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Practice Management

Affluent investors need help now more than ever and are looking for trusted pros to guide them. The bad news is that relatively few advisors are positioned to help them.

This Practice Management article is intended for financial advisors only (registered representatives of broker dealers or associated persons of Registered Investment Advisors).

I believe there's never been a better time for financial advisors to move upmarket and start serving investors with $1 million or more in assets—or for those who already serve this group to get a lot more business.

The reason is simple: More than ever, these investors need your help.

Just think about the current state of the nation. There is so much ambiguity, be it political, social, or economic. The affluent are feeling that uncertainty just as much as any other demographic group. Nearly half of the investors responding to Merrill Lynch's Affluent Insights Survey, which covered individuals with investable assets of more than $250,000, say that prolonged economic uncertainty is a new reality to which they must adjust. These investors are on the hunt for trusted professionals who can help them make smart decisions about their wealth.

The trouble is that very few advisors are truly capable of helping them. The upshot is that if you want to move upmarket or strengthen your foothold in the affluent market, you probably need to expand your value proposition to get there.

Defining the "Affluent"
While the Merrill survey defined the group more broadly, for this discussion let's consider the affluent as investors with $1–5 million in investable assets. Certainly, not all of these investors can be painted with the same brush, but they do tend to share a few key characteristics that are helpful to know when marketing to them:

  • Complex need—As people become wealthier, their lives become more complicated. You have to be in a position to address their key concerns and planning questions—which, in many cases, will go beyond mere investing to issues like protecting their wealth, providing security for their families, taking care of their heirs, and maximizing cash flow.
  • Entrepreneurial drive—A substantial portion of an affluent client's wealth is created by business opportunities, particularly at the richer end of the spectrum. Entrepreneurs and business owners are more likely than other types of affluent investors to work with advisors, research finds. They're also the most willing to delegate the job of investing to a professional.
  • Diversity of advisors—The affluent tend to work with a strong network of professionals, including, in many cases, multiple advisors and wealth managers. That means you are competing with other members of the networks for the clients' trust and, in some cases, their assets. You need to think about how you can bring more value to your clients' lives and potentially capture additional assets.
  • Capital—Simply put, these investors have the means to engage you.
  • Charitable interests—As clients move upmarket, their desire to do something significant beyond their immediate families increases. Of 700 high-net-worth investors surveyed by the Center on Philanthropy at Indiana University, 76% planned to give as much as they do now, or more, to charities in the next three to five years. This characteristic gets even more substantial among the super-affluent, with assets of $5 million or more (often much more).

The Essentials
When they consider working with an advisor, these investors tend to look for certain characteristics. Essentially, these are the table stakes that get you in the game:

  • Flexibility—The affluent understand that the world is constantly changing. They prefer flexibility to solutions that will lock them in.
  • Discretion and transparency—The wealthy want to know that you will protect their information and be discreet. They also want you to be completely open about what you do, how you do it and how you get paid.
  • Coherency—Many affluent clients like to be involved in financial decision making. They want to collaborate, so if you offer ideas that don't make sense to them, don't expect that they will simply agree to go forward.
  • Sensitivity to risk—The entrepreneurs who make up much of the affluent market may have been risk takers once. But as their wealth grows, they increasingly become risk mitigators—and look to work with advisors who appreciate that.
  • Cost effectiveness—Getting good value for what they spend doesn't mean these clients seek the lowest-cost provider. Instead, they want someone who gives them tremendous value for a reasonable fee.
  • Simple, elegant solutions—Advisors who recommend overly complex solutions tend not to get affluent clients' business. Keep it simple.
  • Legitimacy—Very few affluent investors want risky solutions that may not pass muster with the IRS or other regulatory bodies. Stay on the right side of the line.

Clarify a Process
How do you deliver all of these things to the affluent? I have a regular answer: offer consultative wealth management.

To do that, you need a clear, systematic process. Many affluent investors say their current advisors don't have a compelling, straightforward method for working with them. By establishing a process that ensures you deliver a great wealth management experience consistently, you will do a lot to differentiate yourself from the pack.

A process also helps you be more effective and efficient, and makes it easier for you to articulate what you do and how you do it—helping to draw in more prospective clients.

I recommend conducting a series of five meetings with prospects. Start with an initial discovery meeting in which you ask questions in several categories that help you get a full picture of a prospect's life, including values and goals.

Next, conduct an investment plan meeting in which you present a plan for positioning assets that will help the prospects achieve the financial goals they told you about in the discovery meeting.

The third session is called the mutual commitment meeting. This is where you agree formally to work together and change the person to client from prospect.

Next, hold a 45-day follow-up meeting to get all the new forms and paperwork organized for the client. This sounds small, but it can be an impressive experience for a client because most advisors do not go this extra step.

Finally, hold your first regular progress meeting. Over time, these meetings will help clients see how their plan is helping them close the gap between where they are and where they want to be.

Formalize the Steps
This is the process I recommend and teach to advisors, many of whom have used it to achieve huge success. But even if you choose to implement a different approach, the key point is to have a formal process so you can show prospective clients what it will be like to work with you.

By doing so, you set expectations from the very start of a relationship and have the systems in place so you meet those expectations—and, ideally, exceed them.

Once you've established such a process, you can begin to tap into many other key growth strategies—for example, building a professional network of experts who can help you address affluent clients' advanced noninvestment goals, like estate planning or charitable gifting. These experts, such as CPAs and attorneys, will be much more likely to work with you if you can show them your formal process for delivering a world-class experience to clients systematically.

Likewise, forming strategic alliances with other professionals to gain introductions to prospective clients becomes much easier when you can demonstrate a successful means of working with clients and managing their wealth effectively.

John J. Bowen, Jr. is a contributing writer for Financial Planning.


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