Ten Lessons from Building a Wealth Management Business By: Shahan Farooq

For 20 years I have helped families manage wealth. Here are some of the most important lessons and strategies I have learned about running a wealth management business that I would like to share with investment professionals.

1. Have a mission statement: Starting a wealth management business is one of the toughest things one can do if you do not have a clear mission statement that will help you navigate tough times. It can be something as simple as, for example, “to have the most trusted wealth management business in the GTA”. Whatever your mission statement, it will keep you focused on your ultimate goal and help you recoup when the chips are down. Having a clear mission broadens your thinking so the firm’s operations would not be jeopardized by concentrating on just one main activity.

2. Choose your clients wisely: When starting a wealth management practice, most advisors are not very discerning about choosing their clients. They feel the pressure of starting a new business and instead of choosing their clients to fit their business, they take on everyone as it gives them a feeling of accomplishment. This leads to a negative client experience down the road when things do not work out as that client was never a good fit for your business. It leads to reputational damage and loss of time and revenue. Net worth, age, profession, reputation, and a number of other criteria can guide you to determine whether a client is the right fit for you.

3. You cannot be everything to everyone: When it comes to investing, people can have vastly different needs. There are clients looking for planning, some looking for the lowest fees, then there are those looking for stock of the day tips, and as an advisor, you cannot be an answer to all of them. It is unfeasible to run different practices to suit every client. This does not mean that every client should not have an individualized investment plan or strategy, but you cannot offer everything. For example, if you are running a practice that focuses on wealth planning you cannot be the lowest fee solution in the market. If you try to become the lowest fee practice for a few clients and a planning-based advisor for some others, your entire business would suffer as you would dilute the quintessence of your practice.

4. Be yourself: This is probably the most important criterion for being a wealth manager. If you start playing golf even though you hate it, it will not work. People want to deal with someone who is authentic and shows their true self. Changing who you are just to get a few clients is the wrong way to approach your business and is not sustainable. Stick with things that you enjoy and are important to you.

5. Have a process: Every advisor should have a process that a potential client goes through to become a client. If a client refuses to respect your process, then you are better off without that client, no matter the size. For long-term sustainability, you need someone who is willing to follow your process in order to make sure that your advice adds value for them. Effective financial planning and investment process entail a comprehensive and holistic approach, and that is where synergy with the client matters.

6. Just because they ask for it and it can be done, does not mean that you should do it: A big part of managing wealth is effective risk management. When the markets are going up, normally a client will have a greater risk appetite and when they are going down, it is the opposite. As a wealth manager, it is important to understand this distinction and make sense to a client who wants to take higher risk just because markets are favorable or wants to sell in ephemeral panic. In fact, not being afraid to say “no” is a key element in retaining clients. If a client wants to do something that does not make financial sense, tell them why you advise them not to do it.

7. Make your own luck, it is called hard work: There is no substitute for hard work in this business. The more calls you make, the more meetings you do, the greater success you will have. When the chips are down, refer to your mission statement for inspiration.

8. Be genuine and actually care: This is a business of caring. If you do not care about the well-being of your client, their family and their future, then you are in the wrong business. In most cases, as the client is solely focused on growing their wealth, it is the advisor’s role to make sure that the client can see the big picture with an eye on succession planning, tax planning, family governance, budgeting, etc. Successful wealth managers pay attention to more than just their clients’ wealth. They utilize data and information to ascertain individual needs and behaviors as well. In effect, they have a 360° view of their clients.

10. Making money and managing wealth are not mutually inclusive: Some of the best businesspeople I have met in my life are the worst money managers. Never be intimidated by a client’s success. Just because they have made a billion dollars in their business does not mean they will know how to manage their wealth. That is one of the reasons why in almost all cases within three generations, the families are back to square one in terms of their net worth.
11. Your growth passes through your client’s experience: In a relationship business, it is always about referrals. Even when you are prospecting, there is still no better way to make your case to prospects than through existing clients. Do everything to deliver incredible service to clients – their needs must be an absolute priority from the moment your interaction with them begins. Your clients also echo your reputation to other industry professionals, such as accountants and lawyers, who can be a good source of referrals for you as well.

About the author

Shahan is a highly regarded wealth management professional. He is an Investment Advisor with RBC Dominion Securities based in Toronto focused on addressing the shirtsleeves to shirtsleeves in three generations dilemma.