Wealth is the 'scarce resource' that needs to be applied. And wealth can only play an instrumental role in one's life when life goals and objectives are explicitly clear, says Kees Stoute.
During the press conference to announce Nokia’s acquisition by Microsoft, the CEO of Nokia ended his speech by saying: “We didn’t do anything wrong, but somehow, we lost.” How many heads of wealth management firms aren’t sharing exactly the same sentiment right now?
Last week, I concluded that, in my opinion, those wealth managers who gravitate away from a product and process-driven approach to the business and increasingly embrace a much more client-centric style, are the ones who stand the best chance to secure their future.
But what does this mean? The word ‘management’ refers to ‘applying scarce resources in such a manner that we maximise the likelihood to achieve pre-agreed goals and objectives’.
In the context of wealth management firms, this means that the wealth of their clients should be managed in such a way that they realise the goals and objectives of the firm. It also means that wealth managers manage the wealth of their clients in such a way that they maximise the likelihood that these clients realise their own life goals and ambitions.
A wealth manager’s role
Wealth managers can add tremendous value by helping their clients to secure their financial future with more clarity and more peace of mind.
For those who are interested in how this could work, I strongly recommend an inspiring book on the role wealth managers should play, assuming they have an ambition to add value to the lives of their clients: “Enough? How Much Money Do You Need for the Rest of Your Life?” by Paul D. Armson.
Mr Armson is an experienced wealth manager – calling himself a ‘Lifestyle Financial Planner’ – who clearly explains how he (has) successfully put(s) his client-centric approach into practice.
An interesting case study that Mr Armson shares in his book, concerns a couple in their late 50s. The husband hates his job, but he has in his mind a plan to work until age 62. By then he hopes to travel around the world with his wife. The wealth manager who doesn’t add value ignores these facts and simply focuses on which financial products could be suitable for this couple. The value-adding wealth manager, on the other hand, helps the client to calculate how much he would need to be able to stop working.
It appears that the couple already has more than sufficient funds already to achieve this. So why continue to struggle on for a few more years? The clarity about their financial situation enables the couple to take some rational life decisions, thus improving the quality of their life.
The number of people that know their ‘number’ appears to be very small. This, therefore, represents an area where we wealth management professionals ought to add significant value.
Contact Kees: [email protected]
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