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‘FAT’ IN THE BUDGET
When dealing with high-net-worth clients,
however, it may not be necessary to try to
advise against an imprudent investment.
For example, if a client is already giving away
hundreds of thousands of dollars annually
to charities and children, “I might be more
flexible, because there is fat in the budget,”
Saneholtz said.
He uses Monte Carlo simulations to help
estimate portfolio growth, and generally
looks for an 85 percent success probability
in constructing that portfolio. But when there
is “fat in the budget,” he is comfortable with
only a 70 percent success probability.
A related approach is simply to consider
the “mad money” that clients use for pet investments as independent of the basic portfolio, and make asset allocation and investment
planning decisions entirely without regard
to those “external” investments. That may
require an overhaul of the basic portfolio,
however.
A middle ground, if the relative size of that
independent investment is too large to ignore
for overall investment planning purposes, is
to incorporate it into consideration of the aggregate portfolio allocation. When a client
of Chicago-based advisor Paul Sippil, CPA,
insisted on investing 10 percent of his assets
Listen
FROM PAGE
25
separates the top leaders from everyone else.
Unsurprisingly, it starts with helping the partners create a compelling direction and vision,
the strategies for achieving them, and the
values the firm stands for. With the partners
active participants in the firm’s future, successful firm leaders continually engage their
partners and help them become even more
effective with clients and, critically, successful leaders themselves, given their influence
on what everyone in the firm does.
It sounds easy, but it isn’t. If there’s one
thing that came out of the research, it’s that it’s
no longer good enough for firm leaders to be
appointed on the basis of great client service.
Staying close to clients is still a part of the job,
but it’s not the major part. That’s about helping to build a more cohesive and integrated
firm, where everyone in the firm wants to be a
part of the future, has the capabilities to help
the firm succeed, and demonstrates behavior
that is driven by the firm’s values. And, as firm
leaders need the respect and trust of the partners, they’ve also got to be outstanding role
models in everything they do.
Pulling Together
FROM PAGE
36
in several industry sector exchange-traded
funds, Sippil rebalanced the remaining 90
percent accordingly.
One of the trickier investment scenarios
that advisors may confront involves clients
who want to support a family member in a
business venture. “The emotional implications for the client complicate your ability to
discuss the investment with them analytically,” noted Saneholtz.
Clients
are often
happy to
let the
advisor play
the role of
‘bad cop.’
RETURN TO GOALS
The approach Ruhlin uses in such situations
is the same one she uses with other potentially problematic investments: “You take
While we heard some stories of great leaders, we heard too many where the leaders
didn’t make a difference. And yet there is no
way firms will make any of the things we’ve
described a reality unless they have leaders
who know what to do and can do it.
IN CONCLUSION
Most firms’ efforts to engage their partners
and increase their performance have not
generated the uplift that was hoped for or
expected, while some firms have driven up
performance to the detriment of unity. In or-
der to succeed and create a firm where all of
the partners work to establish an even better
firm, we recommend that leaders and part-
ners commit to:
Having a compelling sense of direction/
vision that all the partners share and want to
play a part in achieving.
Developing strategy through an iterative,
bottom-up process — only after direction has
been agreed on.
Creating collective responsibility and
dealing with team dynamics when necessary.
Bringing the collective capabilities of
the firm to the client by creating interlocking
the conversation back to their goals,” she
said. “I’ll say, for example, ‘You have told us
you want to retire in three years. Have you
changed your goals?’”
Ideally, clients’ goals and the investment
policy statement built on those goals should
be reviewed every year or two, so that the ad-
visor has a strong basis to assume that such
an investment would indeed be at odds with
client objectives.
