'Most wealthy people are ill-served'

Susan O’Brien is a senior vice president and senior wealth advisor at BMO Nesbitt Burns. A sought-after speaker, facilitator and planner, she works with C-suite executives, business owners and wealthy families who want more from their financial advisory relationships. O’Brien is the author of A New Way Forward for Wealth Management, which is available on Amazon. In this excerpt provided to WP, she addresses the misconception that high-net-worth clients are getting the right financial advice.

It’s a fallacy that the affluent are well-served. Granted, they may be well-served in some areas, but not when it comes to their money.  High-net-worth individuals may have their choice of fabulous hotels, luxury spas, coveted seats at sporting events, and tables at five-star restaurants, but when it comes to making long-term decisions about their money, they’re not getting the help they need. Most wealthy families do not have a financial plan in place—or if they do have one, it’s sitting on a shelf, not getting updated every few months as it should be, and often never even executed to begin with.

Why is that?

One would think that money management should be a simple matter of dotting all the i’s and crossing the t’s, but the fact is, money can be a highly sensitive, emotionally fraught subject. One reason for this is family dynamics: Is a parent, sibling, or child estranged? Does someone in the family have a mental health issue? What about an overspending or a money management problem? When such complications intersect with potentially volatile issues such as succession planning, family wealth management becomes a complex puzzle.

At the very least, tackling the tough issues takes courage and commitment on the part of both the client and the financial advisor, who needs to know how to guide the conversation. Human beings tend to operate in pursuit or avoidance mode—that is, the pursuit of pleasure and the avoidance of pain—and sometimes people decide it’s just easier not to broach the topic. Complacency feels a lot better in the short run. Unfortunately, there is a steep price to be paid for avoiding long-term planning.

Why people fail to seek the help they need

Aside from the necessity of revealing delicate personal information, there is another reason many wealthy people are reluctant to seek professional guidance. To some, confessing a lack of knowledge in this area can be embarrassing—after all, C-suite executives and heads of family dynasties are supposed to have all the answers, right?

The truth is, no matter who we are and what station we’ve risen to in life, we can’t know it all. The most successful people know when they don’t know enough to keep the machine running, and they align themselves with people who have expertise in areas they don’t.

A tailored, holistic approach

One way to tell whether an advisor is competent and has your best interests at heart is to find out whether their wealth management advice is generally prescriptive or personally tailored to their individual clients.     

If you meet with an advisor today and the first thing he or she tells you is to check out the performance of what their best portfolios look like, that’s the equivalent of seeing a doctor who reaches for the prescription pad without taking the time to give you a careful, individual diagnosis.

Where are you in relation to your goals? How do you want to live your life? How much risk can you afford to take? Do you have family conflicts that could complicate either your legacy planning or succession planning for your business? All these bread-and-butter life issues and many more need to be considered in order to paint a complete financial picture.

And what about personal desires—is there a special dream of yours that has long been subordinated to other, more “reasonable” goals? That may not have to be the case. How do you want to spend your days? What would your ideal life look like? The right financial advisor will know what questions to ask to help you achieve your goals. This individual will understand how to get to the heart of the matter in order to design the best of all possible long-term financial plans.

Skin in the game

It’s common in the financial services industry for clients to pay for the investment product, such as the mutual fund in which they are investing, or perhaps to pay a fee for portfolio management. The rest of what needs to be done throughout the year—the financial advisor working with the client to update and reevaluate their portfolio based on changes in the business and the family—is basically done for free. These advisors perform hours and hours and hours of unbilled work for continuous financial planning over many years.

In the course of more than 20 years in this business (and a lifetime observing human nature), I’ve learned that when something is given away, the advisor may not be all that invested in it. Advisors need to feed their families, pay their bills, and maintain their lifestyles, just as you do—and unless you are volunteering your time for a worthy charity, you are not giving away your expertise and services.

At the Susan O’Brien Group we came to the conclusion that we needed to charge a financial planning fee for our time and services. We also decided not to take on any clients without doing a comprehensive, integrated, “deep think” on their lives, as part of our vast plan for them. Since that time, we’ve found we are much better at advisors because we are deeply invested. And we’ve discovered that our clients are better invested as well—they are much more open and honest about their lives, and more committed to getting us all the material we need. We are better equipped to do the best job we can right out of the starting gate, and everyone is fully committed to the outcome.