You help your clients invest their assets, but how focused are you on protecting them? Wealth protection is a top five concern among affluent investors, according to research by CEG Worldwide, my firm. And yet it's an issue that many advisors overlook. That makes wealth protection a big area of opportunity if you want to differentiate yourself from the 400,000-plus financial advisors who work with wealthy families.

My goal is not to scare you or your clients, it's to help you consider the risks and inspire you to help your clients take action. You can have a big impact by helping clients think about the threats in each area and how to formulate an intelligent response.



Let's consider four key areas we've determined should be part of a smart wealth protection plan for affluent clients.

Financial assets are the traditional area of asset protection - and the one with which advisors often are most familiar. Protecting financial assets can involve any number of legal structures and agreements, including LLCs, asset protection trusts, prenuptial agreements, buy-sell agreements and many others. You may also want to consider personal and commercial insurance coverage, especially for clients whose wealth has increased significantly over time and who may find themselves underinsured in certain areas.

Run a needs-based analysis for each client to help you identify appropriate strategies. And because the rules governing these solutions can be complex and can vary by state, be sure to work with other professionals who have expertise in these areas (including trust and estate attorneys, high-end insurance specialists and CPAs).

The next area of attention should be your client's home. One key step your affluent clients can take to protect their homes from theft or a break-in is to know the details (names, addresses, phone numbers, etc.) of maids, gardeners, nannies and other household staff who have access. I'm amazed at how many people know only the first names of their service providers.

Encourage clients to fully vet anyone with access and to check references. Of course, it's best to get recommendations from family and trusted friends and check their reputations using sites like Angie's List or Yelp. Whenever possible, encourage clients to work with a company rather than hiring an individual directly.

Also, review clients' homeowners policies to ensure they're current. You can also introduce clients to personal-lines specialists who can design advanced coverage for specific risks.

Another smart move: Keep home inventories up-to-date to be able to substantiate insurance claims. Include pictures or videos of items as well as serial numbers, if possible. Encourage clients to store the information safely offsite, such as in a safe-deposit box.



Technology is a third area of focus. While the affluent conduct more financial transactions online, many older investors - and plenty of younger ones - don't appreciate the growing online risks, and are not prepared to combat them.

Take some time to review with clients the security features of your website or that of your custodian, and discuss ways to stay safe online. Even the most seemingly basic advice can be of great value in protecting clients' assets. They should make all passwords from a combination of letters, numbers and other characters. They should use unique passwords for each account and site. If clients must keep a written list of passwords, hide it far from the computer.

When clients conduct online banking, they should type in the financial institution's website directly and not link to it from an email or other site. They should use only home computers or other trusted devices - never public computers, nor any computer using an unencrypted connection - and ideally, they should dedicate one computer or device solely to financial matters.

Of course, technology usage can also play a part in protecting clients' home and other assets. Many of us use social media to better understand our clients and communicate with them. But often, clients post things without thinking about potential ramifications. For example, we suggest that clients not geotag photos, or post vacation pictures while still away from home (thereby telling the world their house is unoccupied). And don't tweet about every dinner out: There are increasingly frequent stories of thieves using Twitter status updates to identify unoccupied homes. The more clients share their personal data with the world, the more likely criminals are to find it.

Also remember to focus on family members - they are, in fact, the most important assets to most of your clients. Even if your clients are reasonably sophisticated about security threats, their loved ones might not have that same savvy. In some cases, a client's spouse or children may be targeted.

Parents might consider maintaining a child identification folder, updated regularly with recent, high-quality photos along with current height and weight, eye and hair color and identifying marks and fingerprints. You can also help educate clients' young children about what they should and should not share online; consider making this discussion part of a client educational event. And encourage clients to monitor their families' online activities by keeping computers in common areas of the house and using parental control programs.



I've been working lately with Marc Goodman, a world-renowned expert on security threats. He's worked with organizations such as Interpol, the United Nations and NATO over the past two decades. To formulate a plan for intelligent wealth protection, Goodman recommended the following steps. If some of this feels like unfamiliar territory, you may also consider adding a security expert to your team of go-to resources.

1. Conduct risk assessments. All clients have their own unique risks. Use the information above to help them identify and prioritize trouble spots.

2. Identify possible solutions. Each risk suggests multiple protective strategies. Brainstorm with clients and, if appropriate, with your expert contacts about the various ways the client might address each risk. Look online for advice about securing a home, protecting family members and staying secure when conducting financial business online. Where necessary, reach out to other experts, including financial institutional partners (such as custodians), for advice and insights.

3. Emphasize the solutions that are most appropriate. Obviously, clients will want options that will be effective in protecting them from the most pressing risks. However, they should also understand the impact those solutions will have on their lifestyle and then decide whether each particular strategy is worth the benefit it provides. Financial considerations may sometimes be a deciding factor - is the cost worth the benefit? Yet some solutions will have minimal impact on a client's quality of life and can cost little to implement - in fact, these solutions often do the best job of mitigating risks.

4. Create an action plan. Record a brief description of each solution, the specific steps required to implement it and who will take each step, as well as a timeline with deadlines for implementation.

5. Implement and follow up. Much like an estate plan that gets drafted but never put into action, a wealth protection plan that isn't implemented is worth no more than the paper it's printed on. Move through the plan methodically if there are multiple components that take time - but just be sure to put the plan to work.

These ideas and action steps just scratch the surface. What's more, the threats to clients' well-being will change over time. It may make sense to review these issues regularly - particularly if your client base is sufficiently affluent to warrant concern.



John J. Bowen Jr., a Financial Planning columnist, is founder and CEO of CEG Worldwide in San Martin, Calif., a global training, research and consulting firm for advisors.

Register or login for access to this item and much more

All Financial Planning content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access