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| Advisory Jungle |
A Designation By Any Other Name
Suzanne McGee
01/01/2006
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The first time Christopher Poch, managing director of Smith Barney’s Private
Wealth Management Group in New York, took his firm’s exam for the coveted
designation of PWM, or private wealth manager, he failed—despite the fact that
he helped write some of the course material. “It’s a pretty darned hard test,”
he chuckles now.
That is not very unusual, says Bob Matthews, Poch’s
colleague and director of wealth management at Smith Barney. “The pass rate for
this is around 20 percent or so—only 60 people in the whole firm have managed to
pass the exam.” The goal, he insists, is not to subject Smith Barney advisors to
shame or humiliation but to help create “a group of people who can handle
absolutely anything that their clients throw at them,” Matthews says.
A
growing number of the largest private banks are developing programs like Smith
Barney’s to both help train their most promising or most productive wealth
advisors and to differentiate them from their rivals, either on Wall Street or
in boutique investment advisory firms. Those who survive the simulated client
interviews, multihour exams and other obstacles win the right to add still more
initials after their names. The programs’ creators, like Matthews, are eager to
brag about how few manage to do that.
For clients, the result may be nothing
but alphabet soup. Many know that someone whose name is followed by CFA, for
example, is a chartered financial analyst who has completed a structured
curriculum and passed a difficult exam in order to earn that designation. But as
private bankers boost the number of internal programs that lead to new and
unfamiliar labels, confusion may only grow among customers.
Advisors
themselves are not worried. “We aren’t really looking for the type of
recognition a client would give a professional designation like the CFA,” says
Mollie Colavita, a director of the Private Banking and Investment Group at
Merrill Lynch in New York. “It’s more about letting the client know that we are
focused on equipping our advisors to address their sophisticated needs. It’s
about boosting our clients’ confidence in our capabilities.”
Because programs
can vary greatly, it helps to know what some of the new monikers actually mean.
For instance, a private wealth advisor (PWA) at UBS has not gone through the
same kind of program as a PWA at Merrill Lynch. At UBS, brokers must take a
series of 27 online courses and receive a grade of at least 70 percent on an
exam following each one. Then a select number of those survivors are invited to
attend a New York training program where they are counseled on ways to present
themselves to potential clients and on how to hold meetings. After that two-day
program, top candidates are brought back for a series of role-playing exercises,
each focusing on different issues: trusts and estate planning, asset management,
managing the risk of concentrated stock positions and general marketing. To win
the new credential, candidates must pass all four 15-minute mock sessions with
UBS executives, who play the roles of potential clients.
At Merrill, only
advisors serving high-net-worth clients are invited to compete for the PWA
credential. The three-hour written exam requires about 100 hours of study,
Colavita calculates, and a half-day series of mock role-play is required. “We
grade on everything from ethics and professionalism to their knowledge base,”
she says. The pass rate? Only about 30 to 40 percent. Moreover, financial
advisors must submit details of their team’s historical performance, of their
client makeup and a business plan in order to even qualify for the program. “If
advisors aspire to this, they have to be prepared to retool their business
model,” Colavita says. “The team must be committed to serving no more than 100
high-net-worth families.” To succeed, all members of the team must pass the
program.
Although some may view these in-house credentials as nothing
more than a marketing gimmick, Matthews insists that his firm is not caught up
in chasing designations for the sake of having more designations. “We tell our
people that these designations won’t convince clients to join our firm. They are
just evidence of competency—which the advisors still have to display in
practice.”
 Back to Main Article: Navigating the Advisory Jungle
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