After too many years of leaning on several financial wizards for highly specialized advice, more Americans are turning to one “holistic” wealth manager.
“Holistic service can also be termed full
balance sheet advice and guidance,” says
Sandro Rossini, senior vice president and
regional manager of Wealth & Institutional
Management for Comerica Bank in San
Francisco.
Smart Business talked to Rossini about
how to select holistic wealth managers.
What capabilities are required to support
holistic services?
Your provider should have the expertise
and the product offering to address both
your debt and credit needs as well as your
liquid cash and investment needs. You
need to get both investment expertise and
traditional banking expertise in one house
— and, in some cases, from one person.
Take, for instance, a successful business
owner who has his net worth tied to commercial and residential real estate, company-sponsored plans and investment accounts. He’s extremely busy, so he needs
someone who understands his overall circumstances and who can identify any gaps
in his personal finances very quickly. That
involves understanding both sides of the
balance sheet, how his debts and investments work and how to add value.
How many people typically support that one
big client?
While a multitude of people may be required to support the complex needs of a
client, everything should be orchestrated
by a relationship manager. He or she may
call on the support of a portfolio manager
to manage the investments, an insurance
specialist to support insurance needs, and
a financial planner to assess a retirement
goal. A trust and estate expert can determine the most tax-efficient way to transfer
his or her wealth to beneficiaries or a charity of choice. A good holistic wealth manager can partner with several dozen investment houses and ask them to manage a
certain portion of the client’s money.
This is all run through a relationship manager so the client doesn’t have to pick up
the phone and call 15 departments.
Where does a holistic financial adviser start?
A financial plan is the first step. This is
your financial road map and you want it
unbiased. Your adviser should collect and
understand all components of your
finances put together in a comprehensive
way. Then he must prioritize according to
your identified needs and your concerns.
For instance, your investments can be
highly over-weighted in technology, which
could cause your portfolio to drop significantly should the markets pull back. Your
adviser has to recommend an appropriate
allocation to match your tolerance for risk
as well as your time frame for investing.
Many people are not as diversified as they
believe. For example, investments such as
mutual funds may have many of the same
stock or bond holdings. Deep analysis
should uncover any over-concentration. An
over-concentration means greater risk.
Or you may need a line of credit and the
adviser will suggest you liquidate a particular holding instead of borrowing. Understanding which route to take means understanding the intricacies of investments and lending, and analyzing the pros and cons of
each option as well as your priorities.
A good adviser cannot operate without a
broad understanding of financial options.
How does someone choose such an adviser?
The first area is trust, which is an enormous component best built over time.
The second is capabilities. Can you go to
one organization, one contact person, for
the bulk of the services, understanding that
the relationship manager may call on a
variety of experts to support your needs?
Number three concerns the credentials
of the individual relationship manager. You
don’t need an expert in every single discipline, but he or she needs a good working
knowledge of the important financial components like credit, cash management and
investments.
Your other advisers might know what
various organizations can bring to the
table. Generally, you may rely on your
CPAs, attorneys or even a staff financial
planner for direction.
What if I’m not a $100-million-dollar man?
Middle-market clients or business owners don’t have a lot of liquidity. Money is
tied up in the business, as it should be.
That’s the time to start planning and protecting yourself with things like key-man
insurance. What happens if you or one of
your key partners disappears? How’s the
business going to continue? How about
succession? Have you considered a plan to
pass the business’s assets to your next generation with the least disturbance to the
company and impact on taxes?
Test-drive your financial institutions.
They may provide you with research, support and salaried expertise and not make a
dime on you today in order to win you as a
client down the road, when you want to
buy a house or sell the business or have a
big liquidity event.
SANDRO ROSSINI is a senior vice president and regional manager of Wealth & Institutional Management for Comerica Bank,
San Francisco. Reach him at [email protected] or (415)
477-3212.
