At employee-owned RIA firm Halbert Hargrove, working in the best interest of clients means having “difficult conversations” and not just getting a rubber-stamp approval on investment recommendations, says senior wealth advisor Nick Strain.
As fiduciaries, the advisors of Long Beach, Calif.-based Halbert Hargrove believe they need to fully understand the financial situation, motivation and goals of their clients before they can truly recommend investments that serve their clients’ best interest, according to Strain.
And that information – especially in the level of detail the advisors need – can only be unearthed via repeated conversations that often turn to difficult topics clients tend to avoid, Strain says.
Strain, who is based in Los Angeles, says Halbert Hargrove has a “discovery process” before taking clients on board. The purpose is to understand – as much as possible – the clients’ financial priorities, concerns and plans, he says.
It’s not enough to merely find an investment strategy, allocation or product that would be in the best interest of the client, says Strain; the strategy, allocation or product must fit with all the financial aspects of the client, he insists.
“We have to ask about, and take into consideration, things like what they are thinking about with regard to their family members, the charities they support or the passions that they have,” Strain says. “And then we have to ask why they think this way.”
Such discussions often lead to difficult conversations, according to Strain, because clients – especially those who are more senior in age – don’t necessarily want to face the fact that they must think of passing on or distributing their wealth. In many cases that’s because thinking about those topics means they must face the reality that they will pass away someday.
“We have to bring up these topics with our clients because our financial planning approach is to figure out exactly what is doable or not, and what are the risks involved,” Strain says. “We have to be fearless because we have to bring certain topics to the clients’ attention and help them.”
The most difficult conversations the firm’s advisors tend to have with clients are typically related to investment portfolio allocation, estate planning, insurance, and their overspending, “especially when we’re thinking of worst-case scenarios, because we want our clients to be prepared,” says Strain.
Strain won’t remove a topic from his agenda for recurring meetings with clients just because they were unwilling to discuss it previously.
“I will bring it back up again and will ask the clients’ permission to re-discuss,” he says. “That’s necessary when working for the client’s best interest.”
Strain says once he has established a personal connection with his clients and they understand the persistence in the line of questioning, they “can be pretty open.”
Halbert Hargrove has around $2.5 billion in client assets from multiple generations of clients – “from grandparents to kids in their 20s,” according to Strain.
Most of the firm’s account sizes range from $1 million to $10 million, but it also caters to clients with zero investments through the firm but who are children of older generation clients, he says.
Strain says the most common questions the firms’ clients raise include: Will they have enough to spend during retirement? How will volatile markets affect their investments? How much can they give to family members or charities?
“Part of our approach in financial planning is to really stress test our clients’ next 20 or 30 years,” Strain says. “It’s our job to think about that and make our clients think about that because many of them don’t think that far ahead.”
Strain says technological tools can also help build client trust and can help show that advisors are indeed working in the best interest of their clients.
“For example, by using a financial planning software, the technology analyzes the plan quantitatively without me giving having to give personal opinion or using qualitative information,” he says.