Look into, but don’t police, clients’ spending habits

Name:

Serena Cheng

Occupation:

Director of wealth management and investment advisor, Richardson GMP

Location:

Toronto

Age:

48

In the business since:

1994

Team’s AUM:

$250-$300 million range

Fee model:

Discretionary, fee-based

Typical clients:

Families with at least $3 million to invest

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This article is part of the Advisor’s Edge 20 Ways to Be a Better Advisor feature package, published in the June 2018 edition of AE. Click here for more tips and to learn about our 20th anniversary.

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The nice thing about wealthy clients is you don’t have to worry as much about discretionary spending. If someone feels it’s important to spend $20 at Starbucks every day, so be it.

But there are more potentially hazardous temptations.

“Money can create challenges,” says Serena Cheng, director of wealth management and investment advisor at Richardson GMP in Toronto, whose clients include professional athletes and entertainers.

“When people have more money to spend on discretionary items, that can lead to abuse of those discretionary items.”

Sometimes that means dealing with “addictive challenges in families.”

These challenges can be easy to spot. As part of her onboarding process, Cheng gets granular in her understanding of clients’ cash flows. She’s found discrepancies of hundreds of thousands of dollars between what should be coming in and what actually is. Sometimes clients will tell her where the money is going, but sometimes they won’t; in the latter cases, she lets them know she’s changing her projection of what they’re investing every year.

“I’m not trying to figure out anything,” Cheng says. “I’m allowing them to share with me what they choose to. But the better I am at my job, the more they’re going to open up.”

And open up they do. Cheng is known in her office for making grown men cry, she says. This is often due to clients’ discomfort when she asks them what’s fulfilling about their lives. When meeting a new client or prospect for the first time, she’s already seen their assets. She knows they have money, so she focuses on more existential questions.

“Money’s not going to just, in itself, make you happy. So when you’re onboarding, you really want clarity with someone,” she says, in order to understand what motivates them.

“I try to tell them, ‘We’re not going to talk all about finances. I hope that’s OK.'”

She focuses on lifestyle and interests, and how those interests fit into a client’s daily life, as well as their level of satisfaction. She wants clients to talk about their challenges and the milestones they consider most important. Then, she relates those back to their finances.

When she does come across a client with alarming discretionary spending, she compares her role to that of a doctor or a lawyer, explaining potential outcomes while reserving judgment.

“I’m not here to police them. I can’t. But what I can do is show them that their choices lead to results. And they can be good results or they can be results that no longer make what they would like to have available to them available anymore,” Cheng says. “All I can do is really outline choices.”