After a recent Fidelity survey showed that 85 per cent of millionaires count themselves as “self-made,” it’s hard to argue with the idea that wealth managers need to stay close to wealth creators. And one firm that seems to have no trouble working with wealth creators is Signature, with 85 per cent of its client base made up of first-generation wealth.
However, as Randy Webb, president and chief executive of Signature, points out to Family Wealth Report, the term “new wealth” can be misleading.
“New wealth is not new, entrepreneurs have been creating new wealth and liquidity around the creation of enterprise value for as long as we’ve been building businesses… It’s fascinating to me how often the idea of new wealth comes up as a new concept,” he says.
As such, Webb more often talks about “new wealth” in more accurate terms such as “new liquidity.” While this may take away some of the mystique of sudden riches, it perhaps more accurately portrays the challenges that come with them. And when looked at in this light, the needs of the “newly wealthy” become more apparent.
The business of wealth
“If you think about someone who’s been a successful entrepreneur it likely has been in a segment where their passion and their focus created the success…and then the liquidity created by a transaction forces them to take that passion and focus and turn it toward something (the capital markets) that by their nature requires you to be great at a lot of things,” says Webb.
“That looks pretty daunting to people,” he says. “It’s really just a transition from a number on a balance sheet to a number on a checking account that we’re involved in.”
Likewise, it’s a transfer of specific complexity – that pertaining to a business – to complexity that comes in many forms: investment management, estate planning, philanthropy, tax management, to name but a few.
At that point, creating some clarity for the client on their new business – of money – and translating the new challenges they face into terms they are familiar with could be key.
“One of the things we talk about at Signature is that we’re in the business of wealth management,” says Webb. “So many of our clients come to us from the success of a business strategy and what we do, or attempt to do, is really take that liquidity that’s created…and build the same level of strategic thinking, the same levels of goals and objectives, and of management against those goals and objectives, into how they think about their liquidity.
“You’re still very close to the sacrifices and strategic choices that created the liquidity, and that really drives our relationships in a different way, toward what you would really look at as a more business-level conversation, based around clarity of a balance sheet, clarity of cash flow, and income statement for that family,” he adds.