Unlikely Path to High Net Worth

Advisors who expect their clients' wealth will grow over the years, and help to build a thriving practice along the way, are likely to end up disappointed. That's according to a new statistical analysis of data from 7 million clients representing $3.5 trillion in invested assets across a variety of firms.

"Only 3% of the time did a relationship that is currently HNW begin with less than $500,000 invested," says Patrick Kennedy, co-founder and vice president of client and product management at PriceMetrix, which conducted the study. "There's a misconception among some advisors that they can grow all of their clients into HNW clients and that's simply not true."

Pricing and the client composition of a practice greatly impact a planner's ability to serve HNW clients effectively, Kennedy says, adding that HNW clients aren't happy working with planners who typically serve smaller clients. "It's strictly a matter of capacity," he adds. - Ann Marsh

Planning for Ill Clients

How can you tell whether your clients have a chronic illness that will affect their financial plan? You can't, estate planner Martin Shenkman told an audience of advisors at the FPA New York Spring Forum: "You must ask everyone who comes into your office: Do you have a health problem?"

Chronic disease may be invisible, but it has major planning consequences for clients, he said, affecting life span, medical costs, insurance needs, tax planning and more. Even client meetings can be affected. Shenkman (who's also a Financial Planning contributing writer) suggested planners schedule shorter, more frequent meetings for clients with fatigue issues; for people who have tremors or other trouble taking notes, offer bulleted to-do lists and summary printouts.

Other areas that could be affected: tax planning, portfolio accounts, cost of care and insurance needs. - Rachel F. Elson

401(k) Sponsors: Plans Insufficient?

Employers sponsoring 401(k) plans are worried about employees' retirement readiness even as account balances hit all-time highs, according to a new survey from Deloitte.

Only 12% of plan sponsors feel that most of their employees are or will be financially prepared for retirement, down from 15% who felt so a year ago. The vast majority of sponsors (70%) feel that only some of their employees will be prepared.

The lack of confidence comes despite increased account balances averaging $85,000 - a record, according to the annual 401(k) benchmarking survey. To help boost employees' preparedness for retirement, plan sponsors have enhanced their 401(k) participant education strategies, the survey found.

For example, 32% reported conducting retirement readiness assessments for employees, up from 25% in 2011. And more began offering employees individual financial counseling and advice, with 61% offering the additional service. - Margarida Correia

Sallie Krawcheck Scolds Advisors

The financial services industry needs a major makeover, Sallie Krawcheck said at an industry conference.

Advisors need to look long and hard at the racial and demographic makeup of their practices, as well as their attitudes toward women and consumers younger than 35, social media and regulatory changes, the Wall Street veteran told the audience at Envestnet's annual Advisor Summit in Chicago.

The advisory business needs to worry about "becoming the Republican Party - middle-aged and older white guys talking to each other," warned Krawcheck, the former president of Bank of America's Global Wealth & Investment Management division.

Advisors need "a new perspective" toward women, she said, adding that talking to husbands and nodding at wives is bad procedure. Wealth managers also need to adapt to the next generation of clients, who are interacting with experts in different ways, and have different expectations, Krawcheck said. Stung by market crashes, people younger than 35 have also become more conservative investors, she noted, and are "more risk averse than any generation except their grandparents." - Charles Paikert

Getting It Wrong on Referrals

Advisors need to rethink their assumptions about referrals, says a prominent industry expert.

"I'm so convinced most advisors are sitting on a mountain of opportunity when it comes to referrals," says Julie Littlechild, founder and CEO of Advisor Impact. "They just need to think about it in different ways."

Satisfaction with an advisor isn't enough to drive a referral, Littlechild maintains. What is really needed is "engaged" clients who "place a high value on advice relative to the fees they pay and see the advisor as a proactive leader in their life." Among Littlechild's suggestions: Find a "triggering action, such as when a client's friend asks for a recommendation; be able to explain in plain English how you can help solve a problem; and contact one or two clients to get feedback about their experience working with you." - Charles Paikert