Top advisors say wealth management puts new spin on "know your customer". No-account kids and failed marriages top the list of vital but hard-to-broach topics wealth managers have to grapple with in order to serve their clients effectively.

"Some of the most difficult times in a client's life can also be the most critical from the perspective of wealth planning," says Anthony DiValerio, a Philadelphia-based financial advisor with UBS Financial Services.

Writ large

According to a recent Dow Jones survey of wealth managers, six tough topics represent particular obstacles to effective client service: immature children, previous marriages, death of a spouse, financial disagreements between spouses, worries about retirement and children from multiple relationships.

Broadly speaking, the wealth managers surveyed -- including financial and investment consultants, accountants and estate planners -- agree it's important for advisors to be close enough to their clients to talk about difficult, even taboo, subjects. In point of fact, they say wealth managers worthy of the title need to relate frankly and comfortably to their clients if they hope to help their clients through their life stages, good and bad.

But then effective communication strategies come into play for every aspect of wealth management.

Consider something as basic as an investment policy statement. Jason Taylor of the Threshold Group, a Gig Harbor, Wash.-based multifamily office that works mainly with multi-generational families, views them as "roadmaps for the advisor" that also help clients adhere to investment disciplines they themselves helped devise. In effect, says Taylor, investment policy statements are aids to communication -- between advisor and client and among family members. "They're a great educational tool for helping clients understand what we do and why we do it."

Signature Financial, a Norfolk, Va.-based multifamily office that works principally with first-generation wealth, is another advisory that takes communication to heart. Last year the Journal of Wealth Management published Signature president Anne Shumadine's article on "scenario planning" -- a role-playing exercise that forces families to make decisions about hypothetical events. According to Shumadine, scenario planning is a powerful tool for planning because it encourages clients to take a long-term view and allows for open discussion of sensitive topics.

In a similar vein Signature executive v.p. Susan Colpitts says investment policy statements -- and the communication that accompanies them -- can help define the relationship between advisor and client by establishing risk tolerances, delineating return expectations -- whether relative to the market or absolute against inflation -- and exposing the challenges inherent in a rigorously "social" investment stance. "But without thorough communication, it's just paper," says Colpitts. "We don't deal in boilerplate, so for us as much as for our clients [an investment policy statement] has to meaningful."

Getting personal

Exhaustive communication with clients is inseparable from an advisor's role as a fiduciary, says Marc Primiani of Los Angeles-based Quintile Wealth Management. We don't do anything without laying out the reasoning behind it," he says. "As [a registered investment advisor], as a fiduciary, you sometimes have to spend a tremendous amount of time articulating and documenting the context of our actions, not only for investing but [also] from the perspective of planning."

Though he works down market from the multifamily offices, the need for painstaking, probing communication with clients is also an important element of Wayne Starr's practice. An advisor with BKD Wealth Advisors in Kansas City, Mo., he frequently has to help clients who have made rising home values a cornerstone of their retirement savings.

"You have to get down to real basics and ask, in the context of planning, 'How do you look at the real estate you own,'" says Starr. "If their expectations are wildly optimistic in terms of what's going on in the market, then you have to gently rein [those expectations] in" -- and of course offer alternate retirement-savings vehicles.

To be effective, wealth managers have to be ready to steer clients from pitfalls that, though stemming from highly personal matters, could land those clients in trouble if they're not addressed.

"Acting as the de facto CFO of a family requires the wealth manager to use a balance of tact and frankness that is difficult to strike given the mix of business and personal matters at hand," says Michael Sawyer, a New York-based advisor with Smith Barney, describing tactics for dealing with spouses who are at loggerheads over financial matters. "This can be particularly challenging when dealing with two 'chief executives' who have different ideas about how to handle their assets." The solution, says Sawyer, is to "play the role of both arbitrator and advisor."

Emotionally immature adult children can be every bit as disruptive to proper effective long-term wealth planning as feuds between husbands and wives.

"Privilege can lead to excess and a lack of responsibility," says Joseph Montgomery, who heads Wachovia Securities' Williamsburg, Va.-based-based Optimal Service Group, a team that works with insurance companies and their executives. "Helping clients teach the next generation the value of a dollar will allow the clients to enjoy their wealth secure in the knowledge that their legacy will live on."

Similarly, children from multiple relationships can "raise difficult questions about inheritances and child support," says James Covell, a New York-based advisor with RBC Dain Rauscher. "Working with the lawyers and the family, the wealth manager should begin the process by advocating full disclosure so plans and programs can be put in place."

In sum, says advisors, successful wealth management calls for forthright communication strategies backed by effective solutions.

"It's a wealth manager's duty to sit down with clients and discuss the ramifications of life events and how they fit into the larger wealth management picture," says UBS' DiValerio.

Though this may be easy enough in the common run of events, other advisors say it's important to have already cultivated sufficiently close relationships with their clients to ease communication when things get thorny. -FWR

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