Welcome to Financial Advisor IQ

Handling Risk Is Key to Serving UHNW Clients

August 31, 2017

High net worth clients deal with risk differently than less affluent investors, and advisors who hope to cater to the very wealthy need to understand how to approach risk accordingly, Andrew Marsh writes in Canada’s the Globe and Mail.

Affluent investors put stock in a risk management approach that removes emotions and timing from long-term investing, according to Marsh, president and chief executive officer of independent wealth management firm Richardson GMP Ltd. In part this is because high net worth investors don’t need to take on extra risk to build wealth, he writes.

Wealthier clients also have a clearer understanding of what they need money for, which in turn determines their risk tolerance and asset allocation, according to Marsh. And such clients want advisors who understand their approach to risk, he writes.

For starters, wealthy investors look for advisors who are willing to challenge their long-held beliefs and ask pointed questions about their attitude toward risk, writes Marsh. Such clients also want advisors who can optimize portfolios based on what Marsh calls a “risk road map” that aligns financial goals with the appropriate amount of risk.

Affluent investors also look for someone who can wear many hats, including that of a wise counselor able to calmly talk them through turbulent times in the market and ensure they are sticking to their long-term plans, he writes. It’s also essential advisors truly understand where their clients’ risk limits lie, according to Marsh. That means continuous probing about clients’ risk boundaries.

By Alex Padalka
  • To read the Globe and Mail article cited in this story, click here.