Focus on Ultra-High-Net-Worth Clients, Part I · 2017-03-08 · “The Ultra-High-Net-Worth...

“The Ultra-High-Net-Worth Investor by the Generations” “Perspectives on Serving the Ultra-High-Net-Worth Space: An Interview with Jean L. P. Brunel and Charlotte B. Beyer” “A Mixed Blessing: Serving the Ultra-High-Net-Worth Market”

Focus on Ultra-High-Net-Worth Clients, Part I

JANUARY / FEBRUARY 2016 5

FEATURE | The UlTra-high-NeT-WorTh iNvesTor by The geNeraTioNs

particularly among younger generations. For example, 99.2 percent of UHNW Gen Xers have a college degree (Federal Reserve Board 2013).

Communication and Trust Naturally, attracting and retaining an UHNW client is any financial advisors’ goal. But overlooking some basic relation-ship fundamentals can lose UHNW clients.

For example, communication is key to a successful UHNW advisor-client relation-ship and response time is crucial. According to one Vanguard report, not returning phone calls in a timely manner is the number-one reason UHNW investors switch advisors (Vanguard 2014).

Good communication is not limited to cli-ent and advisor. Sandeep Varma, president of ATS Advanced Trustee Strategies, which specializes in estate planning, always includes the family.

“Before we implement strategies, we have a family meeting that includes the children, without their spouses, and we have regular family meetings throughout the relation-ship,” Varma said in an interview.

Trust is important as well. Varma said he believes that a team approach can help to

However, male UHNW individuals gener-ate the jobs. The top 10 U.S. male entrepre-neurs alone employ more than 865,000 people (Wealth-X and UBS 2014).

The following is a snapshot of the UHNW population in the United States:

• The United States is home to more bil-lionaires than any other country in the world.

• New York City is the U.S. city that is home to the most UHNW individuals— 12 percent of the total U.S. UHNW population.

• Charlotte, North Carolina (population 800,000), has more UHNW individuals than the country of Israel (population 8 million).

• California is the state with the largest UHNW population, with 13,445 UHNW individuals (Wealth-X 2015).

• 59 percent of UHNW are retired; 16 per-cent are semi-retired.

• 25 percent of UHNW are still working. • 89 percent of UHNW use a financial

advisor (Vanguard 2014).• 9 percent of U.S. UHNW individuals are

in the technology industry (Wealth-X and UBS 2014).

UHNW individuals have higher levels of education than those who are not UHNW,

Ultra-high-net-worth (UHNW) inves-tors represent the top 1 percent of households by wealth, that exclusive

segment so often praised and pilloried in the press.

Not to be confused with merely high-net-worth investors, each UHNW investor has a net worth of at least $25 million. The United States is home to 177,000 such households (Federal Reserve Board 2013) and has the world’s largest concentration of this upper wealth tier (Wealth-X 2015).

As a group, UHNW investors have amassed their fortunes as entrepreneurs and busi-ness owners, senior corporate executives, and consultants. The wealth of this popula-tion is 76 percent self-made; only 13 per-cent have benefited solely from inheritances (Wealth-X and UBS 2014).

The face of the 1 percent is mostly white and non-Hispanic, and this population decreases only incrementally between gen-erations. Nearly 96 percent of the mature UHNW population and 94.5 percent of UHNW baby boomers fit this profile (see table 1) (Federal Reserve Board 2013).

The UHNW world is a man’s domain because men represent 87 percent of UHNW individuals. Women comprise 13 percent of the UHNW population, but there are more female UHNW individuals in the United States than there are UHNW individuals total in all of India.

In the United States, UHNW women have more individual net worth than UHNW men. On average, female UHNW individu-als are worth $160 million and male UHNW males are worth $132 million.

The Ultra-High-Net-Worth Investor by the GenerationsBy C a m Ma r s t o n

Table 1: UHNW Breakdown by Race

Matures Boomer Gen X Total White non-Hispanic 95.5 94.5 70.9 92.1

Black/African American 0.6 0.4 0 0.4

Hispanic 0 2.2 0 1.2

Other 3.9 2.9 29.1 6.3

Note: Other is a broad category that includes Asian. Source: Federal Reserve Board 2013 Survey of Consumer Finances

© 2016 Investment Management Consultants Association Inc. Reprinted with permission. All rights reserved.

INVESTMENTS&WEALTH MONITOR6


produced a desire for financial security and comfort, and they achieved it through dis-cipline and riding a wave of good economic times to amass wealth.

Matures lived in a more traditional era where men worked and women stayed home to raise children. Loyalty was given their employers and expected in return. A worker could expect to work at one com-pany and retire with a pension.

Conservative, patriotic, and conformist, matures understand the nobility of sacrifice for the common good. A mature UHNW investor has a desire to feel needed and val-ues simplicity.

“The older investors seem to be much more normal millionaire-next-door types,” Varma said. “Often we find these clients spend less on a monthly basis than clients that have a much lower net worth. Many of the older ultra-high-net-worth clients live in the same house they’ve lived in for 30 or 40 years. A client recently told me that his wife, who almost never goes clothes shop-ping, went to a Goodwill store to buy clothes and was thrilled with the deals she found.”

Due to the age of this generation, the need to build relationships with their heirs is paramount. By involving family members, you have a chance to acquire the younger generation as current or future clients and keep the money where it is. Often heirs leave their inheritances in place for about a year and then take the money to the first advisor who offers help (Vanguard 2014).

These older investors have a fear of running out of money despite having fewer years to spend it. They fear losing it to market risks or having to spend it all on long-term care or healthcare costs.

personal potential as a key to happiness (Diener et al. 1985).

U.S. UHNW individuals are the world’s most generous and most frequent givers. The typical UHNW philanthropist donates $25 million in a lifetime (Wealth-X and Arton Capital 2014).

UHNW women are only a fraction of that population but around the world female philanthropists donate 26 percent more than their male counterparts (Wealth-X and UBS 2014).

UHNW by GenerationUHNW investors represent a fraction of the overall population and when broken down by generation, the numbers are minuscule (see table 2). The percentage of UHNW millennials is a tiny fraction of the whole despite the presence of high-profile members such as Mark Zuckerberg,

In spite of their wealth, UHNW individuals of all generations fear they will run out of money. According to a 2015 report by SEI and Scorpio Partnership, U.S. UHNW indi-viduals expect, on average, that their port-folio investments will grow 15.8 percent in the coming year yet 59 percent say their biggest anxiety is running out of money or being unable to maintain their current life-styles (SEI and Scorpio Partnership 2015).

Matures: Traditional and Thrifty Although their numbers are dwindling, the mature generation still represents a sub-stantial percentage of UHNW investors.

This generation’s individuals were born before 1946 and grew up during the Great Depression and World War II. Their “waste not, want not” attitudes are a direct result of their experiences during these times. The financial instability of their early years

build trust and credibility with a client. An advisor who claims to have all the answers can jeopardize that relationship.

“A 70-year-old client has a wealth of experi-ence, both good and bad,” Varma said. “They know that no one knows everything and they like knowing that you have a team of qualified professionals to rely on for cor-rect and up-to-date information. Some-times admitting you don’t know the answers, but will confer with another pro-fessional to get the best solution for the cli-ent, builds trust and credibility. Younger clients, on the other hand, often expect the advisor to have all the answers all the time.”

Being atop the wealth ladder, the UHNW investor is less risk-averse than those in lower income tiers. Among UHNW inves-tors, investor independence is significant. On the whole, UHNW investors control 40 percent of their assets on their own, allow advisors to handle 22 percent, and consult with an advisor but make decisions themselves on the remaining 38 percent (Vanguard 2014).

An advisor can expand their share of the pie by getting a clear picture of a UHNW investor’s entire portfolio because assets may be hidden or unavailable now but available in the future. A portfolio review can ensure proper asset allocation and reveal opportunities to add further value to investment decisions.

UHNW individuals have large social net-works that on average include seven other UHNW individuals and usually one bil-lionaire (Wealth-X and UBS 2014). Like most people, UHNW individuals have social networks that extend to online com-munities. Nearly 25 percent of the UHNW population accesses social media at least once per day, with 38 percent signing in to LinkedIn and 25 percent checking out YouTube (Vanguard 2014).

Does wealth buy happiness? The ultra-wealthy are more likely than everyone else to say happiness depends on winning the appreciation and respect of others. They’re also more likely to cite the realization of

Table 2: UHNW Households

Matures Boomer GenX TotalNumber of households within a generation classified as UHNW

59,291 96,468 21,061 176,821*

* Number of households represented.

Source: Federal Reserve Board 2013 Survey of Consumer Finances




and prepared to make things work on their own, despite the slacker label given to them in their youth. The underlying persona of the Gen Xer is not a lack of motivation but a lack of trust.

The optimism demonstrated by baby boomers in the 1960s gave way to the scan-dal, inflation, world crises, and recession in the 70s and 80s. As a result, Gen Xers culti-vated a deep sense of skepticism, cynicism, and pessimism. The advent of the personal computer and the Internet during their for-mative years made Gen X the first tech-savvy generation. Technology also fed their need for self-reliance and self-education.

This fierce self-reliance and technological savvy has resulted in an entrepreneurial generation. Although they account for fewer UHNW households than matures or boomers, Gen Xers have the most total assets—$42.7 million (see table 3). That’s because 81 percent of this population is either self-employed or in a business part-nership, so their assets may reflect the paper value of businesses (see table 4) (Federal Reserve Board 2013).

In fact, our research at Generational Insights (https://generationalinsights.com) has found that of the Fortune 500’s top U.S.-

like those of their children. Like their par-ents, boomers tend to have strong existing relationships with their financial advisors. They are relatively comfortable with the advisor-led model, unlike their Gen X and Gen Y heirs (Accenture 2015).

Nearly 50 percent of ultra-high-net-worth investors are extremely or very likely to retain their parents’ advisors. Therefore, it’s important that advisors adjust to the next generation’s attitudes (Leonhart 2014).

The most generous of the generations worldwide, baby boomers represent more than 53 percent of the UHNW philanthro-pist population (Wealth-X and Arton Capital 2014).

Gen Xers: Self-Reliant, Tech-Savvy Generation X was born between 1965 and 1979 and numbers roughly 61 million peo-ple in the United States. Among the UHNW population, Gen Xers represent approxi-mately 21,061 households (Federal Reserve Board 2013).

Growing up with less economic and family security than the boomers, many Gen Xers were raised in households where parents both worked or were divorced. They were the original latchkey kids—self-sufficient

Baby Boomers: Two Generations in One At 76-million strong, boomers comprise an influential generation of people born between 1946 and 1964. Many consider them two generations in one. Most people think of boomers as the generation with the rebellious and influential youth culture of the 1960s, and that label would apply to the leading boomers, those born between 1948 and 1955. The larger contingent, however, is the trailing boomers, those born between 1956 and 1964.

The two have slightly different mindsets. Older boomers tend to be more idealistic and younger boomers more pragmatic. Younger boomers tend to be more skepti-cal, less confident with, and less loyal to their financial advisors. This means advi-sors need to give younger boomers more attention and determine how their needs are different.

Both older and younger boomers value personal freedom and self-expression over authority. They have little respect for those that speak at them; instead, boomers respect those who speak with them.

Due to the cultural turmoil of the 60s and 70s, older boomers have strong social awareness. They respect racial and cultural diversity, believe in safeguarding the envi-ronment, insist upon equality between the sexes, and see individual liberty as central to the American experience (Fidelity and Guaranty Life 2013).

Mostly, boomers refuse to consider them-selves old. They are the group that insists upon defying and redefining old age. They want to be treated as vibrant adults with optimistic futures.

That future includes making sure they take care of their families. The great transfer from the mature generation to the boomers is still taking place, but an even larger wealth transfer from the boomers to their heirs has started and will continue over the next 30 to 40 years.

Boomers’ attitudes toward advisors are more like those of their parents and less

Table 3: Total UHNW Household Assets by Generation (median, in $ millions)

Matures Boomer Gen X Total*

Total value of assets 33.4 36.7 42.7 36.7

Total value of financial assets 8.8 19.2 3.1 15.7

Total value of nonfinancial assets 24.8 20.7 39.2 24.3

Total value of directly held stocks 0.6 2.2 0 0.6

Total value of business(es) in which they have active or non-active interest

8 9 27.3 10

* Total is all UHNW people, regardless of generation.


Table 4: UHNW Percent Entrepreneurs by Generation

Matures Boomer Gen X Total*

Percent of UHNW individuals who are currently self-employed or in a business partnership

58.8 62.5 81.5 63,5

* Total is all UHNW generations.





clients who own fewer assets will find little success. With affluence comes options, and the UHNW investor can pick and choose with which advisor—or team of advisors—to place their money. Advisors also need to remember how well-networked the UHNW investor is. This creates opportunity for the advisor who develops deep relationships with clients and who may be referred to an investor’s peers.

Cam Marston is president and owner of Generational Insights, where he focuses on generational change and its impact on the marketplace. He is author of The Gen-Savvy Financial Advisor. He earned a BA in commu-nication from Tulane University. Contact him at [email protected].

ReferencesAccenture Consulting. 2015. The “Greater” Wealth

Transfer, Capitalizing on the Intergenerational Shift in Wealth. https://www.accenture.com/us-en/insight- capitalizing-intergenerational-shift-wealth-capital- markets-summary.aspx.

Diener, Ed, Jeff Horwitz, and Robert A. Emmons.1985. Happiness of the Very Wealthy. Social Indicators Research. http://psy2.ucsd.edu/~nchristenfeld/Happiness_Readings_files/Class%206%20-%20Diener%201985.pdf.

Federal Reserve Board. 2013. Survey of Consumer Finances. http://www.federalreserve.gov/econresdata/scf/scfindex.htm.

Fidelity and Guaranty Life. 2013. Beyond Baby Boomers. http://www.tarkentonfinancial.com/NEW_PDF/MarrionWhitePaper.pdf.

Leonhart, Megan. 2014. Half of HNW Investors Keep Parent’s Advisors. http://wealthmanagement.com/client-relations/half-hnw-nextgen-investors-keep- parents-advisors.

SEI and Scorpio Partnership. 2015. Algorithms of Wealth: Wealthiest Americans May Be Their Own Worst Enemies. http://www.thinkadvisor.com/2015/08/26/wealthiest-americans-may-be-their-own-worst- enemie?page_all=1.

Vanguard. 2014. Today’s Affluent investors: Insights and Opportunities. https://advisors.vanguard.com/iwe/pdf/FASSRSB2.pdf?cbdForceDomain=false.

Wealth-X. 2015. American Ultra Wealth Ranking 2014–2015. http://www.wealthx.com/wp-content/uploads/2015/ 03/American-Ultra-Wealth-Ranking-2014-2015.pdf.

Wealth-X and Arton Capital. 2014. Philanthropy Report 2014. http://www.wealthx.com/philanthropy-report/.

Wealth-X and UBS. 2014. World Ultra Wealth Report 2014. http://www.worldultrawealthreport.com/home.php.

set to receive the bulk of the boomer wealth transfer. This is clearly a population on the rise.

Ease with technology, a sense of optimism, and a sense of entitlement are all hallmarks for this generation. They grew up in a time of broad economic and technological expansion but have been chastened by the Great Recession. They entered the real world at a time when jobs were hard to find.

Millennials also have a sense of social and environmental responsibility. They are attuned to peers and trendsetters and make avid use of social media. This connected-ness means that they tend to operate with a herd mentality, following the advice and actions of their peers, with much less per-sonal due diligence than Gen X. As a result, finding success with a small but influential group of millennial clients will have a rip-ple effect with their peers and throughout their circle of influence.

By involving this generation in their par-ents’ financial affairs early, a financial advi-sor has a chance to acquire this coveted demographic as current or future clients.

ConclusionThe transfer of wealth from the boomers to the millennials has begun. Advisors whose UHNW clients are primarily boomers will need to adjust to the communication and social styles of the millennials if they want to retain the boomer’s children as clients. And, as our research reveals, advisors are wise to offer to help the millennials with their assets once they’ve received them.

Perhaps the most surprising thing about each of the generations' UHNW investors is how typical they are of their generational profiles. Overall, ultra-high-net-worth investors differ from their generational peers in only one significant way and it is the most obvious one—they have a much greater net worth than the others in their generation. Wealth has not changed the basic generational attitudes that were formed in their youth. However, the advi-sor who treats them just like their other

based companies classified as “unicorns” (start-up companies that have soared to a $1-billion valuation or higher based on fundraising), 58 percent are led by Gen Xers.

UHNW Gen Xers like to spend money, too. They are the most likely of all age groups to expect the greatest increases in spending in the coming year (SEI and Scorpio Partnership 2015).

“This generation is often much bigger spenders,” Varma said. “They buy bigger, more expensive houses and cars and upgrade them more often.”

Still, the younger affluent tend to be more socially responsible and often seek out less-traditional ways to use their wealth to help others (Vanguard 2014).

Gen X has different attitudes toward invest-ing than their boomer or mature parents. They expect transparency and control and readily share information with peers through a variety of social media forums. They also are not tied to traditional sources of investment advice or service (Accenture 2015).

They are less fearful of losing money than their older counterparts, but the way they earned it can affect their comfort level.

“Someone who is in their 30s who inherited wealth is more afraid of losing it than someone in their 70s who built it,” Varma said. “This is because someone who built their wealth knows how to make it again.”

Gen Y/Millennials: Entitled and Coveted The millennial generation was born between 1980 and 2000. They claim some high-profile members, but their presence among the UHNW is tiny due to their youth. But give them time.

Millennials, also known as Generation Y, have been called “echo boomers” because they are primarily the offspring of baby boomers. At 85-million strong, they out-number their parents’ generation and are



FEATURE | aN iNTervieW WiTh JeaN l. P. brUNel aNd CharloTTe b. beyer

PERSPECTIVES ON SERVING THE ULTRA-HIGH-NET-WORTH SPACE

An Interview with Jean L. P. Brunel and Charlotte B. BeyerBy S c ot t We l c h , C I M A ®

A s the Investments & Wealth Monitor Editorial Board brainstormed about building an ultra-high-net-worth

(UHNW) issue, we thought it would be inter-esting to get the perspectives of someone who is an advisor to UHNW families and some-one who represents UHNW consumers of wealth management services and solutions.

We quickly identified Jean L. P. Brunel, CFA®, to rep resent the UHNW advisor and Charlotte B. Beyer to represent the UHNW family, because each is a true industry thought leader.

Brunel and his firm, Brunel Associates, offer wealth education and analysis. There he capitalizes on more than 35 years of experience that has focused on tax-aware investing, goals-based wealth man-agement, and the role of alternative assets in balanced portfolios. Brunel was chief investment officer (CIO) of JP Morgan’s global private bank, CIO of Private Asset Management at US Bancorp and, most recently, CIO of GenSpring Family Offices. He has been the editor of the Journal of Wealth Management since its founding in 1998, and is the author of the books Integrated Wealth Management: The New Direction for Portfolio Managers and Goals-Based Wealth Management: An Integrated and Practical Approach to Changing the Structure of Wealth Advisory Practices, as well as many peer-reviewed articles. In 2015, he received the inaugural IMCA J. Richard Joyner Wealth Management Impact Award.

Twenty-five years ago, Beyer founded the Institute for Private Investors (IPI), where she has used her Wall Street experience to help improve the relationships between wealthy investors and their financial advisors. She served as chief executive officer (CEO) for 21 years until her retirement in 2012. She also collaborated with The Wharton School in 1999 to create the first private wealth man-agement curriculum for UHNW families. Her book Wealth Management Unwrapped is modeled after her lectures inside that curriculum and includes the same lessons Beyer shares with her students, more than 800 investors with substantial assets from around the globe. Now, she devotes time to the Principle Quest

Foundation, which she founded in 2012 to sup-port innovative education and mentoring for girls and women (www.principlequest.org).

I asked Beyer and Brunel 10 questions about the UHNW space, and here is what they had to say.

Welch: F. Scott Fitzgerald famously wrote: “Let me tell you about the very rich. They are different from you and me.” Is that true or just a cliché? If you believe it is true, tell me how and what that translates into from the perspective of the UHNW in terms of what they expect from their advisor(s).

Beyer: I would agree with Ernest Hemingway, whose wry reaction to Fitzgerald was, “Yes, they have more money.” I would add, however, that our industry has, for decades now, trained the UHNW to feel entitled, to expect too much.

Often professionals are too timid in working with the very wealthy. They are too deferential, treating the client (or prospect) not as a partner but rather as the boss. Clients and advisors who enjoy the most successful relationships acknowledge the need for balance.

One investor said it well: “[There is a] conflict between a family’s desire to fully customize services to its specific family unit versus a for-profit entity’s desire to seek homogeneity in the delivery of ser-vices to maximize profitability through scalability. It’s very hard to find a good balance.”

Brunel: I do not believe it is correct to generalize most of the time, and this is particularly true in the realm of the very rich. The fact is that we are talking of anywhere between a few thousand to a lot fewer than a million people worldwide if you extend the definition of UHNW to $10 million or more in assets. The sample is way too small for any generalization to be meaningful.

Realistically, the most significant, and material, difference between our clients and the rest of the world is that they frequently have

Jean L. P. Brunel Charlotte B. Beyer




Beyer: The UHNW require, and expect, a more holistic approach. Before long, even those with a small nest egg will, too. An IPI member expressed it this way: “This is your livelihood, but it’s my life.” I’ve used the metaphor of playing chess on four boards at once; a move on one board impacts every other board (see figure 2).

Brunel: Philosophically, the most important potential difference between the ultra-affluent and the merely wealthy is that the

Figure 1: Wealth Management Bagua

Figure 2: Playing Chess on Four Boards at Once

Courtesy of Charlotte Beyer

© 1999–2015 All rights reserved.

Courtesy of Charlotte Beyer

© 2015 All rights reserved.

more options. Many individuals must live from paycheck to pay-check, and often the selection of their career is dictated more by what they can do and find than by what they love.

By contrast, the ultra-affluent typically have the option of focusing on what they want to do, be it income-generating or not. Wealth is an enabler, but it does not do anything for anyone unless that anyone uses it wisely and works toward the achievement he or she seeks.

Welch: We often think of “wealth management” from an investment consultant’s perspective—that is, our primary value proposition focuses on the client’s investment portfolio. Is that an appropriate frame of reference when working with the UHNW? If not, what are the solutions and services that UHNW value the most?

Brunel: Most ultra-affluent families have their own focus and it would be an error again to generalize. As a rule one can argue that individuals in that world have three fundamental “wealth stake-holders”: personal, dynastic, and philanthropic.

Further, their goals run the full gamut of needs, wants, wishes, and dreams, when dealing with what they seek to achieve, and night-mares, fears, worries, and concerns, when dealing with what they seek to avoid. Thus, when dealing with service providers, related to the management of their wealth, their principal focus must be driven by whether they are more interested in personal, dynastic, or philanthropic issues and whether they have more wealth than needed to achieve all goals. When they do not, they must either take financial risks to grow the wealth to achieve them or scale back either the goals themselves, the degree of urgency with which they want to achieve them, or the time frame over which they want to reach them.

This will lead certain families to focus on asset management, in a tax-aware or tax-oblivious manner, on generational planning and wealth transfers, on family education, or on many other dimen-sions of the challenge.

Beyer: I liken this bias to the chief executive officer (CEO) of a company firing all employees except those in the IT department because the CEO is so enamored of technology and loves hearing about IT innovations.

It is self-destructive to ignore the company’s other departments. As I suggest in Wealth Management Unwrapped, the CEO of My Wealth, Inc. knows that there are seven other departments: family governance and education, personal/business administration and budgeting, risk management/insurance, tax planning and administration, wealth transfer, trust administration, and philan-thropy (see figure 1).

Welch: Stipulating that investment advice has at least some value to the UHNW, what (if any) are the primary differences between the needs and objectives of the UHNW versus the merely wealthy?

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WEALTHMANAGEMENT




families had experience of choppy markets, either by having per-sonally lived through them or by having been told about it.

Beyer: Deep psychological scars remain for consumers of virtually all financial services. The loss of trust seems almost permanent, and yet, UHNW had more coping options.

Many moved into direct investing, both direct lending and private equity, feeling they had more control, which felt better than relying on Wall Street. Today’s headlines still report on multi-million- dollar fines for various misdeeds committed years ago—an almost daily reminder of the crisis and its collateral damage.

Welch: Almost by definition, when dealing with the UHNW, you are dealing with multi-generational or dynastic wealth. What does that mean with respect to the solutions they expect from their advisors?

Beyer: Increasingly, I hear families following the lead of Warren Buffett, rejecting the whole idea of dynastic wealth. One partici-pant at the Wharton Private Wealth Management program pro-claimed he expected every generation after him to be G-1.

Another family in attendance told of how the proceeds from the sale of the business created by their father and uncle were inside a foundation. They were far more excited that their mandate was to spend it down in their lifetime.

Too much wealth in early adulthood is not universally viewed as a healthy or ideal way to ensure a family’s success. Advisors need to first grasp how the family defines legacy—because it does differ dramatically from one family to another.

Brunel: The answer to that question is found by combining the answers to questions 2 and 3. This is one of the areas where it is most important for the advisor to have the ability to operate across the well-known silos in the industry (whether they involve invest-ment, tax planning, gifts and wealth transfers, and ultimately future generation education).

Families use quite significantly different approaches when dealing with their various issues (focus on taxes, focus on philanthropy,

classical asset/liability conceptual framework is increasingly hard to use in the ultra-affluent world.

A merely wealthy individual may truly have one practical goal that dominates the landscape: spending a comfortable retirement and leaving whatever is left over to future generations, charities, or both. In that context, reaching some minimum required target “retirement capital” can be analyzed as a classical bullet liability, which can then serve as the basis to formulate the applicable strate-gic asset allocation.

The ultra-affluent can afford a considerably wider range of goals, as discussed in the earlier question, with each of these goals having a different time horizon and urgency level. The combination of the two helps determine what reasonable “funding cost” should be used for each of the goals to determine an appropriate level of assets needed to achieve the goal, over the desired time horizon and with the desired level of urgency (required probability of success), and the funding cost will be associated with a resulting strategic asset alloca-tion appropriate to that goal.

Thus, the risk profile of the individual will not be formulated from the top down, but by aggregating and appropriately weighting the risk profile associated with each goal.

Welch: Many investors’ risk aversion and/or investment philoso-phy changed dramatically after the events of 2008. Did that happen in the UHNW space as well and, if yes, how so?

Brunel: All investors are in some way subject to the vagaries described by behavioral finance. Thus, it would be ridiculous to argue that this or that segment of the universe did not.

Yet, one can observe that those individuals who had spent the time to develop reasonable goals-based asset allocations did not suffer as much as those who did not. Several reasons explain this.

The most important is that a definition of success is created for each goal, such that, for short-term goals that had to be achieved with a high degree of predictability, for instance, the crisis not only did not hurt, but it helped: lower-volatility assets (i.e., cash and short-duration investment-grade bonds) actually did not lose value and, in many cases, appreciated in value during the crisis. Thus, the expense- defeasing goal was achieved and more capital was leftover than antici-pated; the crisis was therefore not an unmitigated catastrophe.

Second, in the process of determining the appropriate funding cost, individuals had discussed potential return variability in practical rather than theoretical terms. Thus, they were aware that markets could experience serious downdrafts and were not as surprised as others when it happened.

A final reason, which does not have much to do with the goals-based process, is that many multi-generational ultra-affluent

“Too much wealth in early adulthood is not universally

viewed as a healthy or ideal way to ensure a family’s success.

Advisors need to first grasp how the family defines legacy … ”




Welch: A couple of questions regarding “selling into” the UHNW space. Question 1: The UHNW very often highly value their privacy and are very reluctant to engage with people they believe are trying to sell them something. Given that understandable reti-cence, how do you recommend advisors approach the UHNW to establish a relationship?

Beyer: The most successful interactions I’ve seen are those where the professional is not attached to the outcome (read sales target). Instead, the advisor shows genuine interest in discovering more about the family’s situation and decision-making process.

When an advisor’s questions intrigue a family instead of putting them on the witness stand, the result will be a sale, but not neces-sarily the product du jour. One advisor described it this way, “I know they will buy from me someday (just not necessarily today) because now they trust me and know I will come back when I have something truly relevant.”

Brunel: I do not believe there is much alternative to any conversa-tion starting as a result of an introduction from someone who is trusted by the potential client.

The only other solution may be through what I might call the establishment of a position of intellectual leadership, such that the potential client seeks the advisor.

In either case, the point is that there is no direct, cold-call-type approach to the potential client.

Welch: Question 2: When working with the UHNW, advisors are often interacting with the family representatives of single- or multi-family offices. Any recommendations on how to initiate and maintain those relationships?

Brunel: The answer differs considerably whether one is thinking of a single- or a multi-family family office. Whenever dealing with a single-family office, whether the contact person is a family member or a hired professional, I think we are back in the prior situation of having to rely on some form of introduction. The guard that people within a single-family family office must maintain makes it virtu-ally impossible to get the kind of necessary conversation going. Sound-bite conversations, in which one would typically engage when having an initial, non-introduced contact, are totally mis-matched with the detailed understanding that one must be able to demonstrate.

More to the point, the initial sessions must be centered on the advisor listening to the client; people who are very good at selling themselves are rarely equally good at being a quiet and attentive listener.

Multi-family family offices are a different kettle of fish. There, any sale is really more of an “engineer to engineer” situation, because

maximize early transfers, minimize early transfers, risk-seeking versus risk-averse, and many others). Thus, the advisor needs to be aware of all the various interactions that may occur (investments, income taxes, estate and gift issues, philanthropy, insurance, risk management, and others), though he or she is not required to be a specialist in all areas. Understanding these interactions and the way in which whatever the advisor’s area of specialty is will allow him or her to contribute to the client’s effective finding and imple-menting of the most appropriate solution.

Note that a goals-based wealth management framework is uniquely suited to dealing with the issue, because it is designed to operate across as many “accounts” as there are goals and/or structures; it should be able to combine taxable and tax-exempt components, and to use both cash-flow as well as “label”-driven processes, to recognize the difference between goals that have specific cash-flow streams attached to them (even if a stream is solely comprised of some future bullet payment) and those which are of a more “generic” nature such as “protect my capital” (in real or nominal terms) or “grow my capital.”

Welch: What is the most appropriate way to charge for services and solutions rendered—in your experience what approach(es) worked well and what approach(es) did not?

Brunel: This is a difficult question because there may be more than one way to skin that cat effectively. Ostensibly, time-based fees have the benefit of being ultimately tailored to the needs of the clients, with these needs assessed in function of the skills and time needed to address them. Yet, too narrowly defined time fees (such as by the hour) can leave a bad taste in the client’s mouth with the feeling that the meter is on each time he or she talks to the advisor.

Asset-based fees can make sense when the advisor’s duty is chiefly focused on the management of the assets; yet, even there, there are issues to the extent that the challenge is rarely a function of raw asset numbers. In the end, I suspect that the answer rests not so much on the method but on the way the fee is assessed and explained.

Indeed, a solid conversation linking the work with the fee, however it is eventually computed, can go a long way toward making sure that there is total perceived alignment between the interests of the various parties. Most of the families do want advisors to make enough to be able to stay in business and prosper; what they typi-cally do not want is to feel they are fleeced or that there is a conflict of interest between them and their managers.

Beyer: Sophisticated UHNW families prefer a project, retainer, or complexity-fee arrangement over a straight assets-under-manage-ment model. This can be renegotiated every few years, and while not as predictable for the firm’s budgeting, this approach is more realistic if a firm expects to match resources to clients profitably.




marize the issues you believe are most important when working with the UHNW, or to discuss any important issues that we have not yet talked about.

Brunel: The questionnaire was quite complete. In my view, the fundamental issue remains for the advisor to be totally committed to be an interpreter whose mission is to help the client achieve his or her goals. Being an interpreter means understanding the issues in the client’s own language and making sure that any communica-tion that requires technicalities is handled in plain language rather than jargon.

Being focused on helping the client achieve his or her needs revolves around the ability to ferret out what those needs are— digging deeper into dreams when necessary; to identify the sources of technical knowledge that will be needed to address the issues at hand; to design a solution that takes all issues into consideration; to build a delivery team—which, in single-proprietor firms, involves bringing outside resources to bear as needed—that can demonstrate that all the skills are in place; to seek all possible sources of feedback to ensure that no situation develops where the client is unhappy without the advisor knowing; and to remain suf-ficiently humble to seek to help the individual rather than to demonstrate how smart one is.

Beyer: Investors at all wealth levels need to step into the shoes of CEO of My Wealth, Inc. This does not mean reading volumes of technical investment textbooks, but rather being a responsible CEO. A CEO accepts that no one is a better expert on the needs of that company, My Wealth, Inc. A CEO demands meaningful reports and partners with vendors.

Partners treat each other with respect and are not trapped in a boss/subordinate dynamic; partners are candid with one another; and most importantly, partners each gain a tangible reward from working together.

Welch: Closing Note: My thanks to both Charlotte and Jean for sharing their time, experience, and expertise with the readers of Investments & Wealth Monitor. I have been privileged to know them both for more than 15 years, and I continue to learn from them every day.

Contact Brunel at [email protected].

Contact Beyer at [email protected].

Scott Welch, CIMA®, is chief investment officer with Dynasty Financial Partners. He earned the Investment Strategist and Alternative Investments certificates from IMCA. He earned a BS in mathematics from the University of California, Irvine, and an MBA in finance from the University of Massachusetts Amherst. Contact him at [email protected].

most successful MFOs tend to have different skill sets in the man-agement and advisory elements of their firms.

Beyer: The most common mistake I see is the advisor undermines the family office executive by trying to bypass the family office. Just as bad is viewing the executive as a low-level gatekeeper. Often the family office executive is the most trusted advisor. Better to ask about how decisions are made, recognizing that each family office is unique.

Welch: Do you see any differences between working with male ver-sus female UHNW clients? If yes, please explain.

Beyer: Ignore the women in the room—daughters, wives, sisters—at your peril. I’ve heard countless stories from women about how male advisors don’t look them in the eyes, speak only to the men at the table. Generalizing about the differences is silly; however, most of us accept the treatise of the book Men are from Mars, Women are from Venus.

In my experience men can be too quick to bestow “guru” status to a firm or individual. Many advisors claim they follow the endowment model made famous by David Swenson at Yale. But recall David is the first person to warn investors, “You can’t do what I do.”

Confident women often will ask more questions because they want to learn enough to partner with you and not feel either stupid or uninformed. It’s funny that many readers of my book assume it is intended for women and are quite surprised when I tell them most of the anecdotes in Wealth Management Unwrapped are told by male investors.

Brunel: My experience is too limited to comment with any degree of conviction. I have never felt that sex was a primary determinant. Rather, it has been important to shy away from stereotypes and respect the fact that certain individuals will be more sensitive or intuitive than others. Sex does not always provide a good predictor of this.

The only other pitfall I have seen and that must be avoided is to fail to know or recognize who owns the money. Thus, I was once in an environment where the wealth creator was the wife of an otherwise highly successful industry CEO; the advisor I was accompanying almost lost the opportunity when he kept talking to the man, rather than balancing the conversation between the two spouses.

The wife’s face lit up when I redirected the conversation with an open acknowledgement that it was her money after all—this was all the more important because, in the case in point, she had created—rather than inherited (another stereotype)—the wealth in a profession where creativity and originality are more important than brashness.

Welch: Thank you for your time and for your enlightening responses and perspectives. Please take this opportunity to sum-



FEATURE | serviNg The UlTra-high-NeT-WorTh markeT

special treatment; but innovative touches, both small and large, can surprise them. An UHNW advisory team I know hired a staff member from the hospitality industry whose sole responsibility was to spend each day thinking of ways to surprise clients beyond their expectations. Some of these surprises involved helping clients save time by doing a task for them—for example, lining up sev-eral venues for a 60th birthday party, so the client had only to choose one from the group, and then making all the arrange-ments for the party.

Connections and Client PassionsConnections can form a distinct and invaluable way to serve UHNW clients and to differentiate a practice. UHNW individ-uals are themselves well-connected. According to the Wealth-X/UBS World Ultra Wealth Report 2014, the immediate social complex of UHNW individuals includes seven other UHNW persons, at least one of whom is a billionaire. These complexes often share similar beliefs, inter-ests, and hobbies.1 At the same time, by vir-tue of their wealth, UHNW persons are exposed to high achievers in a variety of different occupations and fields, especially in areas with which they may be particu-larly au courant, such as art or philan-thropy. Being able to offer UHNW clients connections with these types of persons, whether through one’s firm or one’s own network, provides a unique value. Indeed, when directed to the adult, millennial chil-dren of UHNW clients, such connections can be one of the best ways to develop strong relationships with family members who are not primary clients. That is, expos-ing these children to unique and successful

enjoyable. They have a strong tendency to associate with people like themselves, and they expect those with whom they work to be high achievers.

In the realm of exclusive treatment, which encompasses service, client experience, and connections, that means having a leading- edge technology platform that includes client relationship management, account aggregation reporting, all aspects of invest-ing (access to all products and services), risk management, and advanced planning. It means offering a level of responsiveness that exceeds clients’ expectations, a fact that, in concert with the complexities of business and family lives, demands a major investment of time—and thus necessitates a very limited clientele. It means hiring and maintaining an advisory team that reflects and practices the “serving heart”—an atti-tude that always considers the client’s needs as paramount. Isadore Sharp, founder of the Four Seasons Hotels and Resorts, epitomized the “serving heart.” Sharp built the reputation of his business by hiring for attitude, and he is known for saying, “Competence we can teach; attitude is ingrained,” (see e.g., Frank 2007; Johnson 2008; Murphy 2010).

Some advisory teams, realizing the impor-tance of exclusive treatment, actually hire team members whose primary responsibility is to think of creative experiences for clients— opportunities to make them feel special and to make their family members feel special as well, in ways they hadn’t considered them-selves. This is no simple endeavor when dealing with people who can experience just about anything they want. They expect

Financial advisors are attracted to the ultra-high-net-worth (UHNW) market like iron filings to a mag-

net. The allure of potentially significant revenue streams indeed may blind them to what it will take to deal successfully in and with this market. That judgment results from decades of experience working with UHNW clients and advisors seeking to work with them as well as helping to develop an industry-leading educational program on areas of critical importance to UHNW clients. So it is that the first step in building and maintaining a successful UHNW practice entails formulating a real-istic understanding of the costs imposed by running such a practice. Those costs involve providing what UHNW individuals value most: exclusive treatment, a deep and singular level of trust, and unique insights. The cost of entry includes state-of-the-art technology; adequate support personnel; access to experts and centers of influence; and, due to the inordinate amount of time required to work with UHNW clients, it also includes serving a significantly limited number of total clients. But the total costs do not stop there.

Client Expectations and Exclusive TreatmentBecause the overwhelming majority of UHNW persons are self-made as opposed to having inherited wealth, these clients display the characteristics of successful high achievers. That is, they are smart, opti-mistic, motivated, focused, persistent, pas-sionate, and very demanding. They view success as due to personal responsibility, challenging tasks as opportunities, and engaging in those tasks as valuable and

A MIXED BLESSING

Serving the Ultra-High-Net-Worth MarketBy Ro b e r t B . S e a b e rg , Ph D




exchange-traded funds (ETFs), hedge funds, and private equity—not just what they are designed to do, but the real innards of the products and how they actually work under widely varying conditions.4 It might involve special acuity about correlation—for example, how a number of sector ETFs may be closely correlated to the S&P 500, thus unwittingly undermining attempts at diver-sification. Insights might come from being able to apply a deep understanding of human behavior and how we make deci-sions about constructing and maintaining portfolios and how we should react to cer-tain market conditions. They might, for example, help us understand better how Isaac Newton could calculate the “madness of men,” commenting on why he had invested in the South Sea bubble. Or they might involve highly specialized knowledge of incorporating corporate benefits in finan-cial planning or business-succession plan-ning. To help achieve such insights, the best advisory teams become in effect learning syndicates, dedicating time individually and collectively to reading widely and discussing all manner of topics, from research in neu-roscience to imagining the future; from demography to ethics; from the nature of recessions to strategic philanthropy.

Advisors who become what Charlie Munger, vice chairman of Berkshire Hathaway, calls “learning machines” are neither generalists nor experts but in effect a combination of both. They are what some call “T-shaped” learners—so-named because the horizontal bar stands for breadth of knowledge and interests and the vertical bar stands for in-depth under-standing of one or several of those areas. An interdisciplinary approach encompasses “how different ideas, sectors, people, and markets connect,” and offers the best chance at both innovating and imagining the future.5 Perhaps the best way to approach T-shaped learning is to gain an accredited credential based in areas important to UHNW clients such as IMCA’s Certified Private Wealth Advisor® (CPWA®) certification, then combine it with an investment expertise, e.g., the CFA® or CIMA® certification, or a specialty in tax, estate planning, or philanthropy. The

checking the knowledge levels of those advisors. They assume successful advisors have the requisite knowledge of markets and investments, geopolitics, and economic cycles. In part, they rely on the possession of certain credentials as offering prima facie evidence of that knowledge. Instead of testing their knowledge, then, they are beginning a process to determine if these advisors can be trusted to have their and their families’ best interests at heart. That is, they are examining emotional intelligence, also known as “EQ,” of potential advisors.

Emotional intelligence is considered an essential component of leadership, and it also forms a critical aspect of successful advisors (see, e.g., Ovans 2015). Listening, observing, and open-ended questioning are the foundations of empathy, and empathy is the basis of trust. The best advisors act as if they are cultural anthropologists, searching out details about their best clients. They do this through unstructured interviews and by observing them at work, at home, and at play. They understand that successful ques-tioning puts the person questioned in a position of greater power and engenders humility on the part of the advisor, which is essential in the growth of empathy and then trust. This is not a simple endeavor for the advisor, because successful advisors hold and project high-power roles, and recent research has shown those in high-power roles tend to exhibit lower levels of empathy. Empathy, therefore, is and must be a delib-erate choice, and humility and vulnerability help make it so. Research has shown that when people realize that empathy is not a personality trait but rather a skill, they engage in a greater effort to show empathy for people unlike themselves.3

Unique InsightsFinally, UHNW clients look for unique insights from their advisors, insights that go beyond the expected range of knowledge and cover all sorts of topics including mar-kets, investments, family dynamics, tax planning, risk management, philanthropy, and more. Insights might come from sophisticated understanding of major trends shaping our world or from in-depth under-standing of particular investments such as

entrepreneurs or experts in impact philan-thropy provides suitable role models and may substantively enhance the develop-ment of the family’s human capital.

For connections to work best, an advisor must really know what interests most of his UHNW clients. In fact, many successful UHNW advisory teams will tell you their clientele share similar primary interests, which leads those teams to cultivate special relationships with experts in those areas. Those for whom art is a major client inter-est, for example, will cultivate relationships with acclaimed art advisors. If their clients share an interest in other collectibles, they will establish bonds with authorities in those areas, whether they deal with musical instruments, pens, maps, coins, or fine wines. Often prospects and clients them-selves can be excellent referral sources, pro-viding entrée to particular advisors. As in dealing with other professionals, e.g., CPAs and attorneys, advisors need to vet a profes-sional’s approach thoroughly and practice and develop a real relationship over time.

In sum, it is not enough for advisory teams to offer access to experts in areas such as risk management, personal and cyber secu-rity, or concierge medicine. The successful teams also must offer entrée to areas of cli-ents’ passions, and that entrée must be to those kinds of experts who actually under-stand the critical nuances, such as the importance of innovation in modern and contemporary art. UHNW collectors, that is, don’t simply want to own works of art by certain artists, they want to own those works that have shown the greatest genius and have had the most influence. In other words, it is not just the art itself but under-standing the peculiar value of the art that adds real stature to the collector. Art advi-sors who understand this are thus far more valuable than those who may not have as good an aesthetic sense.2

Singular TrustBeyond such exclusive treatment, UHNW clients also presume a level of singular trust between themselves and their advisors. Indeed, when prospects meet first with potential advisory teams, they are not




4. For example, a recent analysis of the iShares Emerging Markets High Yield Bond ETF demonstrates the difference between stated and real risk. The ETF has a yield of more than 8 percent, yet its three largest positions yield much less than 8 percent. The fund is able to yield more than 8 percent due to its fourth-largest position—two Venezuelan bonds, one with a yield to maturity of ~33 percent and the other yielding ~61 percent to maturity. At these extraordinary rich yields, there must be some serious risk of repayment default. Thus, the risk of this ETF most probably far exceeds what it states. See “The Fixed Income Compendium August 2015,” PCS Research Services, Horizon Kinetics.

5. Charlie Munger quoted in www.fool.com/investing/general/2013/01/15/charlie-mungers-three-rules-on-how-to-become-a-suc.aspx. See also Donofrio (2011) and Gadiesh (2009).

6. The original quote, from Albert Einstein, is this: “In the middle of difficulty lies opportunity.”

ReferencesBrown, Brené. 2012. Daring Greatly: How the Courage

to Be Vulnerable Transforms the Way We Live, Love, Parent and Lead. New York: Gotham.

Cameron, Daryl, Michael Inzlicht, and William A. Cunningham. 2015. Empathy is Actually a Choice. New York Times (July 12). http://www.nytimes.com/2015/07/12/opinion/sunday/empathy-is-actual-ly-a-choice.html.

Covey, Stephen M. R. 2008. The SPEED of Trust: The One Thing That Changes Everything. New York: Free Press.

Donofrio, Nicholas M. 2011. Innovation that Matters. In Kauffman Thoughtbook 2011, Ewing Marion Kauffman Foundation.

Frank, Robert. 2007. Richistan: A Journey Through the American Wealth Boom and the Lives of the New Rich. New York: Crown Publishers.

Gadiesh, Orit, and Daisy Wademan Dowling. 2009. Bain & Company Chairman Orit Gadiesh on the Importance of Curiosity. Harvard Business Review (September).

Inzlicht, Michael, Jeremy Hogeveen, and Sukhinder S. Obhi. 2014. Power Changes How the Brain Responds to Others. Journal of Experimental Psychology: General 143, no. 2 (April): 755–762.

Johnson, Jamie. 2008. Serving the Superwealthy. Vanity Fair (September 17). http://www.vanityfair.com/news/2008/09/the-first-time-i-heard.

Lewis-Kraus, Gideon. 2013. Yelp and the Wisdom of “The Lonely Crowd.” New Yorker (May 7). http://www.newyorker.com/tech/elements/yelp-and-the-wisdom- of-the-lonely-crowd.

Murphy, Dave. 2010. Isadore Sharp: We Hire for Attitude. Insights by Stanford Graduate School of Business (February 1). http://www.gsb.stanford.edu/insights/isadore-sharp-we-hire-attitude.

Ovans, Andrea. 2015. How Emotional Intelligence Became a Key Leadership Skill. Harvard Business Review (April 28). https://hbr.org/2015/04/how-emotional-intelli-gence-became-a-key-leadership-skill.

Schroeder, Alice. 2008. The Snowball: Warren Buffett and the Business of Life. New York: Bantam.

Stewart, James B. 2014. With Art, Investing in Genius. New York Times (November 11). http://www.nytimes.com/2014/11/29/business/with-art-investing-in-ge-nius.html?_r=1.

influence that beckons the type of UHNW investor more likely to rely on Buffett’s inner scorecard. It is a way of dealing with people and the world that bespeaks a com-forting kind of authority. Such advisors are people upon whom one can rely. In that sense, they convey their own sense of status to the UHNW persons they advise. They become, in effect, one of the connections they seek to offer. It may seem illogical, but just as humility may bespeak a kind of power, an advisor with gravitas extends it to UHNW clients, and they in turn extend their status to the advisor.

Where can such advisors be found? No one place has a monopoly on successful advi-sors to UHNW individuals. They may be found in wirehouses and registered invest-ment advisor boutiques, private banks and multi-family offices. They are a special breed, characterized by a T-shaped IQ, well-versed in the relational arts, possessed of deep dedication, a relentless commit-ment to hard work, and a serving heart. There are not many of them, and they can-not serve many clients—which signals opportunity. But, to invert one of Einstein’s profound observations, in the midst of opportunity lies difficulty.6

Robert B. Seaberg, PhD, is president of Intersect Consulting, LLC, which advises financial services firms and financial advisors as well as nonprofit boards, executives, and philanthropists. A Phi Beta Kappa graduate of Colgate University, he earned a PhD with dis-tinction from the Maxwell School of Citizenship and Public Affairs of Syracuse University. Contact him at [email protected].

Endnotes 1. Wealth-X/UBS World Ultra Wealth Report 2014, p.34,

http://www.worldultrawealthreport.com/home.php. 2. See Stewart (2014). An early Picasso apparently is

valued more than a later Picasso, because the earlier works portrayed Picasso’s invention of cubism. Andy Warhol’s 1960s works are valued more than those of the 1980s because the earlier works resulted from his reinvention of modern art using mechanical reproduc-tions and photography.

3. See Cameron et al. (2015) on the tendency of those in high-power roles to exhibit less empathy; and espe-cially Inzlicht et al. (2014). On vulnerability, see Brown (2012) and especially her 2010 TEDx Houston talk on “The Power of Vulnerability,” one of TED’s 10 most-viewed talks. Covey (2008) argues that trust is actually conditioned on our behavior—additional support for the fact that each of us controls our ability to be vulnerable, to empathize, and thus to engender trust.

advantage of using teams is that the generalist-specialist approach may be spread among team members, achieving a richer dimension of learning than any single advisor might have. Furthermore, diverse, multi-generational teams may provide an especially rich opportunity for learning, allowing team members to expe-rience additional different points of view and leading to collective wisdom, which is itself a multi-dimensional construct based on the integration of different perspectives.

Select the Right UHNW ClientsCreating a successful UHNW practice depends on one’s ability to select the right UHNW individuals to become clients. Just as the UHNW investor seeks the right advi-sory team, so too the advisory team needs to seek the best UHNW clients for the team. One criterion is the special interests of the UHNW individuals, such as philan-thropy or art. The closer these special inter-ests match the advisors’ interests, the better the potential for connections and the stron-ger a relationship is likely to be.

Advisors also need to distinguish between UHNW individuals who use inner as opposed to outer “scorecards,” as Warren Buffett has described them. It is similar to understanding who uses a gyroscope, to stay true to one’s ideals and values, versus who uses radar, to fixate on the people around them. Those using outer scorecards invariably look to external measures, such as various indexes, to rate performance, or to the professed returns of others like them. To them, success always entails beating some benchmark. It is hard to turn some-one with an outer scorecard into a contrar-ian. And, given the egos of superior achievers, it is hard for those advisees not to be drawn to those external comparisons. Advisors need to focus instead on clients with inner scorecards, who look to the advisor to help them develop a unique fam-ily wealth index to measure outcomes (see Schroeder 2008; Lewis-Kraus 2013).

GravitasCreating a successful UHNW practice also depends on having a sense of presence or gravitas. Gravitas is a depth and dignified


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