate balance between cost and service levels to most effectively reach this market, and they must be flexible enough to change as the market environment evolves. DSG

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