I met a prospective client for lunch a couple of weeks ago. "Barry" (not his real name) is a high net worth (HNW) former real estate developer who sold his operating business several years ago. He still has a handful of income-generating properties, but the vast majority of his wealth is now held in his investment portfolio. We met for a working lunch to discuss his goals, and to see if there was a suitable "fit" between us.
Over the course of my career, I've had literally thousands of conversations with clients and potential clients, and hundreds of working lunches. Most of them have been pleasant and interesting, although not all of them have led to new business. But this conversation stood out.
Whomever Barry ends up working with, I'm certain it will be a positive, profitable relationship. Why? Because right from the get-go, it was obvious that Barry knew how to work with financial professionals. He was blunt and direct, without being impolite or hostile. He knew what he wanted from this relationship and, perhaps more importantly, what he didn't want. Most important of all, he was able to communicate those wants clearly and cogently.
This is the reason why I keep replaying the conversation in my mind. His candour, his "straight-up" style was indicative of the kind of business-like approach I often see from HNW investors. I believe it's one of the reasons why HNW investors get "more" out of their relationship with their wealth adviser: more attention; more access to innovative strategies or special opportunities; and, ultimately, potential for improved performance.
Obviously, I didn't record my conversation with Barry for confidentiality reasons. But I do remember several key points that stood out. It's my hope that by sharing these points with you, you can use them to develop a more positive, profitable relationship with your financial professional, no matter what your net worth.
"I don't want someone who thinks the same way I do."
Some investors want a financial order taker—someone to validate their decisions. Others want to delegate financial decisions to a trusted surrogate, so they don't have to think about money. Most, like Barry, want a partner: someone who can provide solid investment ideas and strategies, someone who can "push back" when the client is about to do something potentially "off track".
Now, any of these approaches can work, but the point is to know what you're looking for, and to communicate that in your first, and every meeting. That way, it's easier to determine whether there's a good fit between you and the professional.
"I'm the kind of guy who tells it like it is. If I'm not happy, you're going to know."
As the guy sitting on the other side of the table, Barry's clarity was a breath of fresh air. I appreciate the straight-up approach — perhaps because I'm the same way. The ability to have a discussion without beating around the bush will help prevent oversight and errors.
This should be an important goal for every investor. If you can be crystal clear with your expectations (when they are met, and when they aren't), and if you can accept that same level of clarity from your professional (when they make good decisions, and when they don't), then you're likely to have an excellent working relationship.
"If I don't like something, we're not going to do it."
I wasn't surprised to hear this from Barry. After the big market drop of 2007-2008, it was clear many investors (including many HNW investors) had been sold investments they were neither comfortable with nor fully understood. They bought it anyway, because their adviser told them to, and they suffered the consequences.
This is obviously a real "black eye" for the financial services sector. But there's a lesson here for investors too. Don't be afraid to say "no" if you don't understand an investment, if you're not comfortable with the approach, or if something seems too good to be true. Peace of mind counts for a lot in this business, and any professional worth the label will work hard to make sure you can sleep at night.
"I'm not looking for a stock jock. This is about more than the portfolio."
Throughout our discussion, Barry made it clear he was looking for something more than a portfolio manager. Other items were on the agenda too: handling his holding company assets; setting up trusts for kids and grandkids; perhaps starting a charitable foundation. Success would be measured not only by investment performance, but how well these other goals were achieved.
Even if you don't share Barry's goals, there's something you can take away from his approach. Too many investors start a relationship without telling the professional how he/she will be evaluated. By being absolutely clear about how success will be measured, you do two things:
(a) you provide tangible, easily-identifiable yardsticks the professional can work to;
(b) you let the professional know he/she will be constantly evaluated, and over what time period.
This isn't mean or nasty — it's the way any professional relationship should work. By emphasizing the need to evaluate progress toward tangible goals at regular intervals, you establish a "pay for performance" type of relationship, and give the professional an incentive for living up to your expectations (ie.more assets directed to them over time) . At the end of the day, everyone benefits and isn't that the point of working with a professional?
Thane Stenner is founder of Stenner Investment Partners within Richardson GMP Ltd., as well as Director, Wealth Management. Thane is also Managing Director for TIGER 21 Canada. The opinions expressed in this article are the opinions of the author and readers should not assume they reflect the opinions of Richardson GMP or its affiliates.