Earlier This Year
I was invited on a golf outing that was organized by the church we all belonged to, turned out that the guy behind it was a financial advisor with a well-known but small regional firm. Only one of this group of 20 men was I even acquainted with and after we all spoke in turn about what we did or didn’t do for a living they placed me with a father son duo that day, to form a golf threesome. We got going and the dad and son were pretty good golfers. Early in the round the dad began asking me about the time I spent advising clients and more about his personal financial picture, his accumulated assets, and his plan to retire in a 2-3 years. Come to find out the organizer of the group was aggressively seeking his accounts to manage and had been contacting him quite a bit about transferring his stuff over to this advisor. Knowing a little about what type of clients that small firm serves he waited for me to respond to all this and I said the first thing that came to my mind, “all I have to say is you’d be his largest client” (followed by a smirk}. I thought that would stop him in his tracks but instead he took my comment as a positive, saying “Good!” I shook my head saying, “no, you never want to be any advisor’s largest client”. That left him so confused, he really didn’t understand where I was going with this. Elaborating here on the subject may help everyone to understand that when you’re running money for clients you never want your largest client to know they are your biggest relationship.

Here’s One Example
If the secondary goal for owning a house (besides living in it) was price appreciation is it smart to buy the largest home in a neighborhood? No it is not because buying the largest home in a completed neighborhood means that appraisals in that neighborhood going forward would all be below yours (all other things remaining constant). You will never be rewarded by owning the largest square footage in a given neighborhood as all comp sales [going forward] will be below any valuation you might seek.

The Meat and Potatoes
Here’s another example to get you closer to what I’m talking about in the case of “fitting you and your financial circumstances” with the right firm. Would you go into a Red Lobster Restaurant and order a Filet Mignon? Probably not, but hey it’s on the menu, so it is possible. How about this, if you had a $million dollar plus portfolio would you move it to Edward Jones? My answer is if it’s only bonds maybe but other than that – hell no! But look they’ll gladly take your assets, so it’s available! What if a high net worth client had an advisor handling their stuff from there, would all the available tools including estate planning consideration, trust & tax recommendations, and product selection be a good fit for such a client? The answer is an affirmative “No”. And I’m not singling out Edward Jones at all I’m simply pointing out that it’s a client’s responsibility to know exactly what level of firm they need, the one that can provide them with the best answers going forward. Financial firm sophistication is not equal out there at all. Find out where clients like yourself, with assets similar to yours and needs similar to yours, find out who they are working with before you embark on any long term commitments. Yes, you can always move your assets unless they’re in illiquid securities so always be careful on what securities you agree to purchase and the rabbit holes you agree to go down.

I worked @ Merrill for quite awhile before retiring and I saw both of these circumstances happen regularly, I ran into clients that were too small to get any advantage by dealing with us as well as clients too large to get all the bells and whistles they needed. However, along the way I never ever let a client know when they were my largest relationship, that’s a big No-No. All that does is leave a client wondering where else could they benefit from, surely there’s more sophisticated products, strategies, and analytics out there to benefit them Never let someone know when they are your biggest relationship! On the other hand, I routinely reminded my smallest clients that were my smallest relationships. There are some advantages to that, one is they will expect less from me and on top of that it makes them feel like they’re getting something additional from a more sophisticated environment than where they really belong. When I was with Merrill our client assets sweet spot was from $1 million to say $5 million? Once a client reached $10 million plus in assets they would begin seeing holes in our service offerings especially from the standpoint of estate planning and trust strategies. Back then if a client could only bring over less than $250K the firm would keep 100% of any commissions or management fees and not pay the advisor until assets reached at minimum $250K so we never targeted anyone real small. One had to build their book with clients North of $500K in assets continually to secure a good income stream. There are firms that cater to ultra-high net worth clients as well and these boutique firms usually will have CPAs and Estate Planning Attorneys on board for continuing strategy consultations. Some of these will also have concierge services available such as paying client monthly expenses, filing tax returns, making travel arrangements, etc.

Find Where You Fit
In order to get the most out of a financial advisor and a financial firm educate yourself on who that firm is catering to – their “sweet spot” so to speak. Do a little homework to find out who makes up the majority of the clients in a particular firm. Are they serving clients like you? Do they share similar circumstances and goals? Yes you can usually switch firms but why waste precious time and energy on being where you don’t belong? But aren’t all financial firms the same? Ask yourself, do all ice cream flavors taste the same? Not at all! There’s a place, a sweet spot for everyone, you just have to do some homework to find it.
Fact: The majority of high net worth clients are referred to their financial advisors, they ask trusted colleagues, who they admire, who their financial advisors are, that’s how the business is done today… been that way for a couple decades now. You should do the same.