For advisers who serve the mass affluent, breaking through with high-net-worth clientele can feel like an elusive goal. You might think it’s impossible to compete against venerated names in wealth management. You might lack access to VIP perks and concierge services that wealthy clients often enjoy.
If this sounds like you, you’ll be interested to know that a notable 20% of HNW clients say they are likely to switch their primary financial adviser in 2021. Those with $10 million or more in assets are even more likely to switch, at 37%, based on a Northwestern Mutual survey of 500 high-net-worth and ultra-high-net worth consumers with a minimum of $2 million in investible assets. Add to that the impending generational wealth transfer and the expectation that most heirs will look for new advisers, and the near- to mid-range opportunity to attract HNW clients is significant.
Why are wealthy investors so willing to switch advisers? Despite the pedigrees and lifestyle perks offered by many HNW wealth managers, some are failing to address their clients’ most foundational needs when it comes to planning. This blind spot is creating an unprecedented opportunity for aspiring HNW advisers to position themselves to attract clients with wandering eyes.
Here are three key reasons many HNW clients will switch advisers:
1. They want peace of mind. The simple truth is that many advisers are dropping the ball on providing HNW clients with a clear understanding of their entire financial game plan and how it will play out over time. Many advisers focus almost entirely on asset accumulation and growing net worth. They don’t show clients how their investments integrate with other aspects of their financial lives (e.g., tax planning, risk management, retirement income planning, estate planning, etc.). If investments underperform or a major source of income goes away, how will a client’s legacy be protected? When clients don’t know how the pieces of their plan fit together, they’re left feeling anxious and insecure. If they feel insecure, the relationship is at risk.
The other critical element to providing peace of mind is the ability to clearly articulate how the pieces of a client’s integrated plan fit together. Modern financial planning and reporting capabilities are essential to providing clients with a convenient, holistic, accessible view of their wealth. Don’t fall into the trap of thinking that older clients don’t care about digital experience. HNW investors of all ages are increasingly digitally savvy — a trend only accelerated by the pandemic. Advisers who leverage technology to bring a client’s financial picture to life have an edge.
2. They want a one-stop shop. HNW clients — like so many of us — feel increasingly squeezed for time. Rather than seeking the ultimate expert for each aspect of their financial lives and managing them separately, we see more HNW investors prioritizing convenience. They want a trusted financial quarterback — a point person who can show how all the pieces are going to work together. They see significant value in having a financial guide who can distill the noise surrounding them and point them to the best choice for their situation.
The takeaway for the aspiring HNW adviser: If you wish to serve this audience, you must embrace the role of team captain. Be proactive about recommending integrated meetings with other members of a client’s financial team and cultivate those relationships. Build your own network of go-to banking, tax and legal professionals. Engage prospective clients in broad conversations about their goals and dreams so that you can lead with the full picture in mind and not just the pieces you will execute on.
3. They want to know their legacy will endure. Many wealthy clients want their values and accomplishments to live beyond them. They want the legacy they’re building to endure for generations. If they’re not convinced that their current adviser is equipped to carry that legacy forward, they’ll be open to switching.
To succeed with legacy-focused clients, it’s critical to help them see the importance of transparency and trust throughout the family. Both spouses must be fully involved in planning conversations. Adult children should be involved and educated on legacy plans. Transparency creates value, trust and confidence that the plan will endure.
Bringing heirs into these conversations also means they’re less likely to seek out a new adviser when they take control of family wealth. Advisers who themselves have multigenerational teams are in a prime position to build relationships with adult children and provide greater confidence that the clients’ well-laid plans will in fact be carried out.
It may seem surprising that some of these pain points exist, but I can assure you that very few HNW investors will leave their adviser because they don’t have the best connections to golf pros or vacation planners. Just like any other investor, wealthy clients need clarity and assurance that their financial house is fully in order.
If that’s the type of advice you’re delivering to mass affluent clients, attracting the HNW may not be such an elusive goal after all. With a bit of fine-tuning, you could be well on your way to building a HNW practice.
Tim Gerend is chief distribution officer and executive vice president at Northwestern Mutual.
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Andrew is half-human, half-gamer. He’s also a science fiction author writing for BleeBot.