“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 firstname.lastname@example.org or (415) 477-3212.