Articles

How to be an effective adviser for wealthy families

Henry Hirzel of UBS explains some of the main skills and attributes that wealth managers need to be able to effectively advise families on wealth protection and succession planning.

Date: July 2011

Tags: Succession planning, Estate planning, Next generation

To be able to advise effectively on family wealth planning, Henry Hirzel said in an interview that it is important for advisers to understand the topic of family dynamics, to understand that there are different roles in the family, and to understand how family businesses are run.

For example, UBS has previously produced a study to show that family businesses perform better than other listed companies, he said, since they have a longer time perspective than the quarterly retail pressures of listed businesses.

To enable wealthy families to find the right solutions, however, Hirzel said it is important for advisers to have fundamental knowledge about how to manage assets in terms of asset allocation. In line with this, they need to understand each asset class and which one suits different market environments – and then be able to have these conversations with clients.

Ten years ago, the financial industry was much more product-driven, he said, with advisers selling a “favourite of the day”. Today, however, Hirzel said advisers need to understand the fundamentals of the client’s issues and be able to relate to them in a way which enables the adviser to show them which products achieve the client’s goals.

Challenges in the planning process

For advisers who have covered families for perhaps 10 to 15 years, they need to be able to ask them some fundamental questions and not assume they know everything about their clients, said Hirzel.

Yet that’s a big challenge for advisers, he said, and they need to find their own ways to able to ask such questions. If a relationship is built on discussions about whether markets have been going up and down, or on certain products, it is very hard to go back and ask the question: who are we as a family?

Hirzel said that an effective technique is to shift the discussion from one based purely on financial assets to exploring issues such as whether the client is focused on developing human capital. And also whether they have thought about how to position the family in society.

This can then shift the discussion to be able to dig deeper to come to more fundamental questions.

Next-generation techniques

To educate the next generation and ensure the interests of each generation is aligned, Hirzel said it is critical for advisers to develop context for the family and also relationships throughout the family.

A specific way to develop the relationship with the next generation is to develop their knowledge about how, for example, to manage financial assets and run the family office, he said, as well as making them aware of different roles and responsibilities within a family.

Questions often asked to both generations include: what do I expect from the other generations, both older and younger? And what can you contribute to the other generation and then basically compare the answers that could be a very interesting debate within the family framework?

 
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