Focus on Ultra-High-Net-Worth Clients, Part I

Focus on Ultra-High-Net-Worth Clients, Part I “The Ultra-High-Net-Worth Investor by the Generations” “Perspectives on Serving the Ultra-High-Net-Worth Space: An Interview with Jean L. P. Brunel and Charlotte B. Beyer” “A Mixed Blessing: Serving the Ultra-High-Net-Worth Market”

FEATURE | The Ultra-High-Net-Worth Investor by the Generations

The Ultra-High-Net-Worth Investor by the Generations

By Cam Marston

ltra-high-net-worth (UHNW) inves- Table 1: UHNW Breakdown by Race tors represent the top 1 percent of Uhouseholds by wealth, that exclusive Matures Boomer Gen X Total White non-Hispanic 95.5 94.5 70.9 92.1 segment so often praised and pilloried in the press. Black/African American 0.6 0.4 0 0.4 Hispanic 0 2.2 0 1.2 Not to be confused with merely high-net- Other 3.9 2.9 29.1 6.3 worth investors, each UHNW investor has Note: Other is a broad category that includes Asian. Source: Federal Reserve Board 2013 Survey of Consumer Finances a net worth of at least $25 million. The United States is home to 177,000 such households (Federal Reserve Board 2013) However, male UHNW individuals gener- particularly among younger generations. and has the world’s largest concentration of ate the jobs. The top 10 U.S. male entrepre- For example, 99.2 percent of UHNW Gen this upper wealth tier (Wealth-X 2015). neurs alone employ more than 865,000 Xers have a college degree (Federal Reserve people (Wealth-X and UBS 2014). Board 2013). As a group, UHNW investors have amassed their fortunes as entrepreneurs and busi- The following is a snapshot of the UHNW Communication and Trust ness owners, senior corporate executives, population in the United States: Naturally, attracting and retaining an and consultants. The wealth of this popula- UHNW client is any financial advisors’ tion is 76 percent self-made; only 13 per- • The United States is home to more bil- goal. But overlooking some basic relation- cent have benefited solely from inheritances lionaires than any other country in the ship fundamentals can lose UHNW clients. (Wealth-X and UBS 2014). world. • New York City is the U.S. city that is For example, communication is key to a The face of the 1 percent is mostly white home to the most UHNW individuals— successful UHNW advisor-client relation- and non-Hispanic, and this population 12 percent of the total U.S. UHNW ship and response time is crucial. decreases only incrementally between gen- population. According to one Vanguard report, not erations. Nearly 96 percent of the mature • Charlotte, North Carolina (population returning phone calls in a timely manner is UHNW population and 94.5 percent of 800,000), has more UHNW individuals the number-one reason UHNW investors UHNW baby boomers fit this profile (see than the country of Israel (population switch advisors (Vanguard 2014). table 1) (Federal Reserve Board 2013). 8 million). • California is the state with the largest Good communication is not limited to cli- The UHNW world is a man’s domain UHNW population, with 13,445 UHNW ent and advisor. Sandeep Varma, president because men represent 87 percent of individuals (Wealth-X 2015). of ATS Advanced Trustee Strategies, which UHNW individuals. Women comprise • 59 percent of UHNW are retired; 16 per- specializes in estate planning, always 13 percent of the UHNW population, but cent are semi-retired. includes the family. there are more female UHNW individuals • 25 percent of UHNW are still working. in the United States than there are UHNW • 89 percent of UHNW use a financial “Before we implement strategies, we have a individuals total in all of India. advisor (Vanguard 2014). family meeting that includes the children, • 9 percent of U.S. UHNW individuals are without their spouses, and we have regular In the United States, UHNW women have in the technology industry (Wealth-X family meetings throughout the relation- more individual net worth than UHNW and UBS 2014). ship,” Varma said in an interview. men. On average, female UHNW individuals are worth $160 million and male UHNW individuals have higher levels of Trust is important as well. Varma said he UHNW males are worth $132 million. education than those who are not UHNW, believes that a team approach can help to

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build trust and credibility with a client. An personal potential as a key to happiness produced a desire for financial security and advisor who claims to have all the answers (Diener et al. 1985). comfort, and they achieved it through dis- can jeopardize that relationship. cipline and riding a wave of good economic U.S. UHNW individuals are the world’s times to amass wealth. “A 70-year-old client has a wealth of experi- most generous and most frequent givers. ence, both good and bad,” Varma said. The typical UHNW philanthropist donates Matures lived in a more traditional era “They know that no one knows everything $25 million in a lifetime (Wealth-X and where men worked and women stayed and they like knowing that you have a team Arton Capital 2014). home to raise children. Loyalty was given of qualified professionals to rely on for cor- their employers and expected in return. rect and up-to-date information. Some UHNW women are only a fraction of that A worker could expect to work at one com- times admitting you don’t know the population but around the world female pany and retire with a pension. answers, but will confer with another pro- philanthropists donate 26 percent more fessional to get the best solution for the cli- than their male counterparts (Wealth-X Conservative, patriotic, and conformist, ent, builds trust and credibility. Younger and UBS 2014). matures understand the nobility of sacrifice clients, on the other hand, often expect the for the common good. A mature UHNW advisor to have all the answers all the time.” UHNW by Generation investor has a desire to feel needed and val- UHNW investors represent a fraction of ues simplicity. Being atop the wealth ladder, the UHNW the overall population and when broken investor is less risk-averse than those in down by generation, the numbers are “The older investors seem to be much more lower income tiers. Among UHNW inves- minuscule (see table 2). The percentage of normal millionaire-next-door types,” tors, investor independence is significant. UHNW millennials is a tiny fraction of the Varma said. “Often we find these clients On the whole, UHNW investors control whole despite the presence of high-profile spend less on a monthly basis than clients 40 percent of their assets on their own, members such as Mark Zuckerberg, that have a much lower net worth. Many of allow advisors to handle 22 percent, and the older ultra-high-net-worth clients live consult with an advisor but make decisions In spite of their wealth, UHNW individuals in the same house they’ve lived in for 30 or themselves on the remaining 38 percent of all generations fear they will run out of 40 years. A client recently told me that his (Vanguard 2014). money. According to a 2015 report by SEI wife, who almost never goes clothes shop- and Scorpio Partnership, U.S. UHNW indi- ping, went to a Goodwill store to buy An advisor can expand their share of the viduals expect, on average, that their port- clothes and was thrilled with the deals pie by getting a clear picture of a UHNW folio investments will grow 15.8 percent in she found.” investor’s entire portfolio because assets the coming year yet 59 percent say their may be hidden or unavailable now but biggest anxiety is running out of money or Due to the age of this generation, the need available in the future. A portfolio review being unable to maintain their current life- to build relationships with their heirs is can ensure proper asset allocation and styles (SEI and Scorpio Partnership 2015). paramount. By involving family members, reveal opportunities to add further value to you have a chance to acquire the younger investment decisions. Matures: Traditional and Thrifty generation as current or future clients and Although their numbers are dwindling, the keep the money where it is. Often heirs UHNW individuals have large social net- mature generation still represents a sub- leave their inheritances in place for about a works that on average include seven other stantial percentage of UHNW investors. year and then take the money to the first UHNW individuals and usually one bil- advisor who offers help (Vanguard 2014). lionaire (Wealth-X and UBS 2014). Like This generation’s individuals were born most people, UHNW individuals have before 1946 and grew up during the Great These older investors have a fear of running social networks that extend to online com- Depression and World War II. Their “waste out of money despite having fewer years to munities. Nearly 25 percent of the UHNW not, want not” attitudes are a direct result spend it. They fear losing it to market risks population accesses social media at least of their experiences during these times. The or having to spend it all on long-term care once per day, with 38 percent signing in to financial instability of their early years or healthcare costs. LinkedIn and 25 percent checking out YouTube (Vanguard 2014). Table 2: UHNW Households

Does wealth buy happiness? The ultra- Matures Boomer GenX Total Number of households within a wealthy are more likely than everyone else 59,291 96,468 21,061 176,821* to say happiness depends on winning the generation classified as UHNW appreciation and respect of others. They’re * Number of households represented. Source: Federal Reserve Board 2013 Survey of Consumer Finances also more likely to cite the realization of

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Baby Boomers: Two Generations in One Table 3: Total UHNW Household Assets by Generation (median, in $ millions) At 76-million strong, boomers comprise an influential generation of people born Matures Boomer Gen X Total* between 1946 and 1964. Many consider Total value of assets 33.4 36.7 42.7 36.7 them two generations in one. Most people think of boomers as the generation with the Total value of financial assets 8.8 19.2 3.1 15.7 rebellious and influential youth culture of Total value of nonfinancial assets 24.8 20.7 39.2 24.3 the 1960s, and that label would apply to the Total value of directly held stocks 0.6 2.2 0 0.6 leading boomers, those born between 1948 Total value of business(es) in which 8 9 27.3 10 and 1955. The larger contingent, however, they have active or non-active interest is the trailing boomers, those born between * Total is all UHNW people, regardless of generation. 1956 and 1964. Source: Federal Reserve Board 2013 Survey of Consumer Finances

The two have slightly different mindsets. Table 4: UHNW Percent Entrepreneurs by Generation Older boomers tend to be more idealistic and younger boomers more pragmatic. Matures Boomer Gen X Total* Younger boomers tend to be more skepti- Percent of UHNW individuals who cal, less confident with, and less loyal to are currently self-employed or in a 58.8 62.5 81.5 63,5 their financial advisors. This means advi- business partnership sors need to give younger boomers more * Total is all UHNW generations. attention and determine how their needs Source: Federal Reserve Board 2013 Survey of Consumer Finances are different. like those of their children. Like their par- and prepared to make things work on their Both older and younger boomers value ents, boomers tend to have strong existing own, despite the slacker label given to them personal freedom and self-expression over relationships with their financial advisors. in their youth. The underlying persona of authority. They have little respect for those They are relatively comfortable with the the Gen Xer is not a lack of motivation but that speak at them; instead, boomers advisor-led model, unlike their Gen X and a lack of trust. respect those who speak with them. Gen Y heirs (Accenture 2015). The optimism demonstrated by baby Due to the cultural turmoil of the 60s and Nearly 50 percent of ultra-high-net-worth boomers in the 1960s gave way to the scan- 70s, older boomers have strong social investors are extremely or very likely to dal, inflation, world crises, and recession in awareness. They respect racial and cultural retain their parents’ advisors. Therefore, it’s the 70s and 80s. As a result, Gen Xers culti- diversity, believe in safeguarding the envi- important that advisors adjust to the next vated a deep sense of skepticism, cynicism, ronment, insist upon equality between the generation’s attitudes (Leonhart 2014). and pessimism. The advent of the personal sexes, and see individual liberty as central computer and the Internet during their for- to the American experience (Fidelity and The most generous of the generations mative years made Gen X the first tech- Guaranty Life 2013). worldwide, baby boomers represent more savvy generation. Technology also fed their than 53 percent of the UHNW philanthro- need for self-reliance and self-education. Mostly, boomers refuse to consider them- pist population (Wealth-X and Arton selves old. They are the group that insists Capital 2014). This fierce self-reliance and technological upon defying and redefining old age. They savvy has resulted in an entrepreneurial want to be treated as vibrant adults with Gen Xers: Self-Reliant, Tech-Savvy generation. Although they account for optimistic futures. Generation X was born between 1965 and fewer UHNW households than matures or 1979 and numbers roughly 61 million peo- boomers, Gen Xers have the most total That future includes making sure they take ple in the United States. Among the UHNW assets—$42.7 million (see table 3). That’s care of their families. The great transfer population, Gen Xers represent approxi- because 81 percent of this population is from the mature generation to the boomers mately 21,061 households (Federal Reserve either self-employed or in a business part- is still taking place, but an even larger Board 2013). nership, so their assets may reflect the wealth transfer from the boomers to their paper value of businesses (see table 4) heirs has started and will continue over the Growing up with less economic and family (Federal Reserve Board 2013). next 30 to 40 years. security than the boomers, many Gen Xers were raised in households where parents In fact, our research at Generational Boomers’ attitudes toward advisors are both worked or were divorced. They were Insights (https://generationalinsights.com) more like those of their parents and less the original latchkey kids—self-sufficient has found that of the Fortune 500’s top U.S.-

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based companies classified as “unicorns” set to receive the bulk of the boomer clients who own fewer assets will find little (start-up companies that have soared to wealth transfer. This is clearly a population success. With affluence comes options, and a $1-billion valuation or higher based on the rise. the UHNW investor can pick and choose on fundraising), 58 percent are led by with which advisor—or team of advisors— Gen Xers. Ease with technology, a sense of optimism, to place their money. Advisors also need to and a sense of entitlement are all hallmarks remember how well-networked the UHNW UHNW Gen Xers like to spend money, too. for this generation. They grew up in a time investor is. This creates opportunity for the They are the most likely of all age groups to of broad economic and technological advisor who develops deep relationships expect the greatest increases in spending in expansion but have been chastened by the with clients and who may be referred to an the coming year (SEI and Scorpio Great Recession. They entered the real investor’s peers. Partnership 2015). world at a time when jobs were hard to find. Cam Marston is president and owner of “This generation is often much bigger Generational Insights, where he focuses on spenders,” Varma said. “They buy bigger, Millennials also have a sense of social and generational change and its impact on the more expensive houses and cars and environmental responsibility. They are marketplace. He is author of The Gen-Savvy upgrade them more often.” attuned to peers and trendsetters and make Financial Advisor. He earned a BA in commu- avid use of social media. This connected- nication from Tulane University. Contact him Still, the younger affluent tend to be more ness means that they tend to operate with a at [email protected]. socially responsible and often seek out herd mentality, following the advice and less-traditional ways to use their wealth to actions of their peers, with much less per- References Accenture Consulting. 2015. The “Greater” Wealth help others (Vanguard 2014). sonal due diligence than Gen X. As a result, Transfer, Capitalizing on the Intergenerational Shift in finding success with a small but influential Wealth. https://www.accenture.com/us-en/insight- capitalizing-intergenerational-shift-wealth-capital- Gen X has different attitudes toward invest- group of millennial clients will have a rip- markets-summary.aspx. ing than their boomer or mature parents. ple effect with their peers and throughout Diener, Ed, Jeff Horwitz, and Robert A. Emmons.1985. Happiness of the Very Wealthy. Social Indicators They expect transparency and control and their circle of influence. Research. http://psy2.ucsd.edu/~nchristenfeld/ readily share information with peers Happiness_Readings_files/Class%206%20-%20 Diener%201985.pdf. through a variety of social media forums. By involving this generation in their par- Federal Reserve Board. 2013. Survey of Consumer They also are not tied to traditional sources ents’ financial affairs early, a financial advi- Finances. http://www.federalreserve.gov/econresdata/ scf/scfindex.htm. of investment advice or service (Accenture sor has a chance to acquire this coveted Fidelity and Guaranty Life. 2013. Beyond Baby Boomers. 2015). demographic as current or future clients. http://www.tarkentonfinancial.com/NEW_PDF/ MarrionWhitePaper.pdf. Leonhart, Megan. 2014. Half of HNW Investors Keep They are less fearful of losing money than Conclusion Parent’s Advisors. http://wealthmanagement.com/ client-relations/half-hnw-nextgen-investors-keep- their older counterparts, but the way they The transfer of wealth from the boomers to parents-advisors. earned it can affect their comfort level. the millennials has begun. Advisors whose SEI and Scorpio Partnership. 2015. Algorithms of Wealth: Wealthiest Americans May Be Their Own Worst UHNW clients are primarily boomers will Enemies. http://www.thinkadvisor.com/2015/08/26/ “Someone who is in their 30s who inherited need to adjust to the communication and wealthiest-americans-may-be-their-own-worst- enemie?page_all=1. wealth is more afraid of losing it than social styles of the millennials if they want Vanguard. 2014. Today’s Affluent investors: Insights and someone in their 70s who built it,” Varma to retain the boomer’s children as clients. Opportunities. https://advisors.vanguard.com/iwe/pdf/ FASSRSB2.pdf?cbdForceDomain=false. said. “This is because someone who built And, as our research reveals, advisors are Wealth-X. 2015. American Ultra Wealth Ranking 2014–2015. their wealth knows how to make it again.” wise to offer to help the millennials with http://www.wealthx.com/wp-content/uploads/2015/ 03/American-Ultra-Wealth-Ranking-2014-2015.pdf. their assets once they’ve received them. Wealth-X and Arton Capital. 2014. Philanthropy Report Gen Y/Millennials: Entitled and 2014. http://www.wealthx.com/philanthropy-report/. Wealth-X and UBS. 2014. World Ultra Wealth Report 2014. Coveted Perhaps the most surprising thing about http://www.worldultrawealthreport.com/home.php. The millennial generation was born each of the generations' UHNW investors is between 1980 and 2000. They claim some how typical they are of their generational high-profile members, but their presence profiles. Overall, ultra-high-net-worth among the UHNW is tiny due to their investors differ from their generational youth. But give them time. peers in only one significant way and it is the most obvious one—they have a much Millennials, also known as Generation Y, greater net worth than the others in their have been called “echo boomers” because generation. Wealth has not changed the they are primarily the offspring of baby basic generational attitudes that were boomers. At 85-million strong, they out- formed in their youth. However, the advi- number their parents’ generation and are sor who treats them just like their other

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PERSPECTIVES ON SERVING THE ULTRA-HIGH-NET-WORTH SPACE An Interview with Jean L. P. Brunel and Charlotte B. Beyer

By Scott Welch, CIMA®

s the Investments & Wealth Monitor Foundation, which she founded in 2012 to sup- Editorial Board brainstormed about port innovative education and mentoring for A building an ultra-high-net-worth girls and women (www.principlequest.org). (UHNW) issue, we thought it would be inter- esting to get the perspectives of someone who I asked Beyer and Brunel 10 questions about is an advisor to UHNW families and some- the UHNW space, and here is what they had one who represents UHNW consumers of to say. wealth management services and solutions. Jean L. P. Brunel Charlotte B. Beyer Welch: F. Scott Fitzgerald famously wrote: “Let We quickly identified Jean L. P. Brunel, CFA®, to represent the me tell you about the very rich. They are different from you and UHNW advisor and Charlotte B. Beyer to represent the UHNW me.” Is that true or just a cliché? If you believe it is true, tell me how family, because each is a true industry thought leader. and what that translates into from the perspective of the UHNW in terms of what they expect from their advisor(s). Brunel and his firm, Brunel Associates, offer wealth education and analysis. There he capitalizes on more than 35 years of experience Beyer: I would agree with Ernest Hemingway, whose wry reaction to that has focused on tax-aware investing, goals-based wealth man- Fitzgerald was, “Yes, they have more money.” I would add, however, agement, and the role of alternative assets in balanced portfolios. that our industry has, for decades now, trained the UHNW to feel Brunel was chief investment officer (CIO) of JP Morgan’s global entitled, to expect too much. private bank, CIO of Private Asset Management at US Bancorp and, most recently, CIO of GenSpring Family Offices. He has been Often professionals are too timid in working with the very wealthy. the editor of the Journal of Wealth Management since its founding They are too deferential, treating the client (or prospect) not as a in 1998, and is the author of the books Integrated Wealth partner but rather as the boss. Clients and advisors who enjoy the Management: The New Direction for Portfolio Managers and Goals- most successful relationships acknowledge the need for balance. Based Wealth Management: An Integrated and Practical Approach to Changing the Structure of Wealth Advisory Practices, as well as One investor said it well: “[There is a] conflict between a family’s many peer-reviewed articles. In 2015, he received the inaugural desire to fully customize services to its specific family unit versus a IMCA J. Richard Joyner Wealth Management Impact Award. for-profit entity’s desire to seek homogeneity in the delivery of services to maximize profitability through scalability. It’s very hard to Twenty-five years ago, Beyer founded the Institute for Private find a good balance.” Investors (IPI), where she has used her Wall Street experience to help improve the relationships between wealthy investors and their Brunel: I do not believe it is correct to generalize most of the time, financial advisors. She served as chief executive officer (CEO) for and this is particularly true in the realm of the very rich. The fact is 21 years until her retirement in 2012. She also collaborated with that we are talking of anywhere between a few thousand to a lot The Wharton School in 1999 to create the first private wealth man- fewer than a million people worldwide if you extend the definition agement curriculum for UHNW families. Her book Wealth of UHNW to $10 million or more in assets. The sample is way too Management Unwrapped is modeled after her lectures inside that small for any generalization to be meaningful. curriculum and includes the same lessons Beyer shares with her students, more than 800 investors with substantial assets from Realistically, the most significant, and material, difference between around the globe. Now, she devotes time to the Principle Quest our clients and the rest of the world is that they frequently have

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more options. Many individuals must live from paycheck to paycheck, and often the selection of their career is dictated more by Figure 1: Wealth Management Bagua what they can do and find than by what they love. Business and personal By contrast, the ultra-affluent typically have the option of focusing administration administration budgets and Trust on what they want to do, be it income-generating or not. Wealth is planning an enabler, but it does not do anything for anyone unless that anyone Philanthropy uses it wisely and works toward the achievement he or she seeks. Risk management

Welch: We often think of “wealth management” from an investment administration Insurance consultant’s perspective—that is, our primary value proposition WEALTH focuses on the client’s investment portfolio. Is that an appropriate MANAGEMENT

frame of reference when working with the UHNW? If not, what are Estate plan Wealth transfer evaluation

the solutions and services that UHNW value the most? and selection

Risk allocation Risk

Manager Manager

Asset allocation Asset

management

Investment Investment

Brunel: Most ultra-affluent families have their own focus and it education

technology

Financial Financial would be an error again to generalize. As a rule one can argue that and counseling

individuals in that world have three fundamental “wealth stake- and Reports

accounting Family governance Family holders”: personal, dynastic, and philanthropic. and planning Tax

Further, their goals run the full gamut of needs, wants, wishes, and dreams, when dealing with what they seek to achieve, and night- Courtesy of Charlotte Beyer mares, fears, worries, and concerns, when dealing with what they © 1999–2015 All rights reserved. seek to avoid. Thus, when dealing with service providers, related to the management of their wealth, their principal focus must be Figure 2: Playing Chess on Four Boards at Once driven by whether they are more interested in personal, dynastic, or philanthropic issues and whether they have more wealth than needed to achieve all goals. When they do not, they must either take financial risks to grow the wealth to achieve them or scale back either the goals themselves, the degree of urgency with which they want to achieve them, or the time frame over which they want to reach them.

This will lead certain families to focus on asset management, in a tax-aware or tax-oblivious manner, on generational planning and wealth transfers, on family education, or on many other dimen- sions of the challenge.

Beyer: I liken this bias to the chief executive officer (CEO) of a company firing all employees except those in the IT department because the CEO is so enamored of technology and loves hearing about IT innovations. Courtesy of Charlotte Beyer © 2015 All rights reserved. It is self-destructive to ignore the company’s other departments. As I suggest in Wealth Management Unwrapped, the CEO of My Wealth, Inc. knows that there are seven other departments: Beyer: The UHNW require, and expect, a more holistic approach. family governance and education, personal/business administration Before long, even those with a small nest egg will, too. An IPI and budgeting, risk management/insurance, tax planning and member expressed it this way: “This is your livelihood, but it’s administration, wealth transfer, trust administration, and philan- my life.” I’ve used the metaphor of playing chess on four boards thropy (see figure 1). at once; a move on one board impacts every other board (see figure 2). Welch: Stipulating that investment advice has at least some value to the UHNW, what (if any) are the primary differences between the Brunel: Philosophically, the most important potential difference needs and objectives of the UHNW versus the merely wealthy? between the ultra-affluent and the merely wealthy is that the

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classical asset/liability conceptual framework is increasingly hard families had experience of choppy markets, either by having per- to use in the ultra-affluent world. sonally lived through them or by having been told about it.

A merely wealthy individual may truly have one practical goal that Beyer: Deep psychological scars remain for consumers of virtually dominates the landscape: spending a comfortable retirement and all financial services. The loss of trust seems almost permanent, leaving whatever is left over to future generations, charities, or and yet, UHNW had more coping options. both. In that context, reaching some minimum required target “retirement capital” can be analyzed as a classical bullet liability, Many moved into direct investing, both direct lending and private which can then serve as the basis to formulate the applicable strate- equity, feeling they had more control, which felt better than relying gic asset allocation. on Wall Street. Today’s headlines still report on multi-million- dollar fines for various misdeeds committed years ago—an almost The ultra-affluent can afford a considerably wider range of goals, as daily reminder of the crisis and its collateral damage. discussed in the earlier question, with each of these goals having a different time horizon and urgency level. The combination of the two helps determine what reasonable “funding cost” should be used for each of the goals to determine an appropriate level of assets Too much wealth in early needed to achieve the goal, over the desired time horizon and with “adulthood is not universally the desired level of urgency (required probability of success), and the viewed as a healthy or ideal way funding cost will be associated with a resulting strategic asset allocation appropriate to that goal. to ensure a family’s success. Advisors need to first grasp how Thus, the risk profile of the individual will not be formulated from the family defines legacy … the top down, but by aggregating and appropriately weighting the risk profile associated with each goal. ”

Welch: Many investors’ risk aversion and/or investment philoso- Welch: Almost by definition, when dealing with the UHNW, you phy changed dramatically after the events of 2008. Did that happen are dealing with multi-generational or dynastic wealth. What does in the UHNW space as well and, if yes, how so? that mean with respect to the solutions they expect from their advisors? Brunel: All investors are in some way subject to the vagaries described by behavioral finance. Thus, it would be ridiculous to Beyer: Increasingly, I hear families following the lead of Warren argue that this or that segment of the universe did not. Buffett, rejecting the whole idea of dynastic wealth. One partici- pant at the Wharton Private Wealth Management program pro- Yet, one can observe that those individuals who had spent the time claimed he expected every generation after him to be G-1. to develop reasonable goals-based asset allocations did not suffer as much as those who did not. Several reasons explain this. Another family in attendance told of how the proceeds from the sale of the business created by their father and uncle were inside a The most important is that a definition of success is created for each foundation. They were far more excited that their mandate was to goal, such that, for short-term goals that had to be achieved with a spend it down in their lifetime. high degree of predictability, for instance, the crisis not only did not hurt, but it helped: lower-volatility assets (i.e., cash and short-duration Too much wealth in early adulthood is not universally viewed as a investment-grade bonds) actually did not lose value and, in many healthy or ideal way to ensure a family’s success. Advisors need to cases, appreciated in value during the crisis. Thus, the expense- first grasp how the family defines legacy—because it does differ defeasing goal was achieved and more capital was leftover than antici- dramatically from one family to another. pated; the crisis was therefore not an unmitigated catastrophe. Brunel: The answer to that question is found by combining the Second, in the process of determining the appropriate funding cost, answers to questions 2 and 3. This is one of the areas where it is individuals had discussed potential return variability in practical most important for the advisor to have the ability to operate across rather than theoretical terms. Thus, they were aware that markets the well-known silos in the industry (whether they involve invest- could experience serious downdrafts and were not as surprised as ment, tax planning, gifts and wealth transfers, and ultimately future others when it happened. generation education).

A final reason, which does not have much to do with the goals- Families use quite significantly different approaches when dealing based process, is that many multi-generational ultra-affluent with their various issues (focus on taxes, focus on philanthropy,

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maximize early transfers, minimize early transfers, risk-seeking Welch: A couple of questions regarding “selling into” the UHNW versus risk-averse, and many others). Thus, the advisor needs to be space. Question 1: The UHNW very often highly value their aware of all the various interactions that may occur (investments, privacy and are very reluctant to engage with people they believe income taxes, estate and gift issues, philanthropy, insurance, risk are trying to sell them something. Given that understandable reti- management, and others), though he or she is not required to be a cence, how do you recommend advisors approach the UHNW specialist in all areas. Understanding these interactions and the to establish a relationship? way in which whatever the advisor’s area of specialty is will allow him or her to contribute to the client’s effective finding and imple- Beyer: The most successful interactions I’ve seen are those where menting of the most appropriate solution. the professional is not attached to the outcome (read sales target). Instead, the advisor shows genuine interest in discovering more Note that a goals-based wealth management framework is uniquely about the family’s situation and decision-making process. suited to dealing with the issue, because it is designed to operate across as many “accounts” as there are goals and/or structures; it When an advisor’s questions intrigue a family instead of putting should be able to combine taxable and tax-exempt components, them on the witness stand, the result will be a sale, but not neces- and to use both cash-flow as well as “label”-driven processes, to sarily the product du jour. One advisor described it this way, recognize the difference between goals that have specific cash-flow “I know they will buy from me someday (just not necessarily streams attached to them (even if a stream is solely comprised of today) because now they trust me and know I will come back some future bullet payment) and those which are of a more when I have something truly relevant.” “generic” nature such as “protect my capital” (in real or nominal terms) or “grow my capital.” Brunel: I do not believe there is much alternative to any conversation starting as a result of an introduction from someone who is Welch: What is the most appropriate way to charge for services and trusted by the potential client. solutions rendered—in your experience what approach(es) worked well and what approach(es) did not? The only other solution may be through what I might call the establishment of a position of intellectual leadership, such that the Brunel: This is a difficult question because there may be more potential client seeks the advisor. than one way to skin that cat effectively. Ostensibly, time-based fees have the benefit of being ultimately tailored to the needs of In either case, the point is that there is no direct, cold-call-type the clients, with these needs assessed in function of the skills and approach to the potential client. time needed to address them. Yet, too narrowly defined time fees (such as by the hour) can leave a bad taste in the client’s mouth Welch: Question 2: When working with the UHNW, advisors are with the feeling that the meter is on each time he or she talks to often interacting with the family representatives of single- or the advisor. multi-family offices. Any recommendations on how to initiate and maintain those relationships? Asset-based fees can make sense when the advisor’s duty is chiefly focused on the management of the assets; yet, even there, there Brunel: The answer differs considerably whether one is thinking of are issues to the extent that the challenge is rarely a function of a single- or a multi-family family office. Whenever dealing with a raw asset numbers. In the end, I suspect that the answer rests single-family office, whether the contact person is a family member not so much on the method but on the way the fee is assessed or a hired professional, I think we are back in the prior situation of and explained. having to rely on some form of introduction. The guard that people within a single-family family office must maintain makes it virtu- Indeed, a solid conversation linking the work with the fee, however ally impossible to get the kind of necessary conversation going. it is eventually computed, can go a long way toward making sure Sound-bite conversations, in which one would typically engage that there is total perceived alignment between the interests of the when having an initial, non-introduced contact, are totally mis- various parties. Most of the families do want advisors to make matched with the detailed understanding that one must be able to enough to be able to stay in business and prosper; what they typi- demonstrate. cally do not want is to feel they are fleeced or that there is a conflict of interest between them and their managers. More to the point, the initial sessions must be centered on the advisor listening to the client; people who are very good at selling Beyer: Sophisticated UHNW families prefer a project, retainer, or themselves are rarely equally good at being a quiet and attentive complexity-fee arrangement over a straight assets-under-manage- listener. ment model. This can be renegotiated every few years, and while not as predictable for the firm’s budgeting, this approach is more Multi-family family offices are a different kettle of fish. There, any realistic if a firm expects to match resources to clients profitably. sale is really more of an “engineer to engineer” situation, because

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most successful MFOs tend to have different skill sets in the man- marize the issues you believe are most important when working agement and advisory elements of their firms. with the UHNW, or to discuss any important issues that we have not yet talked about. Beyer: The most common mistake I see is the advisor undermines the family office executive by trying to bypass the family office. Just Brunel: The questionnaire was quite complete. In my view, the as bad is viewing the executive as a low-level gatekeeper. Often the fundamental issue remains for the advisor to be totally committed family office executive is the most trusted advisor. Better to ask to be an interpreter whose mission is to help the client achieve his about how decisions are made, recognizing that each family office or her goals. Being an interpreter means understanding the issues is unique. in the client’s own language and making sure that any communication that requires technicalities is handled in plain language rather Welch: Do you see any differences between working with male ver- than jargon. sus female UHNW clients? If yes, please explain. Being focused on helping the client achieve his or her needs Beyer: Ignore the women in the room—daughters, wives, sisters— revolves around the ability to ferret out what those needs are— at your peril. I’ve heard countless stories from women about how digging deeper into dreams when necessary; to identify the sources male advisors don’t look them in the eyes, speak only to the men at of technical knowledge that will be needed to address the issues at the table. Generalizing about the differences is silly; however, most hand; to design a solution that takes all issues into consideration; of us accept the treatise of the book Men are from Mars, Women are to build a delivery team—which, in single-proprietor firms, from Venus. involves bringing outside resources to bear as needed—that can demonstrate that all the skills are in place; to seek all possible In my experience men can be too quick to bestow “guru” status to a sources of feedback to ensure that no situation develops where the firm or individual. Many advisors claim they follow the endowment client is unhappy without the advisor knowing; and to remain suf- model made famous by David Swenson at Yale. But recall David is ficiently humble to seek to help the individual rather than to the first person to warn investors, “You can’t do what I do.” demonstrate how smart one is.

Confident women often will ask more questions because they want Beyer: Investors at all wealth levels need to step into the shoes of to learn enough to partner with you and not feel either stupid or CEO of My Wealth, Inc. This does not mean reading volumes of uninformed. It’s funny that many readers of my book assume it is technical investment textbooks, but rather being a responsible intended for women and are quite surprised when I tell them most CEO. A CEO accepts that no one is a better expert on the needs of of the anecdotes in Wealth Management Unwrapped are told by that company, My Wealth, Inc. A CEO demands meaningful male investors. reports and partners with vendors.

Brunel: My experience is too limited to comment with any degree Partners treat each other with respect and are not trapped in a of conviction. I have never felt that sex was a primary determinant. boss/subordinate dynamic; partners are candid with one another; Rather, it has been important to shy away from stereotypes and and most importantly, partners each gain a tangible reward from respect the fact that certain individuals will be more sensitive or working together. intuitive than others. Sex does not always provide a good predictor of this. Welch: Closing Note: My thanks to both Charlotte and Jean for sharing their time, experience, and expertise with the readers of The only other pitfall I have seen and that must be avoided is to fail Investments & Wealth Monitor. I have been privileged to know to know or recognize who owns the money. Thus, I was once in an them both for more than 15 years, and I continue to learn from environment where the wealth creator was the wife of an otherwise them every day. highly successful industry CEO; the advisor I was accompanying almost lost the opportunity when he kept talking to the man, Contact Brunel at [email protected]. rather than balancing the conversation between the two spouses. Contact Beyer at [email protected]. The wife’s face lit up when I redirected the conversation with an open acknowledgement that it was her money after all—this was all the Scott Welch, CIMA®, is chief investment officer with Dynasty more important because, in the case in point, she had created—rather Financial Partners. He earned the Investment Strategist and than inherited (another stereotype)—the wealth in a profession where Alternative Investments certificates from IMCA. He earned a BS creativity and originality are more important than brashness. in mathematics from the University of California, Irvine, and an MBA in finance from the University of Massachusetts Amherst. Welch: Thank you for your time and for your enlightening Contact him at [email protected]. responses and perspectives. Please take this opportunity to sum-

JANUARY / FEBRUARY 2016 13

A MIXED BLESSING Serving the Ultra-High-Net-Worth Market

By Robert B. Seaberg, PhD

inancial advisors are attracted to enjoyable. They have a strong tendency to special treatment; but innovative touches, the ultra-high-net-worth (UHNW) associate with people like themselves, and both small and large, can surprise them. An Fmarket like iron filings to a mag- they expect those with whom they work to UHNW advisory team I know hired a staff net. The allure of potentially significant be high achievers. member from the hospitality industry whose revenue streams indeed may blind them sole responsibility was to spend each day to what it will take to deal successfully In the realm of exclusive treatment, which thinking of ways to surprise clients beyond in and with this market. That judgment encompasses service, client experience, and their expectations. Some of these surprises results from decades of experience working connections, that means having a leading- involved helping clients save time by doing a with UHNW clients and advisors seeking edge technology platform that includes task for them—for example, lining up sev- to work with them as well as helping to client relationship management, account eral venues for a 60th birthday party, so the develop an industry-leading educational aggregation reporting, all aspects of invest- client had only to choose one from the program on areas of critical importance to ing (access to all products and services), group, and then making all the arrange- UHNW clients. So it is that the first step risk management, and advanced planning. ments for the party. in building and maintaining a successful It means offering a level of responsiveness UHNW practice entails formulating a real- that exceeds clients’ expectations, a fact Connections and Client Passions istic understanding of the costs imposed that, in concert with the complexities of Connections can form a distinct and by running such a practice. Those costs business and family lives, demands a major invaluable way to serve UHNW clients and involve providing what UHNW individuals investment of time—and thus necessitates a to differentiate a practice. UHNW individ- value most: exclusive treatment, a deep and very limited clientele. It means hiring and uals are themselves well-connected. singular level of trust, and unique insights. maintaining an advisory team that reflects According to the Wealth-X/UBS World The cost of entry includes state-of-the-art and practices the “serving heart”—an atti- Ultra Wealth Report 2014, the immediate technology; adequate support personnel; tude that always considers the client’s needs social complex of UHNW individuals access to experts and centers of influence; as paramount. Isadore Sharp, founder includes seven other UHNW persons, at and, due to the inordinate amount of time of the Four Seasons Hotels and Resorts, least one of whom is a billionaire. These required to work with UHNW clients, it epitomized the “serving heart.” Sharp built complexes often share similar beliefs, inter- also includes serving a significantly limited the reputation of his business by hiring ests, and hobbies.1 At the same time, by vir- number of total clients. But the total costs for attitude, and he is known for saying, tue of their wealth, UHNW persons are do not stop there. “Competence we can teach; attitude is exposed to high achievers in a variety of ingrained,” (see e.g., Frank 2007; Johnson different occupations and fields, especially Client Expectations and 2008; Murphy 2010). in areas with which they may be particu- Exclusive Treatment larly au courant, such as art or philan- Because the overwhelming majority of Some advisory teams, realizing the impor- thropy. Being able to offer UHNW clients UHNW persons are self-made as opposed tance of exclusive treatment, actually hire connections with these types of persons, to having inherited wealth, these clients team members whose primary responsibility whether through one’s firm or one’s own display the characteristics of successful is to think of creative experiences for clients— network, provides a unique value. Indeed, high achievers. That is, they are smart, opti- opportunities to make them feel special and when directed to the adult, millennial chil- mistic, motivated, focused, persistent, pas- to make their family members feel special as dren of UHNW clients, such connections sionate, and very demanding. They view well, in ways they hadn’t considered them- can be one of the best ways to develop success as due to personal responsibility, selves. This is no simple endeavor when strong relationships with family members challenging tasks as opportunities, and dealing with people who can experience who are not primary clients. That is, expos- engaging in those tasks as valuable and just about anything they want. They expect ing these children to unique and successful

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entrepreneurs or experts in impact philan- checking the knowledge levels of those exchange-traded funds (ETFs), hedge thropy provides suitable role models and advisors. They assume successful advisors funds, and private equity—not just what may substantively enhance the develop- have the requisite knowledge of markets they are designed to do, but the real innards ment of the family’s human capital. and investments, geopolitics, and economic of the products and how they actually work cycles. In part, they rely on the possession under widely varying conditions.4 It might For connections to work best, an advisor of certain credentials as offering prima involve special acuity about correlation—for must really know what interests most of his facie evidence of that knowledge. Instead of example, how a number of sector ETFs may UHNW clients. In fact, many successful testing their knowledge, then, they are be closely correlated to the S&P 500, thus UHNW advisory teams will tell you their beginning a process to determine if these unwittingly undermining attempts at diver- clientele share similar primary interests, advisors can be trusted to have their and sification. Insights might come from being which leads those teams to cultivate special their families’ best interests at heart. That is, able to apply a deep understanding of relationships with experts in those areas. they are examining emotional intelligence, human behavior and how we make deci- Those for whom art is a major client inter- also known as “EQ,” of potential advisors. sions about constructing and maintaining est, for example, will cultivate relationships portfolios and how we should react to cer- with acclaimed art advisors. If their clients Emotional intelligence is considered an tain market conditions. They might, for share an interest in other collectibles, they essential component of leadership, and it example, help us understand better how will establish bonds with authorities in also forms a critical aspect of successful Isaac Newton could calculate the “madness those areas, whether they deal with musical advisors (see, e.g., Ovans 2015). Listening, of men,” commenting on why he had instruments, pens, maps, coins, or fine observing, and open-ended questioning are invested in the South Sea bubble. Or they wines. Often prospects and clients them- the foundations of empathy, and empathy is might involve highly specialized knowledge selves can be excellent referral sources, pro- the basis of trust. The best advisors act as if of incorporating corporate benefits in finan- viding entrée to particular advisors. As in they are cultural anthropologists, searching cial planning or business-succession plan- dealing with other professionals, e.g., CPAs out details about their best clients. They do ning. To help achieve such insights, the best and attorneys, advisors need to vet a profes- this through unstructured interviews and advisory teams become in effect learning sional’s approach thoroughly and practice by observing them at work, at home, and at syndicates, dedicating time individually and and develop a real relationship over time. play. They understand that successful ques- collectively to reading widely and discussing tioning puts the person questioned in a all manner of topics, from research in neu- In sum, it is not enough for advisory teams position of greater power and engenders roscience to imagining the future; from to offer access to experts in areas such as humility on the part of the advisor, which is demography to ethics; from the nature of risk management, personal and cyber secu- essential in the growth of empathy and then recessions to strategic philanthropy. rity, or concierge medicine. The successful trust. This is not a simple endeavor for the teams also must offer entrée to areas of cli- advisor, because successful advisors hold Advisors who become what Charlie ents’ passions, and that entrée must be to and project high-power roles, and recent Munger, vice chairman of Berkshire those kinds of experts who actually under- research has shown those in high-power Hathaway, calls “learning machines” are stand the critical nuances, such as the roles tend to exhibit lower levels of empathy. neither generalists nor experts but in effect importance of innovation in modern and Empathy, therefore, is and must be a delib- a combination of both. They are what some contemporary art. UHNW collectors, that erate choice, and humility and vulnerability call “T-shaped” learners—so-named is, don’t simply want to own works of art by help make it so. Research has shown that because the horizontal bar stands for certain artists, they want to own those when people realize that empathy is not a breadth of knowledge and interests and the works that have shown the greatest genius personality trait but rather a skill, they vertical bar stands for in-depth under- and have had the most influence. In other engage in a greater effort to show empathy standing of one or several of those areas. words, it is not just the art itself but under- for people unlike themselves.3 An interdisciplinary approach encompasses standing the peculiar value of the art that “how different ideas, sectors, people, and adds real stature to the collector. Art advi- Unique Insights markets connect,” and offers the best sors who understand this are thus far more Finally, UHNW clients look for unique chance at both innovating and imagining valuable than those who may not have as insights from their advisors, insights that go the future.5 Perhaps the best way to good an aesthetic sense.2 beyond the expected range of knowledge approach T-shaped learning is to gain an and cover all sorts of topics including mar- accredited credential based in areas Singular Trust kets, investments, family dynamics, tax important to UHNW clients such as Beyond such exclusive treatment, UHNW planning, risk management, philanthropy, IMCA’s Certified Private Wealth Advisor® clients also presume a level of singular trust and more. Insights might come from (CPWA®) certification, then combine it between themselves and their advisors. sophisticated understanding of major trends with an investment expertise, e.g., the CFA® Indeed, when prospects meet first with shaping our world or from in-depth under- or CIMA® certification, or a specialty in tax, potential advisory teams, they are not standing of particular investments such as estate planning, or philanthropy. The

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advantage of using teams is that the influence that beckons the type of UHNW 4. For example, a recent analysis of the iShares Emerging Markets High Yield Bond ETF demonstrates generalist-specialist approach may be investor more likely to rely on Buffett’s the difference between stated and real risk. The spread among team members, achieving inner scorecard. It is a way of dealing with ETF has a yield of more than 8 percent, yet its three largest positions yield much less than 8 percent. a richer dimension of learning than any people and the world that bespeaks a com- The fund is able to yield more than 8 percent due to single advisor might have. Furthermore, forting kind of authority. Such advisors are its fourth-largest position—two Venezuelan bonds, one with a yield to maturity of ~33 percent and the diverse, multi-generational teams may people upon whom one can rely. In that other yielding ~61 percent to maturity. At these provide an especially rich opportunity for sense, they convey their own sense of status extraordinary rich yields, there must be some serious risk of repayment default. Thus, the risk of this ETF learning, allowing team members to expe- to the UHNW persons they advise. They most probably far exceeds what it states. See “The rience additional different points of view become, in effect, one of the connections Fixed Income Compendium August 2015,” PCS Research Services, Horizon Kinetics. and leading to collective wisdom, which is they seek to offer. It may seem illogical, but 5. Charlie Munger quoted in www.fool.com/investing/ itself a multi-dimensional construct based just as humility may bespeak a kind of general/2013/01/15/charlie-mungers-three-rules-on- how-to-become-a-suc.aspx. See also Donofrio (2011) on the integration of different perspectives. power, an advisor with gravitas extends it and Gadiesh (2009). to UHNW clients, and they in turn extend 6. The original quote, from Albert Einstein, is this: “In the middle of difficulty lies opportunity.” Select the Right UHNW Clients their status to the advisor. Creating a successful UHNW practice References depends on one’s ability to select the right Where can such advisors be found? No one Brown, Brené. 2012. Daring Greatly: How the Courage to Be Vulnerable Transforms the Way We Live, Love, UHNW individuals to become clients. Just place has a monopoly on successful advi- Parent and Lead. New York: Gotham. Cameron, Daryl, Michael Inzlicht, and William A. as the UHNW investor seeks the right advisors to UHNW individuals. They may be Cunningham. 2015. Empathy is Actually a Choice. sory team, so too the advisory team needs found in wirehouses and registered invest- New York Times (July 12). http://www.nytimes. com/2015/07/12/opinion/sunday/empathy-is-actual- to seek the best UHNW clients for the ment advisor boutiques, private banks and ly-a-choice.html. team. One criterion is the special interests multi-family offices. They are a special Covey, Stephen M. R. 2008. The SPEED of Trust: The One Thing That Changes Everything. New York: Free Press. of the UHNW individuals, such as philan- breed, characterized by a T-shaped IQ, Donofrio, Nicholas M. 2011. Innovation that Matters. In thropy or art. The closer these special inter- well-versed in the relational arts, possessed Kauffman Thoughtbook 2011, Ewing Marion Kauffman ests match the advisors’ interests, the better of deep dedication, a relentless commit- Foundation. Frank, Robert. 2007. Richistan: A Journey Through the the potential for connections and the stron- ment to hard work, and a serving heart. American Wealth Boom and the Lives of the New Rich. New York: Crown Publishers. ger a relationship is likely to be. There are not many of them, and they can- Gadiesh, Orit, and Daisy Wademan Dowling. 2009. Bain & not serve many clients—which signals Company Chairman Orit Gadiesh on the Importance of Curiosity. Harvard Business Review (September). Advisors also need to distinguish between opportunity. But, to invert one of Einstein’s Inzlicht, Michael, Jeremy Hogeveen, and Sukhinder S. UHNW individuals who use inner as profound observations, in the midst of Obhi. 2014. Power Changes How the Brain Responds opposed to outer “scorecards,” as Warren opportunity lies difficulty.6 to Others. Journal of Experimental Psychology: General 143, no. 2 (April): 755–762. Buffett has described them. It is similar to Johnson, Jamie. 2008. Serving the Superwealthy. Vanity Fair (September 17). http://www.vanityfair.com/ understanding who uses a gyroscope, to Robert B. Seaberg, PhD, is president of news/2008/09/the-first-time-i-heard. stay true to one’s ideals and values, versus Intersect Consulting, LLC, which advises Lewis-Kraus, Gideon. 2013. Yelp and the Wisdom of “The Lonely Crowd.” New Yorker (May 7). http://www. who uses radar, to fixate on the people financial services firms and financial advisors newyorker.com/tech/elements/yelp-and-the-wisdom- around them. Those using outer scorecards as well as nonprofit boards, executives, and of-the-lonely-crowd. invariably look to external measures, such Murphy, Dave. 2010. Isadore Sharp: We Hire for Attitude. philanthropists. A Phi Beta Kappa graduate of Insights by Stanford Graduate School of Business as various indexes, to rate performance, or Colgate University, he earned a PhD with dis- (February 1). http://www.gsb.stanford.edu/insights/ isadore-sharp-we-hire-attitude. to the professed returns of others like them. tinction from the Maxwell School of Citizenship Ovans, Andrea. 2015. How Emotional Intelligence Became To them, success always entails beating and Public Affairs of Syracuse University. a Key Leadership Skill. Harvard Business Review (April 28). https://hbr.org/2015/04/how-emotional-intelli- some benchmark. It is hard to turn some- Contact him at [email protected]. gence-became-a-key-leadership-skill. one with an outer scorecard into a contrar- Schroeder, Alice. 2008. The Snowball: Warren Buffett and the Business of Life. New York: Bantam. ian. And, given the egos of superior Endnotes Stewart, James B. 2014. With Art, Investing in Genius. 1. Wealth-X/UBS World Ultra Wealth Report 2014, p.34, achievers, it is hard for those advisees not New York Times (November 11). http://www.nytimes. http://www.worldultrawealthreport.com/home.php. com/2014/11/29/business/with-art-investing-in-ge- 2. See Stewart (2014). An early Picasso apparently is to be drawn to those external comparisons. nius.html?_r=1. valued more than a later Picasso, because the earlier Advisors need to focus instead on clients works portrayed Picasso’s invention of cubism. Andy with inner scorecards, who look to the Warhol’s 1960s works are valued more than those of the 1980s because the earlier works resulted from his advisor to help them develop a unique fam- reinvention of modern art using mechanical reproduc- ily wealth index to measure outcomes (see tions and photography. 3. See Cameron et al. (2015) on the tendency of those in Schroeder 2008; Lewis-Kraus 2013). high-power roles to exhibit less empathy; and especially Inzlicht et al. (2014). On vulnerability, see Brown (2012) and especially her 2010 TEDx Houston talk on Gravitas “The Power of Vulnerability,” one of TED’s 10 most- Creating a successful UHNW practice also viewed talks. Covey (2008) argues that trust is actually conditioned on our behavior—additional support for the depends on having a sense of presence or fact that each of us controls our ability to be vulnerable, gravitas. Gravitas is a depth and dignified to empathize, and thus to engender trust.

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