Roughly 13 percent of financial advisor clients fall under the umbrella of high net worth. Commonly defined as those clients with over $1 million in liquid assets, high-net-worth individuals can be game-changing clients for a financial advisor’s practice. But since this highly sought after category only accounts for a small percentage of clients, finding a high-net-worth individual interested in joining your practice is easier said than done.
In fact, McKinsey Research shows that the median financial advisory practice only manages four high-net-worth households, with 15 percent of practices not serving any high-net-worth clients at all.
How can these practices attract more high-net-worth clients and keep the ones they have satisfied? To help advisors answer that question, we’ve built a list of the top 5 keys to managing high-net-worth clients.
There are some misconceptions about how the wealthy think about price. Some believe that the wealthy don’t think about how much they spend on products and services—they have so much money, why would they care? Others think that the wealthy tend to be penny-pinchers, always seeking out a bargain—how else do you think they got wealthy in the first place?
Both of these probably apply to one high-net-worth individual or another, but neither is true for this class of investor as a whole. A much more common characteristic of this investor category is their appreciation for value and cost-effectiveness.
Financial advisors sometimes go out of their way to offer discounted services or special rates when managing high-net-worth clients’ assets. However, McKinsey research shows that financial advisors who significantly underprice their services erode their perceived value to clients. As a result, they tend to have fewer high-net-worth clients and manage fewer assets with those they do attract.
Instead, financial advisors interested in managing high-net-worth clients’ assets should charge a fair price and drive home the value of what they’re doing.
Being communicative about their plans and results, clarifying the impact they’ve had on their clients’ personal wealth, discussing challenges avoided and opportunities seized—these are the things that attract and keep wealthy clients. Not whether they’re paying one percentage or another in fees.
It’s important to be patient during the onboarding process, especially if you’re serving your first high-net-worth client. It may take time for you to gain insight into the full picture of your wealthy clients’ assets.
First, the wealthy simply have more assets to keep track of—naturally, the onboarding process is going to take more time. Second, you may not be their primary financial advisor.
When you have as many assets as high-net-worth individuals do, it’s totally reasonable to spread out the various aspects of your financial life to different experts. If your client is a business owner, they might have a company financial advisor, for instance. They might have a CPA who handles their taxes, an estate planner for their wealth transfer plan, an investment manager, and more.
You might number amongst one of these specialized financial advisors, particularly if this is your first high-net-worth client. But often, high-net-worth clients also have a single advisor with insight into the full picture of their wealth. Having one central advisor that can keep high-net-worth individuals abreast of their overall financial wellbeing is prudent, even if that individual isn’t directly involved in the day-to-day management of the different elements of their wealth.
Naturally, this advisor will be highly trusted and will have developed a strong relationship with their client. It can take some time for advisors who have just acquired their first high-net-wealth client to build that trust.
Managing high-net-worth clients’ wealth is time consuming. Not only is there simply more to manage, but they’re too valuable to your practice to treat like any other customer.
You’ll likely communicate with your high-net-worth clients more regularly and in greater depth. You’ll spend time thinking about their lives more and taking actions to demonstrate that you’re interested in their wellbeing. And if they call you at 3 AM with some crisis, you’ll wake up and get to work addressing it.
Once you’ve onboarded your first high-net-worth client (and ideally before), take a hard look at your practice and look for where you can find efficiencies. Research shows, for example, that advisors who outsource their investment management save over 8 hours per week.
Time saved with outsourcing can (and should) be applied to serving high net worth clients better: “We now have the capacity to work with much larger accounts, in a much more reliable and meaningful way.” - Advisor
Maybe you already outsource investment management or are curious about other ways to gain more time in your day. Hiring professionals to take care of the tasks that fall outside of your unique specialty is one way.
Many financial advisors do their own marketing, but that could be done more efficiently when outsourced to a professional. Maybe you need to hire more junior staff. Or maybe your business processes are bottlenecked, and you need a practice management consultant to make an assessment.
Whatever it is, take the necessary steps to introduce efficiency into your practice. Otherwise, you’ll be overextended and unable to perform your best work for your most valuable clients.
Rather than merely serve as your clients’ financial advisor, your practice can become their family office.
Family offices provide the wealthy an end-to-end service experience. Not only do these organizations facilitate every aspect of a wealthy family’s financial lives, they also provide support in ancillary areas, like coordinating travel planning, conducting background checks for the clients’ staff personnel, property management, career planning, and more—they might even facilitate dog walking services.
Becoming a family office obviously takes some work, but it gives you an incredible degree of stickiness. If your organization is helping to not just manage your clients’ financial lives but also their lifestyle, property, travel, and more, dissatisfaction in any given area will be outweighed by the sheer utility you provide.
The be-everything, do-everything family office approach can certainly be rewarding, but it’s also challenging to establish and leaves little room for other projects. Some advisors may find it more appealing to position themselves as experts within a niche unique to the high-net-worth space.
Managing high-net-worth clients’ assets isn’t just about managing more assets; it’s also about managing different kinds of assets and in different ways. Because there are simply fewer high-net-worth clients out there, there are also fewer advisors specializing in serving their unique needs.
You could, for example, specialize in executive compensation. What’s the most advantageous way for a company executive to structure their salary, their stock options, executive perks, deferred compensation, retirement packages, and so on? Finding an individual with the knowledge to answer that question isn’t easy.
Identifying and filling a niche that serves the unique needs of executives, business owners, and other individuals that make up this class of investors is an excellent way to attract them on an ongoing basis.
When applied consistently, these five keys make it more likely that you’ll attract and retain high-net-worth clients. That’s the goal, but you might find that it’s also a challenge upon reaching it.
Managing high-net-worth clients requires a significant amount of time, focus, and resources. The more you onboard to your practice, the more important it becomes that you apply our third key in this article: Make the time.
Scaling a financial advisory practice means delegating some tasks and outsourcing others, when appropriate. As mentioned earlier, we’ve identified research showing that advisors who outsource investment management tend to realize significant time savings—time savings that often translate into more time for their most valuable clients. You can read the full study results here.
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