How Entrepreneurs and Wealth Managers Can Work Well Together

An adviser and coffee shop owner go over paperwork at the coffee shop counter. — (Image credit: Getty Images)

The increase in the number of ultra-high-net-worth individuals across the U.S. can mean only good things for wealth managers — especially as more of these newly minted millionaires and billionaires look to set up family offices to protect their wealth.

But working with these newly wealthy individuals — a large, though decreasing, percentage of whom are self-made entrepreneurs, according to Reuters, citing a UBS report — can be a different sort of beast than working with the more traditional second- and third-generation clients who have inherited their wealth. For an entrepreneur, finding a wealth manager who understands their unique ethos is key.

It goes without saying: Trust is central to any relationship between a wealth manager and their client. If you don’t trust the person who is responsible for looking after your money, you’d be better off looking after your own money.

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Entrepreneurs often find themselves in a tough position when it comes to hiring a wealth manager. The same qualities that make them successful in business are also the qualities that put them at odds with many traditional advisers.

But as the net worth of this new class builds, entrepreneurs are going to need advisers who understand what makes them tick.

Here’s what advisers need to understand about entrepreneurs — and critically, what entrepreneurs need to understand about themselves:

Their business is everything

Starting a successful company is hard work. It requires everything you have and then some.

People who start businesses are passionate about what they do, bordering on obsessive. It’s an intensity that pushes them to look at the world differently — something many advisers are unprepared to handle.

Unlike more traditional clients, who simply want to know that their money is safe and growing, entrepreneurial clients tend to lean toward advisers who can manage their money the same way that they manage their company: with a passionate obsession.

The mistake I see a lot of advisers make when working with entrepreneurial clients is being too passive. Because their clients are so hands-on in other aspects of their life, they assume that they will be similarly involved in managing the fruits of their labor.

But entrepreneurs tend to be singularly focused on growing their business; they don’t have the time or headspace to micromanage. Instead, they’re looking for clear and direct guidance, an initiative that’s not common practice amongst wealth managers.

Entrepreneurs depend on — and are looking for — proactive advisers who can give their money the attention that they can’t, preemptively offering guidance. The more a wealth manager can look ahead to take the mental burden off of their entrepreneurial clients, the better off they’ll be.

Holistic planning is the baseline

Unlike a client who has inherited wealth and needs only to be able to maintain their lifestyle, entrepreneurs in many cases are truly starting from ground zero when it comes to building out their wealth. After having worked so hard to create their success, simply drinking the Kool-Aid of the traditional fund structures isn’t enough to give these individuals peace of mind.

These are people who have to make decisions about what’s best for the future of their family — they’re not interested in simply blindly putting their wealth into some portfolio.

Working with entrepreneurs requires greater flexibility and more creative thinking. Something like a liquidity event, for example, is much more common. As their wealth manager, you need to know how to deal with a sudden $20 million coming in from selling equity.

What strategic planning needs to be done in advance of the liquidity event to mitigate taxes and support estate planning? What needs to be done post-liquidity events from a planning standpoint? Often, transforming a business into sudden liquidity creates both complexity and discomfort for the business owner. Given this, what are the best strategies to pursue objectives and provide desired outcomes from reinvesting this money?

A wealth manager who is interested in becoming their client’s first call when a major life event happens is going to find a lot more success both for themselves and their clients.

Entrepreneurs understand entrepreneurs best

It’s almost a universal truth in wealth management: You work best with clients who share some life experience with you, whether that’s starting a business or sending a kid to college. Entrepreneurs work best with other entrepreneurs, wealth managers who understand what it’s like to grow a business.

Having this shared experience not only helps to build trust, but also helps to frame the risk appetite for a client. Entrepreneurs are used to doing things a bit differently and are going to be more willing to take the plunge on investing in riskier opportunities like private equity or alternative investments. They understand the cost that’s involved to make money and to offer services.

For both an entrepreneurial wealth manager and the entrepreneur, working together just makes sense.

Fundamentally, no two clients are exactly the same. Some are more set in their ways, and others are looking for more traditional guidance. Regardless of whether you’ve founded your own company or not, knowing that your wealth adviser has the trustworthiness and experience to help you will always be most important.

But neither clients nor advisers should overlook the importance of understanding in the wealth management relationship. Having the ability to understand what’s important can lead to the greatest success.

Entrepreneurs understand the world differently — it’s not crazy to think the people managing their money should as well.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Tom Ruggie, ChFC®, CFP®, founded Destiny Family Office, a Destiny Wealth Partners firm, to help clients manage the increasing complexities inherent in their business and personal lives. He has identified three key areas where his firm can make a significant difference: presenting a compelling sphere of investments, including alternative, direct and co-investment opportunities; creating a special emphasis on high-end collectors whose collections signify significant alternative investments; and strengthening the firm’s private trust capabilities. Ruggie has become one of the most respected financial advisers in the industry, receiving national recognition and rankings including: 7x Forbes Best-in-State Wealth Advisors (including 2024; #1 N Florida), InvestmentNews Awards RIA Team of the Year (2024), Forbes Top 250 RIA Firms (2023), Forbes Finance Council since 2016, 12x Barron’s Top 1200 Financial Advisors (including 2024), InvestmentNews Top 75 Fastest-Growing Fee-Only RIAs (2023), 12x Financial Advisor Magazine America’s Top RIAs (including 2024), 3x Family Wealth Report Awards Finalist (2024), USA Today Best Financial Advisory Firms (2023).