There was a time, not that long ago, when investors turned to advisors to invest their money in equities and fixed income — and that was about it.
“People just wanted someone to manage their investment dollars,” said Jeff Seavey, senior vice president and wealth advisor with SunTrust Private Wealth Management. “There were stocks and bonds, and even within stocks there wasn’t a whole lot of variation.”
But the needs and wants of high-net-worth investors are changing dramatically. Technology is making it easier and cheaper for people to invest in the market on their own, and inexpensive exchange-traded funds (ETFs) are allowing them to buy stocks for next to nothing.
So today, wealthy Americans are looking to their advisors to do more than just invest. They also want them to oversee all aspects of their portfolios, including their real estate, their businesses and their nontraditional investments, like private equity placements.
If a client wants to buy a business, for example, the advisor might bring in a mergers and acquisitions expert. If a family gets embroiled in an estate issue, the advisor might organize a meeting with a behavioral therapist.
“I might have to coordinate seven or eight experts,” said Seavey.
Many wealth advisors are adopting this do-everything approach. They’re either creating in-house teams of accountants, lawyers and other experts, or collaborating with their clients’ own advisors, said David Wilson, a director at Capgemini, a global consulting firm.
The better overall view an advisor has of a client’s financial picture, the better he or she can serve that client, Wilson said.
This one-stop-shop approach started taking shape about a decade ago, after the financial crisis forced clients to think harder about the value their advisors provide, Wilson said. At the same time, wealthy investors — many of whom had millions in mutual funds — started hearing about ETFs with lower fees.
“It’s been the perfect storm of several different things,” Wilson said. “But number one was the crisis, which shined a light on the value of advisors.”
Changing Client Needs
This evolution would likely have happened sooner or later, as the financial affairs of wealthy Americans are becoming increasingly complicated.
Over the next several decades, an estimated $30 trillion will move from the current generation to future ones — and managing all that money requires an expertise that goes well beyond investing know-how.
What’s more, finances are more international today than ever before. Many wealthy Americans have bank accounts, businesses and real estate holdings spread across different jurisdictions. With new technologies making it that much easier to invest, just offering investment management services doesn’t cut it anymore.
“Advisors have realized that they need to differentiate in a very competitive market post-crisis,” said Wilson. “It’s now more about goals-based wealth management and a need for personalization.”
A More Collaborative Approach
Some advisors now have behavioral therapists, lawyers, accountants and others on staff, while others retain outside experts they call upon as needed. That means that financial advising, which typically used to involve a simple relationship between advisor and client, is becoming a much more collaborative and team-driven job.
Sonita Lontoh, a San Francisco-based technology executive, for instance, invests mostly in ETFs but has advisors who specialize in other areas, like hedge funds, private equity and other alternative investments. She also uses advisors who work on non-money-related issues, and she expects all her team members to work effectively with one another.
Then there are those high-net-worth people who come to an advisor trailing a team of their own experts. That can actually be a benefit, said Marina Nice, a wealth advisor with SunTrust Private Wealth Management.
If a client has “a trusted attorney or CPA, and they want those folks involved, then I want to work with them,” Nice said. “That’s a great arrangement because it’s truly customized to what the client wants.”
Experts For Every Situation
One situation that demands numerous experts is multi-generational planning, said Nice. An aging client might need an estate planning expert to help sort out her complicated estate affairs, for example. Real estate advisors, meanwhile, will help facilitate the sale of property, while tax and other experts will ensure that a company is passed down properly to the next generation.
Nice had a client who needed help deciding whether one of his children, who didn’t share the same values as his siblings, should receive the same amount of money each of them did.
“We had to decide whether the money should be split evenly or not — and how not to hurt the child he disagrees with,” she said. “These are issues that go to the heart and soul of people’s lives, and it can take more than one advisor to help solve it.”