The Affluentialist

There’s a new research paper, entitled “The Small World of Investing: Board Connections and Mutual Fund Returns,” that’s creating a lot of buzz these days in the asset management business. The central finding—as the title suggests—is this: mutual find managers invest more money in companies run by people they went to school with than in other companies.

Apparently all those fraternity parties were a business write-off, and we didn’t even know it.

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Experts who specialize in advising the high net worth on the purchase of artwork is nothing new. In fact, Christie’s and Sotheby’s, the distinguished auction houses, are each more than 200 years old. But over the last few decades, and more intensely over the last five years, art collecting has reached a fevered pitch. Clearly the new entrants into art collecting are not the bluebloods of yore. Instead, they are likely to come from the world of new money—hedge funds, entrepreneurs, corporate chieftains.

Like any other interest or hobby, art collecting has a learning curve. Whether your client is dabbling in photography—a common way to get started in art collecting, or moving right into the acquisition of substantial pieces by notable artists, it’s worthwhile for them to get the advice of well-connected, knowledgeable experts. Enter the “art advisor.”

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Last week, I highlighted some of the results from a recent Wharton paper entitled “Bridging the Trust Divide: The Financial Advisor-Client Relationship.” That blog installment focused on the importance of trust between an advisor and client and the different kinds of trust a client seeks.

The paper also addresses the issue of fees and transparency because this is where some of the distrust between advisors and their clients originates. The paper points out that advisors experience discomfort when it comes to describing their fees. Z. John Zhang, a professor of marketing at Wharton, observes: “In all service industries, nobody really wants to talk about the prices. You want the customer to focus on the service you provide and the results that you can deliver. I think for financial advisors it’s the same.”
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The Wharton School of the University of Pennsylvania recently issued a paper entitled, “Bridging the Trust Divide: The Financial Advisor-Client Relationship.”

The paper, sponsored by State Street Global Advisors, attempts to break down the elements that make up a trusting relationship between advisor and client and makes a particular point about the increasing importance of trust as the financial services industry becomes more service-oriented and less product-oriented. The paper, available at Wharton’s web site, contains empirical research that supports the paper’s conclusions.

The subject of trust is a critical one for an advisor. As the paper points out, ‘trust’ is more than just a marketing position; it’s an essential element of an advisor’s value proposition in the wealth management market. Read the rest of this entry »