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The Graceful Way to Pursue “Liquidity Events”

By Chris Latham April 15, 2013

Databases that alert advisors to “wealth events,” like executive options vesting or an inheritance, sound like a convenient way to gather assets. But many advisors say that cold-calling prospects found online does more harm than good.

“It just makes me out to look like a used-car salesman,” says Tom Froehlich, head of Froehlich Financial Group in Spring Lake Heights, N.J., whose firm manages about $80 million for 200 clients.

Instead, he says, advisors can use online tools, including social networks, to develop relationships with intermediaries and prospects without openly soliciting. For example, Froehlich joins business groups on LinkedIn and writes educational blog posts, and his base of more than 1,300 contacts includes at least 600 CFOs. Froehlich says he has signed up two deferred-compensation-plan clients through the site in the past year. “You use social networking to build yourself as the knowledgeable go-to person,” he says.

To be sure, several companies offer online tools aimed specifically at wealth managers. Executive compensation research giant Equilar, based in Redwood city, Calif., launched its Atlas service in 2011 to considerable fanfare. Essentially a directory of more than 300,000 public-company named executive officers, Atlas breaks down their pay by salary, bonus and deferred compensation, based on SEC filings. Besides detailing options exercised and shares sold in the past three years, the service also displays upcoming liquidity events and estimates listees’ total equity holdings. It leverages users’ own contact networks to facilitate introductions.

Most of Atlas’s 7,000 users pay $200 a month for “premium” service or $400 a month for “professional” service, which provides more detailed profiles. There’s a free option, too, but it offers little that you can’t look up fairly easily yourself.

A similar service, WealthEngine, provides profiles of high-net-worth prospects that it updates daily. Based in Bethesda, Md., the 22-year-old company started its “FindWealth 8” tool in January to help financial professionals track more than 100 million households by income, personal interests, location and buying habits. Advisors can subscribe or pay a flat fee for an individual report. (The company did not return calls about its costs in time for FA-IQ’s deadline.)

My New Financial Advisor, founded in 2010 in Montecito, Calif., matches advisors up with soon-to-retire, high-net-worth baby boomers, based on geography and assets. It provides online introductions and will even schedule an appointment time. According to its website, MNFA's average prospect has $845,000 in investable assets. Advisors can pay by fixed-fee or revenue-sharing model.

Such services can save advisors time on research. But when it comes to making contact, the risk of seeming opportunistic runs high. Prospects may be inundated with pitches and react with hostility to advances that come via a weak connection.

Ralph Adamo, president of Integrity Wealth Management in Newport Beach, Calif., acknowledges that prospects who have enjoyed a windfall make ripe targets because they feel compelled to invest quickly. He recommends that advisors get ahead of wealth events by developing, then leveraging, a robust online network of potential clients before they receive a major asset influx. “I play it very low-profile,” says Adamo, whose firm manages around $100 million for 150 families. “I incubate the relationship.”

Like Froehlich, Adamo prefers LinkedIn for building networks. He looks for shared connections and interests — including non-professional ones — and reaches out to prospects on that basis before asking, “How can we help each other?”

Building Credibility

Prospects who have recently undergone a wealth event favor specialists with a track record of handling similar transitions, says advisor Adam Estes, whose firm is part of Hilliard Lyons and manages about $800 million for 400 clients out of Bloomington, Ind. He suggests that advisors work with their current client base to create a tentative, forward-looking schedule of wealth events. You can lay the groundwork by asking clients to estimate the likelihood, size and date of an inheritance or compensation bonanza. Then you might discuss relevant topics, such as tax implications.

That approach lets clients know you’re ready to handle a wealth event in-house, and they will be more likely to refer you to prospects who expect similar windfalls. “You need to treat the event with a little bit of science and technicality,” says Estes.

Mitch Anthony, founder of Advisor Insights, a Minnesota-based consultancy whose clients include Merrill Lynch, UBS, and LPL Financial, suggests that advisors create a life-transition checklist to help talk to clients and prospects about payouts before they happen. Anthony says that by listening to a prospect’s goals, an advisor can win him or her over without seeming exploitative.

Experienced advisors agree that client-initiated referrals are more effective than intermediaries with prospects who are about to come into wealth. But they also agree that it’s a terrible idea to ask clients if they have any friends with a rich parent at death’s door.

Patricia Brennan, president of Key Financial in West Chester, Pa., uses a welcome letter with new clients that says she welcomes referrals but expects them only if she exceeds the client’s expectations. Then she does not broach the subject again.

For Brennan, who manages about $450 million for 400 clients, an advisor’s brand strength should draw new clients without asking. If your network knows you can manage wealth events, she says, “eventually it gets viral.”