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Should advisers require 'monogamy' from clients?

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(Globalpost/GlobalPost)

By Jennifer Hoyt Cummings

NEW YORK (Reuters) - Many financial advisers accept that their clients work with multiple advisers - that's particularly true of the ultra wealthy, who often like to spread their money around.

Only about one of every three clients turns over all of their assets to one wealth manager, according to a survey of about 400 advisers from research firm Aite Group. Not all advisers are willing to accept a lack of loyalty.

Adviser Art Husami, owner of Santa Fe Springs, California-based Husami and Associates, requires - with some small exceptions - that his 50 wealth management clients foresake all others to work with him. If a client takes on a second adviser for no good reason (good reasons include maintaining a relationship with a bank or helping out a family member who is an adviser), he fires them - though he's only actually done that twice.

The idea of pruning a book is not new. Advisers routinely weed out clients who are rude to staff or require too much work relative to the size of their accounts.

Husami's approach is unusual in that he is taking that strategy to an extreme, said Sophie Schmitt, an analyst with Aite Group.

Husami says his one-adviser policy is not about arm twisting, deadlines or ultimatums. Instead he thinks this is the best way he can serve clients.

It comes down to being able to easily see where all their assets are and making enough of a fee so that he feels he can unconditionally spend time with them - even on things questions like whether they should buy or lease a car.

Most important, it helps him know that his clients are happy - if they wanted to keep some of their money elsewhere, he would have to question if he was failing them in some way.

Husami puts a lot of effort into screening potential clients, and only signs on people who like the idea of his monogamy model. They do not have to initially give him all their money to manage, but he expects them to eventually.

This all-or-nothing policy may sound audacious to some, since many clients like having different advisers for different investments.

So we asked Husami to describe how client monogamy works for him.

TAKING A STAND

Husami, 65, manages about $350 million in client assets for a set fee ranging from 0.5 percent to 1.3 percent of assets under management.

For that fee, he manages their investments but also gives them advice on issues like wealth transfer between generations, taxes and business ownership. He also gets commissions on certain large transactions, like annuity purchases, and he gets particularly upset when his clients take that business elsewhere.

About a decade ago Husami, who has been in the financial services industry since the mid-1990s, realized that the best relationships he had were with clients who had complex needs and let him manage all their money.

These clients, who typically owned one or more businesses and had multi-generational planning issues, let Husami delve into their financial lives.

So he gradually weeded out the clients who kept investments elsewhere and he focused on working with business owners.

About six years ago, a family who had roughly $200,000 invested with him went shopping elsewhere when they wanted to buy an annuity - typically a high commission product.

Husami got frustrated because he gives a lot of complimentary services to clients, like tax advising, in the expectation that they will turn to him when they buy investment products that confer sizeable commissions. He explained that to the clients, but soon after, they went elsewhere for a life insurance policy.

At that point he told the family he didn't think he could give them the time they deserved, and they parted ways amicably.

His other pet peeve is when clients want to use a second adviser to pit their investment returns against his.

"What are you testing me for? I cannot time the market," he said.

Husami is not so extreme as to say his clients cannot talk to other advisers. But if they do, he wants to know why, so he can address their concerns.

GRADUAL MONOGAMY

Phil Wood, president and chief executive officer of Omaha-based One Price Portfolio, says that in a perfect world, all of his clients would give him full authority of their money.

In reality, Wood thinks it is better to give clients more options.

"Why close the door on someone who can be a great client five to ten years from now?" he said.

Ryan Wibberley, chairman and chief executive officer of CIC Wealth Management in Gaithersburg, Maryland, is similar to Husami in that nearly all of his 125 clients give him all their investable assets to manage. Wibberley, however, does not draw a line in the sand like Husami when it comes to clients consulting other advisers.

"To be that disciplined and follow through is admirable," Wibberley said.

(Reporting By Jennifer Hoyt Cummings. Editing by Linda Stern, Lauren Young and Andrew Hay)

http://www.globalpost.com/dispatch/news/thomson-reuters/130816/should-advisers-require-monogamy-clients