Some Strategic Advice to Help Wealth Managers Grow Their Business

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One thing wealth managers can never get enough of is help on growing their business, primarily because they are often paid based on the amount of assets they bring in that can generate fees. The latest advice comes from Pershing, which is a Bank of New York Mellon company, and it focuses on how financial advisors can grow their business by helping entrepreneurs with their often complex financial situations.

It's all part of a new guidebook, titled Building a Business with Business Owners, that discusses how the personal and professional lives of business owners are so strongly intertwined, they require specialized services of wealth managers, making for a potentially lucrative, market opportunity.

"Increasingly, we are seeing advisors consulting with entrepreneurs on issues such as cash-flow management, capital allocation and borrowing – value-added services and advice that generalist financial advisors cannot match," said Kim Dellarocca, a Pershing Director.

According to Pershing, as competition intensifies, a growing number of wealth managers are taking advantage of this trend. Pershing recommends that advisory firms with limited marketing resources focus on achieving deep penetration in a narrowly defined target market, with no more than five potential market segments yielding optimal results.

In the new guidebook, Pershing also warns that because many business owners and entrepreneurs direct the bulk of their personal savings into their business rather than money management accounts, advisors who charge clients a percentage of assets under management run the risk of under-compensation. Instead, financial advisors should consider premium fee arrangements to offset the added expense of working with entrepreneurs.

"For business owners," Dellarocca added, "signing on for these specialized services can be enticing, and can make them more efficient. But entrepreneur clients may need to be convinced that the advisors they select are true experts in their businesses, are not over-promising and can work effectively with existing service providers."

According to the guidebook, key areas where entrepreneurs can benefit from specialized advisory services include:

  • Cash Flow and Financing: Supporting and sustaining both business and personal spending needs, as well as structuring financing for start-up and expansion.
  • Risk Protection: Insight into insurance products, hedging strategies and legal assistance.
  • Benefit Programs: Group health or 401(k) plans, non-qualified retirement plans and insurance benefits.
  • Wealth Management: Integrating personal financial planning and business planning, especially in the areas of tax efficiency, liquidity, estate planning and wealth transfer.
  • Business Planning: Aligning business strategy with personal life and financial goals, encompassing tax planning, succession planning, business valuation, equity transfer and business succession.

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