A number of advisers that I’m working with have put a lot of legwork into getting crystal clear about both their business proposition and their own particular areas of expertise, and as a result are actively changing their business model to work exclusively with a relatively small number of High Net Worth (HNW) clients.
While this approach of course will not work for everybody, there are very few who will disagree with the attractiveness of it, assuming that the adviser can build a strong enough revenue stream around it.
However before you can decide whether you and your business are the right fit for this attractive segment of the market (either to concentrate exclusively on it or as part of your client base), you need to understand some of the drivers behind this group of people. This article sets out some of the characteristics of HNW clients, what they look for and some thoughts on engaging successfully with them.
Who are they?
Well first of all, as a result of the economic turmoil, there are fewer HNW individuals around today as many have seen their investments decimated and of course, some now are saddled with significant personal debts.
However there is still a great swathe of people who fall into this category. While there is no strict definition of this group, a good rule of thumb might be individuals with between €100,000 and €1m in investible assets and a net worth of between €500,000 and €2.5m. Their investible assets will usually be held in a mix of pension funds, shares, property investments and some cash too.
While this group recognise that they have well-above average wealth, they usually identify a recurring number of financial challenges;
- They don’t feel wealthy: Yes, they have assets but they actually still recognise the financial challenges ahead and don’t take these lightly.
- Educating their children is a recognised challenge: Many HNW people will desire a private school education for their children (at least in secondary school) followed by a minimum of an undergraduate degree. With doubts about college fees in the future, many now recognise the need to plan for education fees for each child for a minimum of 10 years. A not inconsiderable sum.
- They worry about retirement: This is probably their biggest financial concern (and an obvious area of opportunity for financial advisers). They have a realistic sense of the asset base they need to build up in order to be able to maintain their desired lifestyle throughout their retirement.
- They want to leave an inheritance: On top of the above, they want to be able to leave an inheritance behind them, recognising the need for building their asset base, as well as having the required levels of life assurance in place.
What do they look for?
First and foremost, HNW people need to absolutely trust you. This won’t be achieved by messages on your website of honesty and integrity, instead it will be achieved by what others say about you, what you say and how you act, and your business proposition. They won’t want to deal with you if they feel they are being “sold to”.
Indeed in addition to the above point, they want someone who will recognise them as an andividual by getting a clear understanding of their financial goals and objectives, building a financial plan based around these and then implementing this plan in a transparent and collaborative manner.
Developing a financial roadmap for the client as opposed to simply recommending some products is a critical approach with HNW people.
How do you engage HNW people?
Picking up on the above points, there are a number of requirements in dealing with HNW individuals.
- Build trust: Spend time at the outset gaining their trust. Have client references that they will value, focus on testimonials, and show case studies of approaches you’ve used in the past to develop innovative solutions for other HNW clients. Show them how your business proposition places them at the core of how you advise and that products are merely a part of the solutions.
- Concentrate on financial planning: Very clearly divorce the development of the financial plan from the product sales piece. Spend time clarifying their financial objectives and structure the plan clearly around these. Jumping into products will only drive these people away.
- Recognise their concerns and address them: One of their big concerns is outliving their assets in retirement. Show them what this means in terms of the war chest they need to accumulate. Build into this picture their other concerns of funding education and leaving a legacy. Show them the size of the challenge – they will appreciate your candour!
- Be knowledgeable: HNW people are usually quite smart and have knowledge of a broad range of areas, as well as an ability to research topics on the Internet etc. They need to feel they are dealing with an expert. If there are highly technical areas in which you are not an expert, you need to build up your own trusted network of experts that you can seamlessly tap into for specialist advice, to ensure you are the conduit for your client gaining a holistic solution.
- Add value: Add value to them, when you are not “on the clock”. If you see an article that would be of interest to them, send it to them. They will appreciate your ongoing and continuing interest in their affairs.
- Be transparent: HNW individuals will expect full transparency from you in relation to all areas of their dealings with you. If they feel you are not being 100% open with them, they will quickly lose trust in you and will go elsewhere for advice.
These are a few thoughts in relation to increasing your chances of success with this important segment of the market. Is there anything else that you’ve found? Please feel free to leave your comments below.