Serving The Needs Of Ultra-HNW Investors w/ Charlotte Beyer (2024)

What You’ll Learn In This Podcast Episode

• What the Institute for Private Investors is and what it was created to do. [3:12]
• How Charlotte’s effort to create a community for ultra-high-net-worth investors almost failed right out of the gate. [12:15]
• Charlotte's advice for earning trust with clients. [17:43]
• How she structured her organization’s meetings and established formal group norms to promote interaction between ultra-high-net-worth investors and the advisor community. [30:18]
• The problem with most presentations advisors make to UHNW individuals. [35:34]
• The 5 P’s that Charlotte counsels her clients to consider when evaluating an advisor. [42:35]
• Charlotte’s 10 Principles of Principal that successful investors follow. [44:27]
• The biggest worry ultra-high-net-worth clients have. [51:29]
• What ultra-high-net-worth investors really want to hear from their advisor in order to connect with them. [57:02]
• What she says is the most important question an advisor can ask any client about family and wealth. [57:02]
• Advice for financial advisors who want to move into serving ultra-high-net-worth clients. [1:26:11]

Resources Featured In This Episode:

• Charlotte Beyer - Institute for Private Investors
• Wealth Management Unwrapped by Charlotte Beyer
• hom*o Deus: A Brief History of Tomorrow by Yuval Noah Harari
• Principle Quest Foundation
• All the Single Ladies: Unmarried Women and the Rise of an Independent Nation by Rebecca Traister

Full Transcript: Understanding And Serving The Needs Of Truly Ultra-High-Net-Worth Investors with Charlotte Beyer

Michael: Welcome, everyone. Welcome to the 78th episode of the "Financial Advisor Success" podcast. My guest on today's podcast is Charlotte Beyer. Charlotte is the founder and former CEO of the Institute for Private Investors, a private networking organization specifically for ultra-high-net-worth investors and some of the advisors who serve them. What's unique about Charlotte, though, was the way that she built a series of conferences and networking events and an online community for ultra-high-net-worth individuals before the world of social media and online communities became what they are today, and in doing so, demonstrated and proved that ultra-high-net-worth clients really do have a unique set of needs and challenges for which they need both an organization and advisors dedicated to serve them.

In this episode, we talk in depth about the two biggest worries of ultra-high-net-worth families. Which is not necessarily about how to maximize their investment returns or minimize their taxes, but how to ensure that their children don't grow up to be entitled or otherwise impacted by the family wealth, and how to avoid the risk of being taken and conned or scammed out of their money. What Charlotte calls the five Ps that she counsels ultra-high-net-worth clients to consider when evaluating an advisor, including the firm's people, performance, process, philosophy, and fees, and why the future of working with ultra-high-net-worth is all about high tech and high touch, and what ultra-high-net-worth investors really want to hear from an advisor to connect with them in a world where they hear a ton of advisor pitches that all sound the same to them.

We also talk about how Charlotte herself built IPI as an organization, how the effort to create a community for ultra-high-net-worth investors almost failed out of the gate, the way she structured the organization's meetings and established formal group norms to promote interaction between ultra-high-net-worth investors and the advisor community, and the lessons that I think any advisor can draw and figuring out how to really listen to the clients you're serving and adapt what you offer for them to fit what they really want and need.

And be certain to listen to the end, when Charlotte provides her suggestions about what financial advisors should consider if they want to move up market into serving ultra-high-net-worth clients, the way the ultra-high-net-worth space is shifting as wealth gets younger with the rise of Gen X and Gen Y investors, as women control an increasing portion of the ultra-high-net-worth wealth segment and have very different expectations of their advisors, and as the advisor value proposition itself continues to change with technology automating for free more and more the things that we were once paid for.

And so with that introduction, I hope you enjoy this episode of the "Financial Advisor Success" podcast with Charlotte Beyer.

Welcome, Charlotte Beyer, to the "Financial Advisor Success" podcast.

Charlotte: Hello, Michael. I'm delighted to be here.

What IPI Was Created To Do [3:12]

Michael: I'm excited to have you on the podcast for what I think is going to be a really unique discussion. You have a fascinating history involved with an organization that I don't think a lot of advisors have familiarity with necessarily, called the Institute for Private Investors, that you had created 25 years ago as I guess like an early version of networking and almost like social media network digital before we did that, because you did this back in the...started in the early 1990s, and with a rather unique membership. Because the requirements to get into the Institute for Private Investors, I guess at least now, maybe the numbers were a little bit different then, is you need a $30 million net worth. Which speaks to a very particular kind of club and person and group that you're involved with.

And I know you've done a tremendous amount of work with that group and that community over the years in just understanding what it is that's unique about truly ultra-high-net-worth individuals and families, right? Because by the time you get to $30 million, like, you're not even just talking about an individual who's wealthy, you're really having conversations about family wealth at this point, because that money is probably going to outlive the first person, at least as long as nothing goes wrong. And so yeah, I'm excited to have you to share some of your perspective around both IPI itself and what you built there, and just better understanding the mental psyche of ultra-high-net-worth investors and what really actually matters to them or not.

So, maybe as a starting point, you can just tell us a little bit about IPI. Like, what is this organization? What was it created to do?

Charlotte: Actually, I was inspired when I was selling asset management on Wall Street back in the late '80s. And people would come in, prospective clients would come in, and they might have $1 million or $5 million or $30 million, and they would sort of be clueless and they'd sit there as we went through our 75-page pitch book, which we thought was fascinating, and I'd watch their eyes glaze over. And I'd say, "There's something wrong with this." Now, the fancy word is information asymmetry, but the real word is most presentations to people of high-net-worth or ultra-high-net-worth are excruciatingly boring.

So what I did back then when I was on Wall Street and it spelled my success was I created a one-page list of questions. And upon meeting any prospective client, I would say, "Here are the questions that I think you might want to ask anyone you're interviewing, and certainly ask us." It transformed everything, Michael. And what happened is we started winning business. And as the sales and marketing person, people, the portfolio managers were just aghast. They said, "Wow, you're telling them what to ask us." But of course we were prepared to answer, and it showed we were sitting on their side of the table.

Michael: I'm just curious, like, what kind of questions were on the sheet? Do you remember? Like, I mean, what were you telling them to grill you and everybody else about?

Charlotte: What percentage of your accounts are high-net-worth investors? How do you handle taxes? Are you tax-sensitive? How often will I be meeting with you? How will you communicate with me? Can you show me a report that shows me how I'm doing? Give me a sample. Who might I talk to about what it's like to work with you? In other words, references. And that was pretty much it. When I said, "What proportion of your assets are managed as for high-net-worth versus institutional?" that was the real clincher, because that meant that we knew how to work with private investors.

Michael: I'm struck by that because, you know, in a world where you're doing these 75-page investment pitch books and, you know, all the pretty charts of, you know, economic outlook and your performance, right? Just, like, all the things we put in investment pitch books, it strikes me, I mean, none of the questions you just said have anything to do with performance or even, like, finely nuanced performance. You know, "Ask us relative to this benchmark and not that benchmark because some managers play games with the benchmark selection."

Charlotte: Well, I should say, I should add there was a question about performance but it was, "Do you have a composite, and how does that differ for each family or individual who becomes your client?" And that was important because in those days, in 1995, of course, there was no such thing as the standards and so on, but it was very important that for me, the prospective clients understood that what's good performance for me may not be good performance for you.

Michael: But much of this is just...it sort of felt like it's just literally, "How will we work together? How often will I meet with you and how will we communicate? And what does a report look like? And do you actually work with other people like me?" Like, it's just striking to me, I think a lot of us, even when we try to differentiate ourselves in the advisor marketplace, you know, we try to be more expert at whatever it is we are. You know, bigger, better, stronger, faster, and this to me is just a much more granular, like, "No, I just want to paint a picture of what it's like to work with me." "I work with people like you, and here's how I communicate, and here's how often we meet, and here's what my reports look like. And if that works for you, that's great, and if it doesn't, you know, ask everybody else that as well." And of course, if you know you're pretty good at these things, you're going to tend to win your fair share of business because you're just helping clients understand how to compare and contrast and you win the business.

Charlotte: The other outcome of showing that one page was that immediately that prospective client felt more empowered and more engaged, and most importantly, willing to talk. Most of these early meetings are unfortunately either the prosecutor is, you know, peppering them with questions or they're just presenting and it's boring. And I felt there had to be a very different process. But what it did is it led me to form IPI because I thought, "Gee, there are all these people out there who have no idea how to find an asset manager or an advisor who's going to be appropriate for them."

So I created IPI, as we call it, affectionately, and what I did is I said, "I'm going to gather people and not tell them what to do, but rather have a whole host of speakers and educational programs that allow them to become better, and better at picking and evaluating advisors and money managers and so on." And yet my ultimate mission, Michael, from the very beginning because I had worked on Wall Street for 20 years was to enhance the relationship between investors and advisors for the benefit of both, not just for one side. And so there was a very clear mission that everybody, investors and advisors alike could embrace and realized it was a balance we were seeking there.

Michael: So, at a high level, like, I guess from the consumer's end, your goal sort of leading in with this one-page question and then starting IPI was essentially just making more educated consumers to better understand, like, just literally how to evaluate and vet and engage advisors?

Charlotte: Yes. And importantly, there was no such group. I had served on the board of the Association of Investment Management Sales Executives and I learned a lot by going to those meetings. And I knew that public fund treasurers got together. And I thought, "Why shouldn't ultra-high-net-worth people get together and compare notes?" And the only other choice they had up until 1991 was to attend a private banking conference, of which they were, you know, entertained lavishly and had a lot of speakers, but unfortunately, most of the speakers were from that particular private bank.

So I decided, "What if you had speakers from four or five different firms and you had different views and you had small member roundtables," which was probably one of the most popular innovations we had back then, "And let people learn from each other, but also importantly learn from smart advisors and realize there's more than one way to look at the markets and families and so on?"

How Charlotte's Effort To Create A Community Almost Failed Right Out Of The Gate [12:15]

Michael: And so when you got started with this, did it have this, like, tens of millions of dollars minimum from the start? Was that always a thing?

Charlotte: Not only did it not have that, but it was a miserable failure as I launched it. It was New Year's Eve 1991. I sent out 1,100 what I thought were beautifully crafted letters and with a stamped envelope inside and a membership application. It was $1,000 to join back then. And I sent them out using lists and anything I could think of, except not clients of the firms I'd ever worked for. That was a principle that I abided by at that point and still do. And guess how many responses I got back saying, "Yeah, I'd love to come to your program in May at the St. Regis?"

Michael: I'm going to guess we didn't get a lot of 1,000.

Charlotte: Zero. Zero.

Michael: Oh, not even, like, one or two that thought, "Hey, this is neat?"

Charlotte: Not even one. And I got five outright rejections, one of which came from Ted Turner's family office saying, "We don't join organizations like this."

Michael: But you've got to admire them for actually taking the time to fill out the rejection and tell you, right? They couldn't even just ignore. Which, I mean, I think sadly, like, sort of does say something to the challenge of the environment you're in. Like, here is Ted Turner's office with however much bajillion dollars and they don't even just ignore your invitation, they go out of their way to tell you no.

Charlotte: But what turned the tide was I was invited to speak to a small group of family office executives and principals that was run at the time by a man named Peter White called International Skye. And he had been a friend when I'd worked on Wall Street, and he invited me to come and just talk for five minutes about this program in late January that I was going to have the inaugural forum in May. And I did, and that brought one member, very prominent family from Maryland. And then it just began to build. And I have to say that I asked speakers that I thought would also tell their friends. So we had a fair number of principals speaking. And in fact, we had at that very first forum, we had Rob Arnott speaking and no one had ever heard of him. And his monograph at the time was, "Is your alpha big enough to cover your taxes?"

Michael: Oh, yes, yes, back when he was sort of pushing really hard at like, "Yeah, yeah, you're making some alpha but you're doing all this additional turnover and your increased tax drag is probably going to eliminate all your alpha anyways."

Charlotte: The other thing that was the breakthrough, and this is all, you know, learning from failure was, I was speaking to a dear friend and saying, you know, "I've got three people signed up. I've signed the contract at St. Regis, I can't get out of it, it's going to kill me." And she said, "No, Charlotte, you've got to make this work. You've got to think of a new way. This is not like a marriage or anything else. You've got to make this work." And so what I did is I called the...I don't know, they were probably 15 firms who had also paid me $1,000 to become a member. And these firms, I called them up and I said, "You know, I told you you weren't going to be allowed to come to this forum because it was for investors, but guess what? I'd like you to come if you bring a bona fide qualified private investor."

And that began to tip the scales because then the investors invited by these firms then had told their friends, and it just began to have some momentum. And in the end, we had 134 people in that ballroom. And it was incredibly gratifying and thrilling for me because that really...from that point on we were on a roll.

Michael: Such a striking thing to me to go from, like, "I have a vision. I'm going to launch this thing. I've set up an event at the St. Regis. I've worked, hustled my butt off to get a mailing list of 1,000 ultra-high-net-worth investors. I send out 1,000 invitations. Not only do zero say yes, but five go out of their way to say no."

Charlotte: But I have one last failure story that really turned into a great victory, or defeat, it turned into a great victory. One of the most prominent family office executives for a European family was based in New York investing in U.S. asset managers in the billion-dollar category. And I was trying to get him to join and he said, "Charlotte, we do not pay to go to conferences. They come to us or we go for free. Call me, call me when you need to fill the room." And I said, "Oh." I said, "I'm sorry, I can't give this to you for free. It does cost $1,000, and I'm sorry." And I hung up, and I was ready to collapse on the floor. Well, the good news is he started hearing about it in his circles, and lo and behold, a week before that May conference, he called up and said, "I am ready to join." And he was there, and he became a very important part of the advisory faculty and a friend. And he passed away a few years ago, but he was a singular personality.

Charlotte's Advice For Earning Trust With Clients [17:43]

Michael: There's an interesting piece there that I know, like, I struggled with a lot in the early days of my career and building business of just being willing to stick to your principles, your pricing, your services, like, whatever thing it is that you do, and not make concessions on it, even to people that may be fairly influential clients, because if what you're doing really works, they come back. Not always but surprisingly often they come back and they come back respecting you a lot more because you held to the principles in the first place so, you know, you've defined kind of the rules of engagement and interaction for them for a long time to come when they couldn't use their sizable client influence to sway you about what you do.

Charlotte: And I believe that's how you earn trust. What happened here was if you'd give it away for free, I don't think people value it. I also think that people do respect, as you say, someone sticking to their guns. And in my case, couple of people who were very well-known personalities or, you know, people who owned businesses would call up and say, "Well, I'm thinking of joining but I want to come and see your program first." And I'd say, "Well, you know, you need to come to a program to experience it, and you need to be a member because I promise all the other members, there will be no one in the room except someone who is a member of the Institute and who's been recommended by another member."

And that individual that I'm thinking of who told me that said, "Well, what if I don't know anyone who's a member?" And I said, "Well, then I'll qualify you. You know, I know who you are. I know you've just sold your business." And he said, "Well, okay." And I said, "And don't forget, I will give you your money back if after you come and you don't find it to be the community you'd hoped for, you'll get your money back." And of course, I never had that happen, I'm happy to say, once in the 23 years of running IPI. Our little slogan was, we were jokingly the SEC for the ultra-high-net-worth. And the SEC stood for safe harbor, education, and community. And that's what I promised and that's what I like to think we delivered to that 1,500 strong group of individuals from, you know, 40-plus countries.

Michael: Interesting. So that's even an interesting way to balance it out of, "Look, I want you to come. We're not going to compromise on our principles, but here's the deal. You have to pay because everyone pays, because that's our deal around here. If you really, really don't find it valuable, you call me afterwards and I'm going to give you your money back, but I don't think you're going to call me." And that's exactly what happened.

Charlotte: Yep, exactly.

Michael: Like, did you have pauses and thoughts on January 2nd of like, "Well, back to the old firm?"

Charlotte: Well, that probably…

Michael: I guess it takes a week for the rejections to start coming in but, like, is there...?

Charlotte: Oh, no, I was at the depths of despair. And, Michael, I mean, I was in tears when one colleague from the old world of Wall Street called me. He said, "How are you doing Charlotte?" I went, "We...we...well..." You know, so I was clearly upset by this. But what I have learned and I learned it I think all through my life is you pick yourself up and you just get back on the horse, in my case. But I had a mentor when I worked at the bank I worked for 10 years before I joined the asset management sales and marketing at two different firms. And he told me, you know, "Don't be afraid to fail because most of your competitors will give up before they should, and you'll, by sticking to it and being persistent, you'll win." And he was right because I made this work. And it was a dark winter, believe me, 1992, but we made it. And that spelled the difference.

Michael: Yeah, I think there's a powerful analogy there for a lot of advisors getting started in their businesses directly as well. I mean, you know, just getting started in your business is terrifying and there's a lot of fear of failure. You know, even for people I know who are thinking about making the leap, like, "What if I make the leap and it doesn't work? Like, it's bad. It has financial consequences. It's just flat out embarrassing."

Charlotte: But you need a fallback plan, which I always had. And my fallback plan was, with IPI, "I'll give it a year, if it doesn't work, I can always go become a trust salesperson in some big trust bank." And I think that was key. And I learned that actually from working in operations at a bank way back, my first job. Because I always knew that you can't count on it to go exactly the way you think it's going to go. And you have to know, "What do we do if it gets messed up? What's our fallback plan?"

Michael: But it's striking as well, like, once you set your, "I'm going to give it a year and I have a fallback plan," like, it sounds like part of what that did for you is it meant you had to be all-in for a year. So, you know, spend a whole bunch of money, send 1,000 invitations, get, you know, zero positive responses and 5 rejections, great, then what else are we going to do? Let's call the speakers and have them invite their friends. Let's call the sponsors and have them invite their friends. Let's talk to people we know and we'll speak about this. Like, you just turned and hit a whole bunch of different marketing channels to try to get something when you went 0 for 1,000 out of the gate, as opposed to saying like, "Well, it's February, let's hit our fallback plan now."

Charlotte: There was one other piece that I should add, and that is under the theme of, "Don't go it alone." Early on I recognized my name and my passion for doing this was not going to be quite enough to pull together a whole membership, so I tapped a handful of people and I called them Advisory Faculty. And one was the family office, a friend of mine who had...was running the office for a very famous fellow up in Massachusetts. Another was running the family office for a group out of New Jersey, and others. And then what they did is they agreed to support me.

One of them, in fact, had said when I approached him about joining Advisory Faculty he said, "I don't think this is going to work, Charlotte, but I'll give it a whirl. I think, you know, it's an interesting idea. They can go to conferences all day long if they want to from their private banks, but let's see what happens." And he used to joke years later, you know, "How wrong was I? This was a great idea." But I think that group of advisors, or we called them Advisory Faculty, I had them moderate or introduce or participate, and it made a huge difference.

Michael: So talk to us a little bit more about what IPI did. I guess maybe in the early years and then you can talk about how it evolved. But, like, so you had this first conference in May of I guess 1992 at that point at the St. Regis. Like, what did you do at this event? Like, what did you give 134 people who showed up in this ballroom that have ultra-high-net-worth assets and have never been to an event like this, much less paid for an event like this, and you want to give them a good experience and a good outcome? It's like, what did you do that got them excited enough that they stuck around and this organization formed and grew?

Charlotte: We combined what I thought to be outstanding content: Tad Jeffrey, Rob Arnott, Garland and others speaking, Diana Frazier. And they spoke for, you know, 45 minutes to an hour. There were Q&A in the ballroom. But the real secret was the breakout where people could speak in smaller groups with each other and compare notes with a facilitator. And I facilitated the investors and the advisors were facilitated by someone else. But it allowed the groups to separate and then talk about what concerns. And I always would have questions to start them off. And at the tables, I always had a roundtable rule. We never did classroom style or audience style until we got so big we had to for the keynotes. But we'd have round tables of seven or eight. And that allowed people to talk to each other. So we'd give them a question and then say, "Go at it at your table." And that allowed for a more intimate connection to take place.

That was the first event. And we never really changed too much in that, except we went obviously online in 1998. We had an online community before such things even existed. It was six years before Facebook, but that community feeling was going on at every event. And we had two here in New York. We then expanded and had programs in San Francisco, then we even expanded international trips where a group of 30 or 40 investors would go somewhere around the world. We had seven of them. So it was all educational, Michael, always educational, but with that added magic of community and connection.

Michael: And normally, I mean, I guess as the title implies, like, it was the institute for private investors, and, I mean, this was targeted for education for the investor.

Charlotte: But the mission was to enhance the relationship for the benefit of both. And I remember we had one retreat one year where one of the private investors who served on the faculty said, "Wait a minute, Charlotte, why are we even talking about this Leaders Council or advisor memberships? This is the Institute for Private Investors and we don't want the advisors around." And I said to him, and I said it loud and clear, "You may not want them around, and you can pick the sessions that you want to go to, but they are important because otherwise if investors get all together and talk only to each other without the benefit of an expertise or knowledge base, they'll all go off like lemmings off the cliff."

So what we did is we created something called Ivory Snow. And Ivory Snow was based on a commercial that my baby and I had been in when she was zero in 1975. And I said, "You're 99 and 49/100th percent pure." Meaning you don't have a product, you are a pure principal of family office. And they would go into their sessions that were labeled Ivory Snow. And so for that particular investor, the story I just told, he could go to those sessions all day long. And the only time he'd see the advisors or the Leaders Council would be when he was in a keynote. That seemed to work very well, but guess what? People said, "No, I like talking to the advisors. I like getting to know them and talking to them about common issues, because it is, at its best, a partnership."

Michael: Interesting. So it's like Ivory Snow sessions was something you would label on the schedule or agenda, like, "These are the pure snow sessions, you don't have to worry about those evil advisor people in here. It'll just be your investor peers if that's your style and that's what you want."

Charlotte: Yeah. But I never would have said nor do I say, "Those evil advisors." In fact, I have real objections. And in my book, I said it in my foreword that I feel that it's a partnership we've all seek, not, you know, the animosity or the, "I have to protect myself."

So yes, the Ivory Snow sessions were always clearly labeled. And we also did a skiers terminology of novice, advanced, and intermediate and advanced, and that helped people select the breakout sessions. It became a two-day forum very soon, and those two days included a dinner that a Leaders Council could host a dinner and have a wonderful conversation and get to know the investors who were his or her guests. This was about community. And I always talked about it from the dais that 60% of our revenues came from investor membership and 40% of our revenue came from the advisor membership. And I said, "That tells you that this is a partnership, but yet it's really going to be weighted towards you and what you want."

Michael: So I've got ask, though, like, you make an organization event with this kind of ultra-high-net-worth families and individuals and open the door to sponsors and advisors, like, how do you not have some of them start coming in and being overly solicitous and taking advantage of the opportunities? Like, it's just...literally, there's so much money in that room. Like, you're talking about events where the people in the room could literally be worth hundreds of millions or billions or tens of billions of dollars. Like, "Here's a room with $50 billion of net worth, who wants access?" Like, everybody.

Charlotte: Absolutely. No. Michael, we had people who...I'd have to hit people on the shins. But more politely, we published norms and we had a code of conduct. And when you joined IPI, everyone, the investors and the advisors, both signed a code of conduct. And it included not being rude if you're an investor, but it also said, you know, you don't try to sell or pitch during the forum. That if you want someone to interview you or think about hiring you, you talk to them after the program. Or if they want to contact you, you can give them your card. That was a huge surprise to most people. And I personally would talk to each and every professional whoever came to the St. Regis for a forum, and I would explain this. And a lot of them didn't understand it, but the really good ones they did.

The big firms who would send a salesperson didn't get it because the salesperson is trying to meet a quota. But the smart firms would send a senior enough person so that they were like a fly on the wall in an amazing focus group. And my favorite story on that was a senior person from a firm came up to me and told me this story. She said, "I went over to so-and-so," and she knew who the person was. It was a fairly prominent individual. And she said, "I've just heard that session on growth versus value and we're a value manager so what should I do? Just go shoot myself?" And he laughed. And she said what happened was that was the beginning of a friendship that developed into a client relationship.

Michael: So did you ever have situations where you had to actually kick out advisors or sponsors because they just couldn't control themselves and they had to keep trying to pitch for clients?

Charlotte: Yeah, a couple of times we did. We did, and it was painful. And to tell the CEO of a large firm that they're sending the wrong people. They're sending people who are just looking to make a product sale and they're not sending people who are going to be part of the educational community. That was hard. But our timing, we were very lucky because the timing was before there were many conferences. So these advisors wanted to be a fly on the wall. They wanted to learn from private investors. So we didn't have an issue. But the publication of the norms, Michael, and it was in the agenda, it was in the books they got, it was in the membership application that they signed saying that they would adhere to it, that probably was the key point. It allowed us to do this.

Michael: Well, I guess and paired with the fact that after you kick out one or two, people get like, "Oh, no, no, no, she's serious about these norms."

Charlotte: Well, I would talk about it from the dais. I would say, "If you ever feel that you're being bothered or solicited or cornered," and people would come up and complain about it to me and I'd go right over to the advisor and say, "You know, you can't do that. You can't keep someone in the corner during the coffee break and not let them escape." On the other hand, I would say to the investor, "You may learn something." And many of them later told me, "I learned a lot." And one of the observations they learned is that unfortunately, too many firms all sound identical. And they complained bitterly about the canned presentations. They complained bitterly about the scripted professionals. And they said, "Why can't people just be real?" So that was a big aha moment, I think, for both sides.

And we ended up having something each December to celebrate the holidays that we called the investor-advisor dialogue. And what I would do is I'd invite all the members to come for a day and give them problems, case studies to solve in mixed groups. So there'd be a group of eight people on a team trying to solve a case study. For instance, the firm has just been taken over by a bigger firm, do you fire them or do you stay with them? And people loved doing that. And in those investor-advisor dialogues, they got to know each other. And they said, "Well, these people are just humans, these advisors, they're not weird." And the advisors began to say, "These investors are just human. They want the same thing I want, peace of mind and connection and so on.

The Problem With Most Presentations Advisors Make To UNHW Individuals [35:34]

Michael: So you were humanizing both side for the other. I mean, I think it's a powerful point that frankly has only gotten worse in the past 5 or 10 years that, you know, so many of us now are converging on trying to give holistic financial advice. And, you know, we all say we have years of experience and credentials and expertise, and we give great service for clients because, you know, who says they don't give great service for clients? So we all end out with the same differentiators, which make them not actually differentiating, and it creates this challenge for investors to actually figure out who they want to work with.

Charlotte: In the ultra-high-net-worth space, they hear so many presentations that they are astute observers. And often this is with the feedback. What makes a difference is when the questions that they're asked are a little more complex, are a little more interesting. But again, it can't be in the prosecutor chair because then people... I'll never forget one ultra-high-net-worth family said to the person who was asking all the questions, "Well, what about your risk? And what are your goals and all this?" And he said, "You know, I'm not going to tell you anything until I know who you are. Tell me who you are and why I should even answer those questions." So that put that advisor back a bit. So it's a tennis match in a sense. You know, the ball has got to go back and forth, and it needs to be more even and not just pepper them with questions.

And I also think in terms of genuine, too often the advisor thinks that deepening the relationship means that I'm going to ask them how many kids they have and their summer house and I'm going to be interested in their golf game. To me, that is superficial and usually is seen as very fake. A very well-known and successful advisor once told me, "The secret to this business with the ultra-wealthy is to build long-term relationships very, very quickly." And I always love that.

Michael: Build long-term relationships very, very, quickly.

Charlotte: Very, very quickly.

Michael: All right, so how do you do that? Like, it sounds lovely.

Charlotte: Yeah, well, exactly. What he did is he would tell stories from families he had worked with just to sort of gauge whether this was something that would resonate with the family. He would talk about how others have approached the due diligence with him and what aspects of it might be most relevant and interesting to the person sitting across the table. Those were the ways he established his credibility, by those stories of other families led the family sitting across or the individual sitting across from him realize, "Oh, this guy really knows what he's doing."

Michael: You know, just the power of...and, I mean, obviously you're not using people's names and breaching client privacy, but just, you know, telling stories of, "Well, you know, I worked with another family that was similar to yours. Here's something that came up for them. You know, they were really concerned about how to split the family business because one of their children is in the business and the other one is not and they didn't want to create a will. Is that a problem for you? Because I know you have three children and only one of them is in the business."

Charlotte: Exactly. And it can be tricky. And I think one of the things that people rarely do is just state how challenging that early meeting really is. To say, you know, "You're here considering my firm, and I want to make sure we address what you want to address. How would you like to approach this? What do you want to know? Or, would you rather I give you a sense of how we work with clients like you?" In other words, always give them an escape hatch.

Michael: So I'm struck this kind of discussion of trying to be genuine. You know, you want to ask an ultra-high-net-worth investor, you know, about all their personal family issues. Maybe you've got to tell some stories of your own first so they're comfortable with you. Because otherwise, you're just a stranger asking very private family information. But I feel like there's a challenge that a lot of us have on the other end from the advisor end, that, you know, I'm sitting across from someone that's got, particularly in the high-net-worth space, like, someone that's got millions or tens of millions or hundreds of millions or a billionaire, and it feels like there's so much pressure to be the consummate professional.

I think that's a tendency we have in just sort of being in an expert professional services business. Like, "I'm the professional, that's why, like, you know, my conversations have to be neutral, in the middle-of-the-road. I never talk about sex, religion, and politics," right? Like, all these sort of verboten areas. Like, don't talk about any...don't bring up any topics that might become controversial for clients because you don't want to, you know, pick sides and alienate people. And it makes it really hard to figure out, like, how do you have...like, how do you try to be genuine and authentic and risk losing, like, the professional veneer and the fear of alienating a client by saying the wrong thing? Like, are we just too caught up in ourselves worrying about this and it's not actually a concern, or is it just, "No, no, you have to get really, really good at the nuanced balance between making yourself more vulnerable, but no you still can't say religious and political things that are going to alienate and upset people?"

Charlotte: Great question. I totally agree with you, but I would define authenticity and being genuine very differently. It doesn't mean you start talking about sibling rivalry and the family business feuds and so on. What it means is you might ask a question like, "What's been your experience with other advisors you have used? When was the last time you hired or put money with a fund? How did you approach it? What were some of the lessons you learned? How can I save you time by getting right to the chase? Where do you want to come in on this?" But learning about what their experience has been and how they view the past relationships is critical.

And in my book where I have the quadrants of sophistication and control and some of those questions in there, what that's all about is figuring out, "Who are you talking to? Who is this client?" And by asking what their prior experience has been with the markets or with relationships, you will learn an enormous amount that you can then immediately be flexible enough to address. So I'm not suggesting you go into the gory details of personal lives, certainly not in the first meeting. Most people would run screaming out of the room.

Charlotte's 5 P's For Evaluating An Advisor [42:35]

Michael: And how much of that is about trying to share stories of other clients and people you've worked with versus literally your own as the advisor?

Charlotte: I think it would be more families you've worked with, individuals you've worked with. I think another little fun exercise is what I call the five P's, which is people, performance, process, philosophy, and phees, which of course we have to spell P-H-E-E-S to make it five P's. But to say, "When you think of someone you're hiring, what is most important to you and why?" And that, again, will tell you a lot about how that person looked. Are they a hot dot chaser, going to fire you in the first market downturn, or are they someone who people are so important they want someone who has the same politics and belongs to the same club and all of that? But at least you'll know that and you'll know whether they're a good client or not.

Michael: That's fascinating to me. Like, just literally asking like...you could do this in the first meeting with most prospects, "Okay, I'm just wondering, clients come to us for a lot of different reasons, so I'm just wondering, like, of these five P's, what's most important for you in this relationship together? Is it people, performance, process, philosophy, or fees?"

Charlotte: Right. There have been, I'm happy to say, and I will say this modestly because I don't think this is a huge number, but there have been advisors who actually give the e-book or my hardcover book to their prospective clients. Or they just copy a page or two and say, "Let's take a look at this." And it's, again, the prospective client begins to feel that you're sitting on the same side of the table. Because my book, again, is addressed to investors, but what it's really intended to do is to allow it to create a partnership.

Charlotte's 10 Principles of Principal That Successful Investors Follow [44:27]

Michael: And can you talk about the book for a few minutes? You know, we'll put a link out in the show notes for people who are interested in it as well, but can you just talk about what it is and how it came about? Because I know you did the original one a number of years ago, you did a second edition more recently.

Charlotte: I wrote it because the Wharton professor who has taught those 1,000 people over the years since 1999 heard my lecture and said, "Charlotte, you ought to write a book." And that was August of 2013. And I said, "What? That's such a cliché, everyone who retires writes a book." And he said, "No, no, you really should." But I did, and it's now become my legacy. Now, when I say legacy what I mean is I thought that if I could share all the insights that I had gained and the learning, and thanks to all those wonderful IPI members and the Wharton students, if I could share that with investors who were just starting down the path, it would be an enormous gift to them, and most importantly, it would also be a gift to the advisors who could then see a very different way of engaging with their clients.

And I added four chapters in the recent edition. One of my favorites, of course, is Women with Wallets, talking to the fact that if you're a woman and you're suddenly very wealthy, which there are a lot of us now, just as I was when I sold my company in 2010, what should you be doing when you're looking for an advisor? What are some questions you can ask? My other favorite chapter is, "I'm a Robot, and I'm Here to Help," which is talking about robo and AI and all of that. But it's all addressed to the investor, with an appendix that's intended for the advisor. Because I feel that there's a corollary for each of the what I call 10 Principles of Principal that I saw successful investors follow that was really a GPS for their own wealth. And those investors, I showed it to them when I was writing the draft of my book and I said, "What do you think of these? Do you think they've captured what you've been doing?" And they would say, "Yeah," or, "Here's something I would change."

So the 10 Principles of Principal start with a very obvious one, which is to be, know your own self. Be self-aware. Because if you think of it, in the book I use the analogy of you become the CEO of My Wealth, Incorporated. The moment you have substantial wealth, whether you like it or not, you've been promoted. And like a good CEO, you need to be self-aware. You need to know who to hire, who not to hire. You need to know how to delegate. You can't go down on the factory floor and learn every single job. You shouldn't go get your CFA and your CFP and try to be a portfolio manager unless that is going to be your new passion. So I think that the concept of a CEO, how has a successful CEO managed the company? And that's my book.

Michael: And I would imagine, you know, while it's not always true, when you get to this level of wealth, when you start talking about tens of millions of dollars, like, unless you inherited it or you got it from a lottery, most wealth at that level, like, you were involved in value creation in a business. Either you made and founded one or you were an executive in a fairly senior position in one. Like, you can diligently save on a monthly basis and invest reasonably well and get maybe $1 million or a few dollars if you're relatively high income.

But, you know, I know I've seen this in our practice for a long time. Like, you don't see people north of $10 million and certainly not north of $20 million or $30 million unless they were attached to value creation in a business. Which means a lot of them if they were not literally a CEO of their prior business, they likely have some fairly senior management or executive level experience. Which to me just makes that conversation very interesting because what it essentially says or becomes to them is you used to be the CEO in the business you founded, now you've had your liquidity event, now you have a new CEO job, your new CEO job is you're the CEO of My Wealth, Inc.

Charlotte: Exactly.

Michael: You didn't retire, you just got a new job, which is to be a steward for all this money that you've just created a liquidity event for yourself.

Charlotte: And what's most fascinating to me is when the book first came out, of course, family and friends were curious and said, "Oh, my goodness, look at this book." And one friend in fact jokingly said, "Oh, Charlotte, it's so wonderful that someone, at last, is going to be worried about the concerns of the ultra-wealthy." Which of course I said, "Well, I think the ultra-wealthy if they can forget about managing the wealth and actually think about what they want to do in their life. What is their passion? What do they want to do? That makes a big difference." But the other thing is that my daughter-in-law's parents, neither of whom have huge amounts of money at all, they said they loved it. They said, "This book has helped us. We're about to go in and talk to our broker about our retirement and our IRA, and we're going to use those questions, Charlotte."

Michael: So we'll make sure we include a link out to the book as well, but for those who are curious, the book is called "Wealth Management Unwrapped." And this is episode 78 of the podcast, so if you go to kitces.com/78, we'll have a link out to the book there if you want to take a look and read. So I guess, Charlotte, like, you have consumers that just buy it directly, you have advisors who buy it and give it to their ultra-high-net-worth clients to help them get oriented around their wealth and, you know, "Welcome to your new job. You're CEO of My Wealth, Inc." And I would imagine there's a subset of advisors that just read it so they can just better understand the mentality and the issues of these ultra-high-net-worth clients that they're working with or trying to work with more so they just better understand that mindset and what the issues are.

Charlotte: Exactly. And yet, I think all people who have any wealth, even if it's that couple going to talk to their broker about retirement, we all want to have peace of mind about our money. We want to know we have enough. We want to know that we're doing the right thing. And as Charley Ellis so beautifully put it, "How we spend our money is the ultimate manifestation of our deepest values." And so even for the person who's not hugely wealthy, a planner or an advisor can work with them around their budget and how they're spending their money because this, I think, is universal. This is not just the ultra-wealthy.

The Biggest Worry Of UHNW Clients [51:29]

Michael: I think the challenge that some of us have, like, I think it happens even in the advisor space. It certainly happens in sort of the general public and media. You know, I mean, I get that sort of framing, like, "We want to have peace of mind about our money and know that we have enough." For most people, it's hard to relate, you know, to someone with tens of millions of dollars who's worried about whether they have enough.

Charlotte: Well, that was my friend who made the joke, "Someone is worrying about the ultra-wealthy." So glad someone is doing that.

Michael: Yeah. So, I mean, help us understand, like, I mean, what's going on in their head? You know, I mean, it's sort of half-joking but half-serious. Like, when you've already got all that money, you know, I get it, I know how to come to the table and hopefully I can get you a little bit more alpha performance because, you know, when you get tens of millions of dollars, like, a couple of basis points of alpha performance is a lot of money. So, you know, I know how to have an investment conversation.

You know, we can have a debate for another day about relative value of active versus passive, but, like, functionally, I know how to try to add value to a giant portfolio of money. How am I supposed to be adding value to the client themselves if our fundamental concern is peace of mind about money and wanting to know we have enough and you've already got tens of millions of dollars so it would seem you have enough? Like, are we just impressing the wrong...you know, our values on them because it's a lot of money to them but it's not a lot of money...or sorry, it's a lot of money to us but it's not a lot of money to them, or are we just missing the boat on what the issues and concerns really are at an ultra-high-net-worth level?

Charlotte: Well, and that's the job of the advisor to figure out what their concerns and worries really are. Many of the ultra-wealthy, their biggest worry is how their children will be impacted by the wealth. And I cannot tell you how many times we've been asked to have sessions at IPI, at Wharton, it comes up every time, "How do I make sure my children don't grow up entitled or worse addicts and just fall off the path altogether?" The issue of worry around their children, their grown children often. The second biggest worry is being taken. There were people within IPI who lost a lot of money with Bernie Madoff because they made the mistake of saying, "Oh, well, if it's good enough for so-and-so it's good enough for me."

And it's interesting that the online community actually had someone ask about Bernie Madoff three years before he was arrested, and he got three answers. One was from South America saying, "He's our best performing manager." The second one saying, "Well, we've just hired him so we're not sure, but he seems terrific." The third one said, "I could never figure out how he made his money. We took a pass." Three years later when he was arrested, I got a call from an investor who had actually posted that question and said, "Charlotte, I want to thank you because that IPI community online saved me..."

Michael: That third person who said, "I couldn't figure out where he's making his money, I took a pass," is what gave others who were skeptical the permission to say, "No, no, it's really okay to take a pass, other people are taking a pass."

Charlotte: So the fear that you were so accurately stating, it's not that they'll run out of money, because, you know, probably they won't, but they're afraid they'll be taken....so many people are deferential to the very wealthy. They get goodie bags. They get invited to benefits and they go home with a shopping bag full of freebies, right? So they're used to being served that way. They're used to people fawning over them. And so what happens is the children of the wealthy then begin, if they're not lucky, they begin to be spoiled brats who feel entitled. And this could be a horrendous outcome for a parent.

On the other hand, what I've seen again and again more lately is the millennials want their money to have meaning, and they want to make a difference in the world. They do not want to be a cog in the wheel. They don't want to just have more toys. They're interested in, "What is my place in the world? Who am I and what's my life going to be like?" And money is just a tool, Michael, it's not the be-all and end-all. But again, as an advisor is talking to someone, that's their job, to figure out, "What is the personality of this individual? What is most important to them?"

Michael: I guess that's, like, the one, well, not the one, like, that's the redeeming opportunity for children, next generation wealth and families? Like, the good news is they happen to actually be the generation that's most interested in making sure the impact of their money has meaning, so if we can manage to not have them get completely spoiled and entitled along the way during the childhood years there's a good chance they'll want to put themselves and the family money to productive use and leave a positive legacy is, like, the silver lining of that dynamic?

Charlotte: Mm-hmm. And wanting to get up in the morning and passionately pursue something I mean, whether it's a craft, a job, work, philanthropy, whatever it is, we all want to feel good about waking up. And as Warren Buffett so perfectly put, you know, "Skip your way to work."

What UHNW Investors Really Want To Hear In Order To Connect With An Advisor [57:02]

Michael: And so what's the...like what's the advisor's role in that dynamic? You know, I think for most of us that work with, you know, the merely wealthy who may have $1 million or few, or further down the line into the mass affluent space and just, you know, people who have hundreds of thousands of dollars and very meaningful money for them that allows them to retire and stop working, for a lot of us in the advisor world, yeah, maybe some of us do an occasional educational workshop for the kids of our clients because it's a nice thing to do for them and it gives back and it teaches them a little financial literacy. And, hey, maybe that means they know me a little bit better as an advisor, so if their parents pass away I can continue the family relationship. Like, we do some stuff for children and families, at least some of us do, but what does this look like at the level you're talking about? Like, how are advisors in an ultra-high-net-worth space actually involved in this discussion? Or are they involved in this discussion?

Charlotte: Well, I need to answer it with a question that's really springing from your question. I believe the most important question an advisor can ask any client about family and the wealth is, "What does success look like for your family? What are you hoping to see down the road?" And it's also very appropriate when someone is retiring, which I'd like to call rewiring because that's what I did, but what does success look like?

And then the second part of that is many advisors to the ultra-ultra-wealthy, I think, make a mistake. They try to be psychiatrist, money manager, you know, all rolled into one. I think that can often do more damage than it can help. So I think that if advisors can be humble enough to recognize they're not going to be able to solve the sibling rivalry or keep a marriage together that's falling apart, they have to really acknowledge that they're not going to go there. But too many advisors think, "Oh, well, I'll just become, you know, ombudsman for all the family problems. I'll help junior find a job. I'll help the daughter, you know, not be so spoiled. I'll show her a chart." And none of that, I think, really works out well. But this is where many of the big firms are moving. They have family historians, they have financial education for the next-gen, and so on.

I would suggest that's springing from people acknowledging and recognizing that people do yearn to connect. We're human after all, we'd like to be in community, but I think sometimes they can make a wrong turn when they get too into the emotional depths or family or psychological issues.

Michael: Because we should be...we should have other experts on our team or refer out to other experts or just because we're just going too deep?

Charlotte: Either refer out or if you're a huge firm, you might have that expertise and capability in-house. But many IPI members would complain to me, you know, they hire a family facilitator. One woman told me, she said, "We knew we were in trouble when the facilitator showed up in an Armani suit and talked only to our father and ignored the three of us, all daughters."

Michael: Oh. Ouch. So what else have you found just with 20-plus years of IPI? Like, what else do we as advisors not understand about just the needs and issues and mindset of ultra-high-net-worth clients and how they're different than other folks we might work with?

Charlotte: I am going to mention the L word, Michael, which is love. I talk about something called the principles and skills of loving in writings that I've done. And what that's about is establishing a level of connection. And the principles and skills of loving include, "I see you. I don't look past you. I hear you in your uniqueness and respect what you're saying. And I intend you good will." Now, in the financial services arena, there have been some bad actors, not by any means the majority, but there have been some bad actors who have just been unscrupulous and manipulative. But the principles and skills of loving are applicable to any level of wealth.

And in a way, what I hear from IPI members is scale can often be the enemy of intimacy. What I mean by that is if the family who's got a lot of money feels that they're just one more number to make the assets under management get bigger, they don't like that. They'd rather hire a boutique and yet most of them are not naive and realize that very successful boutiques often become big. The trick is quantum physics. You have to be both a particle and a wave. If you're going to go for scale, if you're going to be a big firm, it has to be that when a client is talking to you, they feel they have your undivided attention, that you really care. You're going to hear. You're not just going to talk, you're going to listen.

If you think about a doctor and a patient, who's the boss in that relationship, the doctor or the patient? Well, bottom line is they both are. Because if the patient doesn't listen to the doctor and do what they're supposed to do, or the doctor doesn't listen to the patient's symptoms and makes a bad diagnosis, they both lose. So I think it's not unlike in the advisor-investor relationship but there has to be a give-and-take. And it has to be a public acknowledgment that they need to have that dialogue. So asking our questions, "What do we do when we disagree? What if you don't want to do what I think is in your best interest? How do we resolve that?" Talking about that before it happens can be very, very productive. "What do we do if you want to do something and I think it's a terrible idea? You want to sell all your Euro-based investments, or you want to get out of the stock market because you're afraid." Talking about it before it happens can be very powerful.

Michael: Interesting point, and I think frankly is relevant up and down the scale. Like, just asking, you know, I mean, we've all had situations where clients don't take our advice, so just literally having the conversation in advance. So, "Hey, at some point you're probably going to want to do something that may not entirely be advisable and I'm going to recommend against it. And you may or may not be excited to take my advice at that moment because you may be really focused on something else. Maybe you're really scared because the market is declining, maybe you're overly enthusiastic about some investment opportunity that's probably a giant scam but you're fixated on it and I'm trying to talk you out of it. So when we get to that moment of conflict, how would you like me to handle it?"

Charlotte: Exactly.

Michael: And just literally let them answer, "How would you like? No, I'm really serious, like, how would you like me to handle it?"

Charlotte: Or, "How would you like us to handle that?" Because again, I underscore partnership. And in a partnership, you don't have a boss. Yes, you're the CEO and yes, you could fire this person, but once you've hired them as your VP of, you know, investments, whatever that might be that they're running, or they're VP of everything, you need to have a partnership where you truly have a dialogue.

Michael: So what does IPI look like today?

Charlotte: There's lots of competition for private investors of any wealth level. There's 7 million millionaires now in the U.S. I'm just back from China, and they started having IPI-like programs and conferences. I was thrilled to be over there in Suzhou and Shanghai. And the room was filled 200-plus investors, but interestingly, almost half the room were women. So IPI today has gone global. They have programs all over the world. They have memberships: India, London and so on. But I think the competitive landscape is huge. There are lots and lots of groups having conferences that bring together high-net-worth or ultra-high-net-worth. It was an uncrowded space when I entered. There was really Family Office Exchange and IPI were the two, and we emphasized different things. So it really wasn't a competitive landscape.

Michael: And what foes IPI look like today in terms of participation? What are you doing? What's the mixture of folks? I mean, like, is it still a reflection of what it was when you'd built originally, you know, 60% private investors and 40% on the advisor side and doing largely the same thing or has it evolved from where it was when you got started in the early 1990s?

Charlotte: I think it's evolved, Michael. And true to being a founder who is self-aware, when I sold the business in 2010, I stayed for another 2 years and then I thought, "You know, founders can be just totally annoying to the managers who are trying to run the business." So two years after selling the business I left. And that's when I wrote the book. And so I have not been involved with IPI of late. I've certainly kept some relationships from long ago. I'm deeply in debt to all the IPI members and to the magical community we had, but I'm afraid that I can't answer exactly what they're doing now other than what you and I can both see on the web.

Michael: So what led you to sell, to make a transition after 20 years in the business? You’re still going. You weren't looking to retire. You have rewired a bit but didn't want to stop doing things. So, like, what leads you to decide to make a sale and a transition after years of building, when, I guess, you still have some energy left to keep going since you're still very much engaged in this community?

Charlotte: It was a combination of things. I had a wonderful president at the time, and I just felt that I wanted to step away. And I was tired of course. I'd been running it at a fierce pace for 23 years. I also, and this is only partially a joke, I was taught at a very young age you leave a party at its height. So in one sense perhaps I was saying, "You know, the advisory community has many, many, many, many options now to connect with high-net-worth, and maybe it's time for me to sell to someone who can take this globally and expand, and I just don't have that skill set nor the motivation to do it." I was 66 at the time of my sale, and that seemed early by some people's measure and yet I was looking at people that I thought it was wonderful to see them step away from the first business and then go into a different direction, which is essentially what I did.

Michael: So what's the focus for you now? Like, where do you go next?

Charlotte: Well, the six years ago, I took part of the proceeds from the sale and I created a private foundation called Principle Quest. And it's not a coincidence that Principles of Principal, with the LE and AL is in my book, but Principle Quest is devoted entirely to women and innovative experiential education and empowerment, and so that I give small grants. It's a peanut-sized foundation but it has consumed my passion more than I ever dreamed it would. We've held 12 retreats of 10 women each of all ages, colors, backgrounds and so on for weekends. And I've also given those small grants to organizations like World of Money or STRIVE or the Council for Economic Education.

And what I am doing now is working through my foundation and enjoying life as well, traveling. And I must say that I highly recommend it, but it's not easy. The first thought when I retired and when I sold the business was, "Oh, my goodness, now what?" I suddenly understood how people could feel like deer in the headlights. You're thinking, "I don't want to lose this money, but now what do I do?" And it's not uncommon in my experience with IPI members to see people have fallen into deep depression because they didn't have anything to do. And so what I wanted to make sure did not happen to me was that. But it was a process, it didn't happen overnight. The foundation was an idea that my sister actually gave me. And I said, "Don't be silly, I don't have enough money to create a foundation." She said, "Oh, well, just do it for the fun of it." So I went ahead and did it, and I've never regretted it and it's incredibly fulfilling. And I'm going to spend it down before I die.

Michael: So as you look broadly at the industry and, you know, not just how its progressed but now where it seems to be going forward from here, you know, there's so much discussion these days about the relative role of advisors and technology. You know, the infamous robo-advisors and who or what they're coming for or not. So, like, as someone that's seen this evolve over the years and has such kind of a deep line directly in the ultra-high-net-worth space, you know, how does an ultra-high-net-worth investor look at the rise of robos and artificial intelligence? Like, just the relative role of advisor versus technology in, "Help me manage my money."

Charlotte: I have to go back to a story from many years ago. IPI members were quicker to adapt to email and going online than were the advisors. In fact, it was the irritation of ultra-high-net-worth families who were members of IPI that their managers were still using paper and they couldn't email them, and they couldn't put things online. And if you think back to the '80s and '90s, there were very few firms that you could go online and see your account, see the cost basis, look at your performance, try things out. This is what the ultra-high-net-worth demanded and wanted. And many famous banks and custodial banks and advisory firms realized this and they were the winners. So technology is not the enemy in the eyes of the ultra-high-net-worth, it's a friend.

And I would even go further and say it's sort of like if you think about what you do if you're a CEO, you want to have a dashboard. You want to be able to see things, and you want to see them when you want to see them, not when the advisor decides to mail you something or send you something online. And so I'm very...I'm a technophile myself, and I think artificial intelligence and the robo-advisor when combined with an intimate feeling can be a big win. I mean, I don't know about you but I like Alexa. I tell her what to put on the shopping list, you know, I tell her to play a song. And I can see her becoming a companion to the elderly. Telling a joke, keeping the elderly entertained. I mean, I think we're in an exciting time. And yes, there are many caveats and dangers, as "hom*o Deus" and Professor Harari would tell you, which is a book I'd love your readers and listeners to take a look at. I think it's fabulous.

Michael: What's the book called? We'll make sure to add a link to it in the show notes.

Charlotte: "hom*o Deus," H-O-M-O Deus, D-E-U-S. And he talks about how AI is evolving and will evolve. And yet while they're dangerous and I know Stephen Hawking warned us about it, it's also a very exciting time. I think private investors, in fact, and I just want to add one other thing, is they can be too demanding, that's something we all know, but they want high tech and high touch. They want both. Again, back to the quantum physics, they want both and not either/or.

Michael: Yeah, I think that's a good framing. Just, like, high tech and high touch. These are not mutually exclusive. You know, I think the challenge and fear for some of us is, you know, historically, like, "Hey, part of my value is I create this financial plan that gives you a holistic view of what's going on in your entire world all in one place." And that really was, like, a unique value-add to be able to bring that together for clients. Now the truth is technology can drive a lot of that, but it feels scary to give that to clients directly. And, you know, like, then you've got to worry, like, are they going to decide, "Why do I need this advisor anymore? I've got this great dashboard that already tells me what's going on and what I need. So I'm just going to let go of the advisor and keep the technology dashboard."

Charlotte: Yeah. No, that is clearly the threat, and that's where the intimate connection and scalability and tech have to figure it out. And this is where I have no magic solution. I know some firms have figured it out. I think it's easier when you started de novo and then you become bigger than the other way around where you're huge and you're trying to do both.

Michael: Are we just being overly self-conscious in fearing the consequences of giving our clients all this technology directly and just letting them control more of it or, like, is this a real fear we should have and it's, "No, no, like, your clients are going to get this technology and you darn well better figure out how to step up and do a whole lot more on top because otherwise they really will fire you and just keep the technology?"

Charlotte: And if they won't fire you, their kids will. Remember, the next generation, technology is their best friend. I mean, the devices are attached, they're part of them. I think we all resist change. I do as badly as anybody else does. We resist change and yet we cannot put our head in the sand and pretend it's not there. It used to be, I can remember a time when you didn't see the cost basis of your portfolio. I can remember a time when you didn't report your investment performance to private clients. And people would tell me back in the '80s, "Oh, they're not interested in that. They don't care about that." Well, guess what? Whether that individual thought they did or not, they do now and yet performance is not everything. It's not everything.

I guess Maya Angelou has a wonderful poem that I always remember. And I'm sure you've heard this before, "I've learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel." So you can have the high-tech and he can look at it at 3 in the morning or she can look at her account, but if you have made that connection with the client and have talked about your value proposition in ways that are not just, "I'm going to hold your hand," nobody wants their hand held anymore, they want you to be solving complex problems, saving them time, giving their life simplicity, freeing them up to do what they really want to do, having them not have to worry that you are going to be the tickler system that helps them. Those are the things that matter.

Michael: I'm struck by that as well. You made this comment, like, you know, nobody just wants their hand held anymore. So, you know, part of what's become in vogue in the advisor community these days as sort of this, like, response to the rise the technology is, "Oh, well, yeah, you can invest your portfolios in a robo-advisor, but who's going to hold your hand when the scary markets come and the bear market comes and keeps you from selling out at the bottom?" So is that still relevant or does that kind of fall into your category here that, "No, no, no, ultra-high-net-worth investors really don't want their hand held that way anymore, that's not why they're hiring you. Like, they're hiring you to solve complex problems and save them time and help them with more fulfilled lives."

Charlotte: And make them money, and make them money in the way that you and they figure out is going to work for them. If we think about it, if you said that to a client, "I'm here when the markets go down," the typical response I would think from anyone would be, "Well that's why I'm hiring you so that you protect me when the markets go down."

Michael: Great. So now I have to outperform in every bear market. This will be fun.

Charlotte: Yeah, that's a non-starter, but it's a dialogue that can happen before they're even hired. And creating an investment policy statement talking about... The anecdote I remember from my marketing days on Wall Street was my boss, because I was pretty young and green, asking a couple, "Well, how much money can we lose before you fire us?" And I was thinking, "What? What is he doing? He's ruining this prospect for me. And what I realize today and later was that it was a very smart question to ask, not asked well, but it was the essence of, "How much can you lose before you really are going to want to go off the cliff?" And that informs the asset allocation. And then when they see what that means in good markets and bad markets in a simulation, that's when the real discussions can start, and you understand the unique personality of the investor you're working with.

Michael: So if you are in the technophile, not technophobe camp, you know, the future is high tech and high touch and advisors still have a role on top of all these fancy technology tools that we've got coming, what do you view as the threats for advisors in the ultra-high-net-worth space now? Like, is it just about competition, you just have to do that stuff better than everybody else because now it's a really crowded space in a way it didn't use to be or are there other threats that you see to what's coming in the wealth management industry?

Charlotte: I do think there are enormous threats because of the sheer competition, but I do think there are three big changes that can be, as they say in the Chinese character, both an opportunity and a threat. And the big opportunity is wealth is younger, and the population that advisors will serve is younger. And that means tech, but it also means the fact that they want more meaning and want a more substantive grasp of what you're doing for them. They may not like an AUM fee, they may not like the way your reports are working. So to be open to what the younger client or the children of your aging patriarch, and it usually is the aging patriarch.

Second change, so first is younger, the second change is the preponderance of women as both clients, whether it's widows or women who have made it. I mean, Rebecca Traister's book, "All the Single Ladies" is an eye-opener, showing how much wealth there is in women today who form companies at much higher rate than men. And so hiring more women in the firm, making your team diverse, having the input of women in how you make decisions can be a fabulous generator of real value to your clients.

Michael: Because in essence, otherwise, the concern is if you don't have more women and diversity in your advisory team you just won't be able to effectively relate to and understand the growing preponderance of women that have wealth that you're going to be serving in the future?

Charlotte: Yeah, exactly. In your previous podcast, which were terrific, with both Sheri Fitts and Eleanor Blayney, they both made this point in different ways. But women are half the population and increasingly they already own 51% of the assets in this country. So it's a tsunami that's coming and it makes a lot of sense to have a woman at the table. Because when a woman goes into a firm and sees no women at the table, she's just feeling put off. It just doesn't feel right.

The third change that I see or threat is the whole way the advisor community has historically looked at the value proposition and the fee structure. It's not about holding your hand. And I think the assets under management fee-based or premise is, I believe, going the way of the dinosaur. I don't believe reasonable people can say, "Well, gee, I should be paying on an asset under management fee because that's the easiest way for the advisor to charge me, when my needs may be very different from someone with exactly the same amount of money." How does an advisory firm reconcile that? So I'm seeing a small but steady trend toward retainer fees or project fees, or just a different way of looking at it. And there's lots of literature out there on this. But the asset under management fee just is illogical to many of those CEOs of My Wealth, Inc.

Michael: And is that the AUM fee in general? Is that just part of what happens at the sheer size? I mean, it's one thing to talk about an AUM fee on $1 million client, a $2 million, a $3 million client, it's another when you're trying to calculate an AUM fee on, you know, $132 million and then they sell another business and they go to $178 million and you're like, "Well, that'll increase our AUM fee." And they're looking and saying like, "I'm still the same client that was at $123 million and I'm pretty sure you were doing okay based on the AUM fee on my $123 million." Like, is it just something that amplifies the ultra-high-net-worth levels because the dollar amounts are just so large in the first place that it puts even more pressure on AUM fees than the rest of the spectrum?

Charlotte: Perhaps, but I'm going to be a little radical here and suggest that it's not different. And here's why. A story told to me by an advisor. I helped an individual who had a certain amount of money interview advisors. I didn't tell him who to interview, I just said, "Here are some questions to ask," and so on. And the one who won I had breakfast with because I wanted to know why he won. And he said, "We gave him a fee based on what we saw is the amount of work and the complexity of his account." And he looked at me and then he said, "And yet, Charlotte, it really worked out to be 40 basis points."

But the difference and the reason he won is the other two competitors also had basically the same fee, but what he said was, "This investor appreciated the fact that I said, "We have done a calculation. We looked at it and we're going to reevaluate it every two years," I think it was that he said, "Because your needs may change, our needs may change." But that was a solid fee that wouldn't change, but it was based on a retainer or a project fee and complexity as opposed to AUM. And this particular investor, who was an engineer and I think had around $30 million, loved it. And yet, in the end, it was the same fee as the other two.

Michael: So not necessarily about...this isn't literally a fee compression conversation per se, just a, when you're trying to justify and rationalize your fee, it may be harder to do so when you just anchor it to a portfolio, when the driving force of why they're coming to you may not be the portfolio, that may just be part of it. So when you can frame your fee differently and just connect the fee to the value points differently it may resonate more with some clients.

Charlotte: Precisely.

Charlotte's Advice For Advisors Who Want To Move Into Serving UHNW Clients [1:26:11]

Michael: So what would your advice be for an advisor that wants to go further into ultra-high-net-worth today? You know, maybe it's someone who's been doing this for a while, has some years of experience, has a reasonable client base, wants to figure out, "How do I move my business up to work with more of the ultra-wealthy?" Like, what would your advice be to someone that wants to move more into working with the kinds of folks that you had with IPI over the years but they haven't been there in the past?

Charlotte: That's a tough one. It's a good question. Besides the very self-serving answer of, take a look at what I've written...

Michael: Well, we'll have the book in the show notes, kitces.com/78. Go get the book.

Charlotte: Yeah, but that's a GPS for the advisor. But I think also it's to know yourself. In other words, why do you want to work with a higher level of wealth? And if it's just because somehow you see it as elephant hunting, that, you know, you can bag 1 and it's worth, you know, 1,000 mice, that's probably not going to work for you. I think it's probably also some self-examination about where they are in their community and what their niche has been. I think your advice you've had for advisors yourself Michael has been very real, figure out where you're going to shine, where you're going to excel. And so it's not so much, "Oh, well, I will excel with the ultra-high-net-worth," as it would be, "I know how to relate to people and help them understand who I am." And that can resonate with a $30 million account as much as it can resonate with $1 million.

The one caveat I would say is that many ultra-high-net-worth want to be the biggest client of the firm. They feel very important and happy with that. So that can be a plus.

Michael: Except that you can't have a bunch of them because they all want to be the biggest client and not everybody can win.

Charlotte: Right. So the personality of those clients matters deeply, and they may not want you as the advisor to get too big because then they won't be as important. But the caveat there is, you know, you've got to know why you're doing this. What are you growing for? It's not just about the money, it's got to be a big why, and knowing what will be required in those relationships.

Michael: Yeah, I think it's a powerful point that sometimes we don't think about, you know, from the advisor's end, like, getting a big client is just, it's a big client, it's big dollars, it can be big revenue, it's very exciting for growth of the business, you may see yourself as moving upmarket, but from the client's end it's like, they may do that because they want to be the biggest client of the firm. They don't actually want you to grow big. They're basically doing it because they know if they're a giant client for you, you will have to be pretty subservient to whatever they say because you're going to really need to keep them as a client. And that may not actually be the healthiest dynamic for you as the advisor to take on that mega-client if you're not really built for them in the first place.

Charlotte: Well said. Well said.

Michael: Because that is part of the calculus, I think, that goes on from their end, at least for some subset of ultra-high-net-worth investors?

Charlotte: Mm-hmm.

Michael: It's part of the decision of whether they're going to go with an advisor or, I guess, make their own family office? You know, just, "How much do I want to build it versus how much do I want to work with another advisor but I'll just be a giant client for them so I can largely control how they serve me anyways, but then I don't have to build the whole firm myself?"

Charlotte: Yep. I have one other story that is a wonderful one that is right on this topic. A very, very ultra-high-net-worth principal told me this. Fired their former multifamily office and went on a search and ended up hiring another one. And a year later I asked her, I said, "Well, how are you doing? You're happier?" She said, "Absolutely. We're thrilled." And I said, "Well, how can you...you know, what is it that's made the difference? Why are you so happy?" And she thought for a moment and then she said, "Financial planning. I don't have to worry about anything. They come to me and tell me it's time to think about X, or it's time to think about Y." I thought that was a beautiful tribute to financial planning, which used to be not as respected nearly as it is today.

Michael: So we're winning...we aren't winning, we're making progress at least. We are getting this whole value of planning thing out there.

Charlotte: Yes. Yes, you are. And that's why I'm so happy that I work with the CFP, Women's Initiative, because they are doing it.

Michael: I guess that's still the challenge from the other end. So as you said earlier, you know, part of the competitive threat and the shift in the ultra-high-net-worth space is the rise of both younger wealth and female wealth. And, you know, women are half the population and own 51% of the assets. And then in financial advisor world, I mean, by CFP terms, we are still 77% male. When you get into, I know some large firm environments it's actually worse and less diverse.

So, like, what has to change or what...like, what changes to get to the point where we can actually have more women advisors to serve affluent clients in the first place? I mean, I know a number of firms that have said like, "Hey, show me a capable woman to serve ultra-high-net-worth clients, like, I'll hire her right here." And I think they're really genuine. They're just literally having trouble finding experienced women to be advisors in their firm because it's kind of hard when it's only 23% of the CFPs in the first place.

Charlotte: You just nailed it as the problem. If you're looking for experienced planners or asset managers or so on, they're not going to come to your firm because you're hiring them as the first woman. What I think we need to do is the way that many famous brands have done in the financial services arena is train them from the very beginning. Find them in high school or college, or become part of programs like Forte or 100 Women in Finance and find the young, eager women who didn't know about finance, never thought about it as a career, and then train them and they grow. And I was one of those. I mean, I knew nothing. I majored in English in college. And I was a quick learner, and I found I loved it. I had the Wall Street gene in my DNA because both my grandfather and father had worked on Wall Street, but I didn't even think about finance as a career. So I would suggest that it's hiring young, hiring the inexperienced and then training them.

Michael: It's an interesting point. And the flipside that you kind of mentioned lightly there but I think is a big deal, that, you know, for...I mean, just a sad reality, for a lot of firms that unfortunately are very male-centric or exclusively male advisors now, you know, you may want to hire a experienced female advisor so that you have more diversity in your team. A experienced female advisor may not want to come into your entirely male-centric firm and potentially feel like the token female on the advisor staff. That's not necessarily a good feeling from the other end.

Charlotte: Exactly.

Michael: So as you look forward to the profession from here, like, where do you think this space goes over the next couple of years?

Charlotte: I think it goes in the direction that you are predicting and I am as well, which is that there will be huge impact from technology, and the firms that know how to marry it to their high touch will succeed, that aren't burdened by legacy systems. The breakaway trend of the...coming away from the big firms going onto platforms, going into boutiques and so on I think will just accelerate. But I wish I knew more about how it really will all end up. I think if you think of, again, back to the medical field, you don't go to a cardiologist to find out about your diabetic condition. So I think there'll be an acknowledgment that more specialization needs to occur, but we'll always want to have someone who is our GP, someone who can sort of be the quarterback, someone who can look at it as a big picture when it's the ultra-wealthy.

With the merely wealthy, they like the simplicity of one advisor, and yet ultra-wealthy also do. So I think it's the idea of someone who can see the big picture, makes a complex much simpler, and give them a confidence that they're overseeing their wealth in a prudent and, in many cases for many investors, an opportunistic way. Not just being the traditional slowpoke.

Michael: I guess just the distinction is, you know, and I know a lot of advisors over the years have said, you know, "I'll be your one true advisor. I'll be your quarterback. I'll be the family CFO. I'll be the center of it." You know, for the, well, I'll call them the merely wealthy and affluent, often you can do that as an individual advisor and have the scope of expertise to do that. I guess part of the point here that you alluded to, like, in the ultra-high-net-worth context, if you want to be that quarterback generalist, like, you really actually have to be a quarterback, which means there's a team that you're passing to and that it really is a much more of if you want to be in that quarterback generalist role, like, you really will have to be more plugged into specialists and other people with niches if you want to make that work in the ultra-high-net-worth space as opposed to the general affluent space where I really might actually be able to do most of that myself?

Charlotte: Yep. There's far more complexity. That's absolutely true.

Michael: So as we come to the end, this is a podcast about success, and one of the themes that always comes up on the podcast is just that the word success means different things to different people. And so you've built what I think anyone would objectively call a very successful business. You built, like, an entire new category of community group in a space that no one said you could do that, in a world before social media and community and networking were things the way they are today and you know successfully built it and sold it. And so I'm just wondering, like, as you look at a personal level now, how do you define success for yourself at this point?

Charlotte: Well, I must confess that I'm blessed with having sold a company so that I don't have money worries. And that was not my measure of success, but I was lucky enough that it happened. How I measure success though, I'm not sure has changed all that much from my 20s. And that is how I measure success is my ability to connect and have meaningful relationships: family, friends, clients, colleagues and so on. It's what gives life meaning, in my mind. If I am just going after a dollar sign, it happened to me when I was on Wall Street. I got the biggest bonus check I'd ever gotten after selling like crazy for a year. And I remember looking at this check, and it was huge, and I remember saying, "Is that all there is? There's something wrong with this. I don't feel that excited about this." And it was within eight months that I went out on my own and became an entrepreneur.

Michael: Perhaps by the savings that you built by getting the really nice, large check.

Charlotte: Of course.

Michael: You turned it to good use.

Charlotte: Yeah, I did. I said, "Well, this will hold me for a year." And that was, again, my fallback. But I define success as meaningful connections and not going it alone. Realizing that I have someone I can lean on. You know, wonderful family and husband. That I have colleagues, cohorts, industry friends that I can count on, that makes life more fun. And by the way, fun is big, as is freedom and the power to put my money where my mouth is and do what I believe in.

Michael: Well, I'm glad you could come and share that with all of us here. I think it's a powerful message around...you know, doing good and helping people also happens to sometimes generate some nice money and eliminate some money worries. But it doesn't have to drive you to get you to that point. You can still get some very good outcomes doing good along the way.

Charlotte: You bet you can. And I never in a million years thought I would ever end up with the wealth I have when I first created IPI. All I wanted to do was pay the mortgage and pay my children's tuition. And I thought, "That'll be enough." I wasn't worried about anything else. And you're right, when it happens it happens because I was doing something I loved. I was passionate and I stayed true to what I believed in and had realized there was a need out there in the ultra-high-net-worth community to find a community. So it was a wonderful blessing and a stroke of good fortune. And it probably didn't hurt that I worked like crazy.

Michael: Well, amen. A little bit of hustle helps, too.

Charlotte: You bet.

Michael: Well, thank you. Thank you for joining us on the "Financial Advisor Success" podcast.

Charlotte: Michael, this was lots of fun, which is one of my measures of success. So thank you for inviting me.