How to turn down a wealthy prospect

The advisor

Amy Dietz-Graham is an investment advisor at BMO Nesbitt Burns in Toronto.

She has worked there since 2007. She’s IIROC-registered, insurance- and options-licensed, and also has her CIM.

The challenge

Declining a wealthy prospect.

How she got started

At age 11, Dietz-Graham started sitting in on meetings between her dad and his advisor. “I’d ask them questions, and I read a lot about topics like mutual funds and the market while growing up.”

However, the two men never went into detail about diversification, risk and fees, and she learned little about finance in high school. She wanted to know more, so she majored in financial economics and applied mathematical methods at Western University.

While still in university, she broke into the industry by researching and cold-calling financial firms in Toronto. She also met with advisors to learn more about registering, investment strategies and serving clients.

Through one of those meetings, Dietz-Graham met Sean Durkin, her mentor and the current business partner at her firm.

Overcoming her challenge

After seven months on the job, Dietz-Graham met her first wealthy prospect. He was a family friend who had assets of $3.5 million, so she was keen to add him to her roster of small-business owners and entrepreneurs. “I wanted to show what I could do and bring in a big account.”

But there was one problem: while she and Durkin are discretionary managers who typically offer traditional 60/40 portfolios modelled on pension funds, the wealthy prospect was 90% invested in equities. He told her he was risk-averse, but had the portfolio of a risk-on growth investor.

Also, her discovery conversations with him were tough. He had high expectations based on his past investment experiences. “I like to ask, ‘If we got you a 10% versus an 8% rate of return, what would that do for your life?’ But his mentality was he just wanted higher returns because he’d historically had great returns.”

And, when pressed about his experiences with past advisors and why he left them, he wouldn’t open up.

Still, Dietz-Graham didn’t want to lose a potential client. She met with the prospect several more times, and Durkin suggested she present sample, conservative portfolios. She also warned the client about taking on too much risk.

But, after four sessions, she knew she had to turn him away. “It felt horrible to lose the account and I felt like I was letting Sean down. But I realized the client wasn’t a good fit. It didn’t make sense in the long term for us or him.”

$1.6 MILLION

The average high-net-worth household relationship represents approximately $1.6 million in managed assets.

Source: CSI-Investor Economics report

So she called the client to let him know. “I told him I appreciated his time and that we could keep in touch. He was surprised but understood.” Looking back, she adds, “I think the chase was fun for him. I’m not sure how many advisors he’d had, but it seemed his past experiences weren’t good. He didn’t understand the discovery process and seemed closed off to it.”

As a result, she’s thankful he wasn’t her client during the 2008 crash. “He didn’t buy into the philosophy I was comfortable with. Also, the recession would have opened his eyes to how much risk was in his portfolio,” and she could have been blamed for any significant losses.

Since 2007, she has chatted with the man at several family functions. “He did make a comment about 2008 a few years ago, but we just laughed it off.” When dealing with former prospects, she says, “The key is to keep the conversation light.”

What she learned

Refine your discovery process in your early years. If you’re efficient and organized, you’ll impress prospects and won’t waste time.

Dietz-Graham has found her niche with executives and business owners who have assets of at least $1.5 million.

“I now mentor advisors and always share this story. It’s easy to get caught up in building your business, but you need to be firm in your approach to find the right clients.”

And that’s why she meets with prospects no more than two times to determine whether they’re a fit for her and the firm. “I make sure to discuss how brutal the market can be as a way to see if clients are open to discussions about worst-case scenarios and how to plan around those.”

It’s important to learn from your mistakes, she adds. “Sean always lets me try something my way. With the wealthy prospect, it wasn’t about losing the account but about learning to refine my whole discovery process. I learned prospects interview me at the same time as I’m interviewing them, so I now ask how they learned about money and about their past experiences with advisors.”

She notes, “You can catch a lot of red flags by asking those questions. They offer insight into people’s expectations and what services they’re used to.”

Wealthy expect advisors to be financial hub

Canada’s wealth managers will need to expand their skills if they’re to keep up with the demands of their rich clients, says a new report.

A joint CSI-Investor Economics report says clients with more than $1 million in investable assets increasingly want their wealth manager be the primary relationship manager for all or most of their financial advisory needs.

The report states:

• The number of households with more than $1 million in investable assets is expected to increase by 76% to 1.1 million by 2022.
• By 2022, wealthy households will control about $3.7 trillion—or two thirds—of all financial wealth in Canada.
• Rich households are seeking opportunities to consolidate their financial dealings with fewer providers.
• Financial institutions are providing more integrated offerings and are increasingly expanding the competencies of their wealth managers so they can serve the role of primary relationship manager.