Education vital to advisor-client relations

Thomas Coyle

10 March 2005

Wealth consultants advocate "no strings" approach to educating clients. Wealthy families want more than winning investment strategies. They want to understand their investments - and a recent poll of ultra high-net-worth investors suggests they're growing impatient with their advisors' inability to help them do that. That means advisors have to start educating their clients about investing in ways that are entirely free of product-push, say wealth industry players.

Last year the Institute for Private Investors (IPI), a New York-based education and networking resource for ultra wealthy families, asked 300 of its private members what general improvements they'd like to see in the wealth management industry. Four of 10 said "willingness and skill in investor education." But well-to-do investors aren't alone in seeing education as a priority. Responding to weak markets in the aftermath of the dot-com meltdown and a series of high-profile corporate fraud scandals, the Securities and Exchange Commission set up a fund in 2004 aimed at improving investors' grasp of investing concepts and principals.

The IPI has taken action as well. Last year it established the Investor Education Collaborative (IEC). The brainchild of IPI CEO Charlotte Beyer and Susan Remmer Ryzewic, the IEC seeks to help advisors educate their clients in a format that attempts to replicate the frankest and most beneficial interaction Beyer and Ryzewic have seen in 14 years of observing investors and advisors communicate with one another.

In practice that boils down to a series of case studies that advisors can use as teaching aids with their clients. By taking a family members through a case study and then examining it together in a structured question-and-answer session, the IEC says advisors can help family members get a better understanding of their fundamental attitudes about investing, including insights into the degree to which those attitudes may be shaped by purely behavioral processes, as well as a firmer grasp of the investing principals at work in their own portfolios. In turn, says the IEC, advisors who use the case studies come away with a deeper understanding of their clients' attitudes and expectations about investing - enlivened, says one advisor, by a new appreciation of their clients' family dynamics.

"IEC plans to set the standard in investor education by offering a more engaging way to teach vital investing concepts," the IPI says in a press release. "The goal is to offer an affordable, successful method for investor education using proven techniques and technologies."

Daniel Geary, director of Lydian Wealth Management's Philadelphia office, says the IEC approach works. "It's exciting because it gets people to interact," he says."People are more used to straightforward PowerPoint presentations - you know, where you explain investment concepts and the yield curve, and after five minutes everyone's asleep."

The Metropolitan Group is a proponent of the case-study approach to educating high-net-worth families. The Cresskill, N.J.-based consultancy for wealthy families has developed nearly 30 case studies around topics such as family governance, succession planning and conflict resolution. "." -FWR