About 10 years ago, I had lunch with the now-retired CEO of one of the oldest and most respected multifamily offices in the United States. Over our meal, he told me he had recently received a middle-of-the-night call from one of his firm’s clients looking for immediate, discreet assistance with a family member involved in a matter 2,500 miles away that involved law enforcement.
This was not strictly about wealth management. The client was facing an emotional issue and was in an uncertain position where he needed help from someone he could trust. The CEO said that he treasured the fact that he was the client’s first call. It was a rare opportunity for him to demonstrate commitment and reliability while taking their relationship in a new and unexpected direction. He finished the story by saying that while his firm was known for its wealth management services, he believed that it was these types of calls that establish a baseline for what ultra-high-net-worth relationships need, and he valued the chance to be of service before anyone else in the client’s inner circle.
Since wealth management emerged as a profession, it’s been oriented toward investment advisory expertise. The general idea of wealth managers is that they preserve and grow their clients’ assets using strategic investment management, and then add overlay services to reduce clients’ market risk, manage their tax obligations, protect their assets from lawsuits and losses (unrelated to the market), and prepare the assets for transfer to their heirs and beneficiaries.
As these overlay services become more specific, they require more specific expertise. Depending on your practice, you may be able to perform such duties in-house, access them through an affiliate network or partner up with independent specialists whenever necessary. The more services your clients need, the broader your offering becomes (consider our CEO’s story). But it happens only if you rise to the occasion and want to become your client’s first call.
There are numerous lessons to take from our CEO’s story, but let’s consider three:
1. If you expand the scope of what you do for clients, you can help them with critical needs and cement your role as one of their primary advisors, someone to call when they need unconditional support.
2. When you step outside the strict scope of wealth management, your client interactions will reveal more information and insights about them that help you expand your understanding and allow you to offer better, more targeted services.
3. Familial, emotional and personal matters can be the missing mortar in the bricks of a longstanding but reserved and professional relationship.
To these ends, you can extend your core wealth management offering by also advising clients on things such as their charitable planning and philanthropic activities. Such advice allows you to deepen your existing relationships and reinforce the essential nature of your role. And because there’s usually a link between a family’s philanthropic goals and the values of the individual family members, giving this advice offers a unique way to get to know clients on a more personal level and assist in the development of their legacies.
Just as important, when charitable giving is coordinated alongside core wealth management, it allows for better alignment and more strategic outcomes in several areas:
• Budgeting and cash management. When clients have a precise amount earmarked for charitable use, it helps them stay disciplined about what they want to accomplish. An easy way for you to start is by helping them identify a percentage or a flat dollar amount for specific causes or organizations they want to support each year. To avoid exceeding the budget, they might find it helpful to allot monies for unexpected fundraising appeals from friends and family or urgent needs such as disaster relief. It’s important to some clients that they can be responsive to those types of requests.
• Investment strategy. It’s not uncommon for clients to treat their tax-exempt assets, such as those in a private foundation or a charitable gift trust, as a separate portfolio. Unfortunately, clients who do that build an artificial wall between their portfolios, one that could compromise the way their charitable assets are managed and limit effective oversight. By coordinating the management of both taxable and tax-exempt investments, you can ensure that both are put in the context of a broader financial strategy for the client.
• Tax and estate planning. Some of your clients are going to want your help with tax mitigation and wealth transfer strategies. If these are their key concerns, you should talk with them about charitable planning. They can pursue philanthropic activities in a variety of ways, and you can guide them through the timing and structure of charitable gifts, especially those that offset windfalls or capital gains. At the same time, philanthropy can be a mechanism for multiple generations within a family to clarify and bond over their shared values, and it teaches younger family members valuable life and leadership skills.
If you keep an open mind about how far you want to extend your practice, you could likely deepen your relationships with clients and deliver on the promise of wealth management.
Hannah Shaw Grove is the chief marketing officer of Foundation Source and the author of The Family Office: Advising the Financial Elite.