If you are seeking the services of a high-income financial planner, you need money – or “investable assets," as the industry calls it.
Most high-net-worth wealth management firms deal with customers with at least $1-million to $5-million, says Charlie Sims, CEO and president at Cumberland Wealth, a firm with offices in Toronto, Calgary and Kingston.
“At Cumberland, most people show up with at least one account of $500,000 and then they arrive with a series of other accounts … RRSP, TFSA, RESP, spousal. Many people have a corporate account because they’re running their own business.”
It’s the combination of services provided that bring those clients through the door of the wealth management firm, Mr. Sims says, including tax and retirement planning, estate and legacy planning.
“We manage money on a discretionary basis, which means we take on a fiduciary responsibility for our clients. All of our client-facing individuals have the chartered financial analyst designation, the CIM [Chartered Investment Manager] designation or are certified financial planners. Many of them have business degrees. Some of them have chartered accountant designations and we have a suite of portfolio managers who are responsible for running investment pools,” Mr. Sims says.
And high-net-worth firms, most of which charge a fee for service, also are willing to put in the all-important time with the client. They set themselves apart with a premium “high-touch” experience, offering far more than investment advice.
At Sandstone Wealth in Calgary, clients can expect three initial meetings with the company’s team to determine whether the client and the firm are a good fit, president Brent Pickerl says. Then there is another meeting to go over statements and there will be quarterly meetings for the first year. After that, it’s up to clients to choose how often meetings are scheduled.
Sandstone clients generally have a minimum of $2-million to invest, Mr. Pickerl says, although younger clients with “great characteristics” and good wealth potential are also in the customer mix.
Clients come to Sandstone for the global investment focus and “they want to hire an expert and they’ve outgrown the bank and don’t want to do it themselves.”
The firm provides a variety of services and works with clients’ personal lawyers, accountants and their families. If there are services and investments not available in-house, Sandstone will find them. And unlike less-premium firms, the company offers services related to foundations and family trusts.
At Elevate Wealth Management, a team of advisers in Vancouver under the Quintessence Wealth umbrella, clients need about $250,000 to access services, portfolio manager Rob Parrish says.
That’s not high net worth these days, Mr. Parrish says. The average client at Elevate probably has $500,000 and up, he adds.
“What we found is that most of the new clients we’re meeting, unless they have about that number [$250,000], they’re focusing on the day to day. They don’t have a lot of options moving forward.
“Frankly, my partners and I have been in the business for 20 or 30 years. Most of our clients have been with us 15 or 20 or 30 years. We only have so many hours in a day. We put limits on new clients and we just cannot accept clients with low dollars that frankly we can’t really help very much,” Mr. Parrish says.
“Our practice is focused on clients who want their adviser to manage their money on a discretionary basis, but also want a high touch. Most of them want to be talking regularly about the other areas their investments support – education, retirement planning, tax planning.”
The face-to-face helps Elevate partners get a feel for the client.
“Sometimes their stated comfort with risk is high, but we can see it in their eyes that if they knew more it may not be that high,” Mr. Parrish says.
He adds that the team needs to determine the characteristics of the client. A client who is bringing in $1-million which is their entire life savings built over the years has different needs than one who is the grandchild of a someone with $100-million who has $1-million of their own to make their mark.
Abacus Wealth in Edmonton offers high touch for clients but doesn’t have a minimum floor level in terms of assets.
The group of 17 independent brokers offers investments and insurance products, and debt and financial planning counselling, adviser Trevor Bernes says.
“We have pretty low overhead for our advisers and they get paid more on the share of what’s available than a typical high-net-worth planning firm. If you look at … a wealth management firm at a bank, they’re typically getting 20 to 40 per cent of the commissions generated. Our advisers get about 65 per cent, for our newer advisers to as high as 85. So when you’re getting 85 per cent of the pie you can spend more time because you’re not sharing your earnings with a large corporate structure.”
Mr. Bernes estimates he spends three to four hours in meetings with new clients in the first month. He thinks the industry as a whole is moving to lower levels of service for lower-net-worth clients.
“The regulators are going to start to determine the answer to this question. Right now on the table they’re talking about taking away deferred sales charging investments. That’s where you get paid an up-front commission that does not charge the client unless they leave the financial institution you’ve set them up with.
Mr. Bernes says without the deferred sales charge, for advisers at a large brokerage the commission on a $50,000 investment isn’t enough to pay for enough time to create a customized financial strategy.
“The commission structure and the time versus compensation for advisers is what’s dictating this aversion to the smaller family client and forcing advisers to only take on a large amount of capital,” Mr. Bernes says.
The regulators haven’t changed the rules yet, Mr. Bernes says, but he’s concerned about the future.
There is also a shortage of advisers, which limits access for those with moderate or low assets to invest, adds Mr. Bernes, 36, who is planning a long career in the business, but that’s not the general pattern for independent advisers.
“A lot of advisers who do what we do – high service, high touch, independent broker relationship that’s not in a bank – are lone wolves. Unfortunately a lot of them are old. The average age of an independent private adviser is 68 or 69, so I don’t know how much they’re building their book of business.”