Many advisors have built very successful practices catering to high net worth individuals. What makes their businesses reach this level of success, and what can you learn from
Handled properly, the high net worth (HNW) side of your business can result in a fruitful, productive, and highly profitable relationship for both you and your client. Handled improperly, however, it can become a drain on your time and resources, leaving you unavailable and without any energy left for your other clients. So if you want to acquire clients in this market segment, it is important to know how to handle them in a way that is rewarding for both parties.
Some ultra-high net worth families use Family Offices to manage all of their affairs. As an advisor, there is a lot that can be learnt from looking at the Family Office structure. By incorporating some of these behaviours, attitudes, know-how and activities into your team’s day-to-day conduct, you will be able to attract and retain bigger clients over time.
Favourable First Impressions
When entering a Family Office, it is evident that details are extremely important and that first impressions are critical. Let’s walk through the elements that create the right impression.
The office itself:
- The reception area speaks volumes about your business. Make sure that it is clean and orderly at all times. It should be comfortable, appropriately lit, and any noise should be kept to a minimum. Invest in a tasteful décor with the help of a professional interior designer. This sets the tone for the entire experience.
- Provide a variety of reading materials, including non-financial magazines that cater to higher-net-worth people, such as Architectural Digest and the Robb Report.
- It is not hard to notice that all client-facing team members in a Family Office, including associates, assistants and receptionists are highly polished. The same should apply to your team: all team members should act professionally and look the part.
- More specifically, any client-facing individual in a Family Office acts in a pleasant manner, without ever being overly friendly or “chummy”. (In other words, these are not the roles where one hires a summer student or a best friend’s teenage son or daughter!)
- Phone etiquette should be of the highest standard.
Any area that the clients have access to (whether they walk through to get to your office or can see from there) has to convey the message that your business is well run, well organized and efficient in everything that it does, and that confidentiality is part of the office culture. Loud music, clutter, people hovering around chatting about weekend plans, all this should be avoided in public areas and taken behind closed doors. The above advice may seem commonsensical, but it is so fundamental as to bear repeating. Don’t forget: neglecting just one of these aspects can reduce your entire effort
Getting Down to Business
First impressions are essential, but obviously they are only a starting point. When it comes to your actual business relationship and the service you provide, what makes the HNW individual “tick” – in other words, what are his/her concerns and how do you address them?
From the outset, in all your dealings with wealthy clients, you must be proactive, attentive, responsive, reliable, and always very discreet. These clients need to feel that they can confide in you and trust you with confidential information. They also want to feel that they are part of the process and are being heard. They may not be experts at money management, but they typically know want they want. Two-way communication and alignment of interests is thus vital. You can only achieve this by listening carefully and asking questions.
Many HNW individuals might come to you with complex situations. They seek you out because they have needs that may be critical or urgent, and they may have been disappointed in their previous experiences with an advisor. You must plan and develop a clear strategy with steps showing execution and oversight. They expect you to have access to all the right professionals in order to provide them with a full solution, and to coordinate all of the elements and professionals required, so the execution of the plan is seamless. You are expected to make things easy for them throughout the process. Ultimately, they want you to simplify their life.
For many high net worth clients, risk management is a priority. They have earned their money – and many have worked very hard to do so – and have no desire to take on extra risk to earn a lot more. What they want is to preserve the capital that is already there, and generate a cash flow that meets their specific lifestyle needs. You must figure out these needs and address the cash flow requirements by presenting them with a portfolio that produces the required cash and ensures peace of mind.
Any strategy that you present must be customized to the individual’s specific situation. That also obviously applies to the investment recommendation. Cookie-cutter or model portfolios will not do. These clients expect a certain sense of exclusivity, so don’t propose products that are readily accessible to all; instead, offer customized solutions using unique strategies that are only available to a certain segment of the market. Tax being one of the few certainties in life, maximizing tax efficiency is also an essential requirement. It is also a critical tool for you, as it creates an opportunity to distinguish yourself. Show your clients the best way to provide them with the cash they need in the most tax-efficient, yet strictly legal way.
Succession will typically be a concern for the HNW person. It may be more or less pressing depending on the age of the individual, but you should be prepared to address this important aspect of the financial planning situation. Not only is it comparatively more important to wealthy individuals than to average earners, but there are more solutions and structures to be envisaged, such as trusts, for instance. Working on a transition strategy with a view to involve the family is key; coaching and educating the family regarding the eventual transition will go a long way.
Last but not least, maintaining open communication channels is paramount. These clients want to have direct access to the person making the decisions, so you need to work with Investment Counsellors or discretionary Portfolio Managers that provide such access and share your high standards. Written communications are also key. Reporting must be consistent, timely, clear, pleasant to read, and provide relevant information. These clients want to know how much money they have and what rate of return they are making. In short, provide them with easy access to information at all times.
Ultimately, high net worth clients want to feel important to you, knowing that you go above and beyond the call of duty for them. They want to feel protected and cared for exclusively, and to have confidence that they and their family are in the best hands possible.
Some things may go without saying, but the old adage is especially true with these clients: God is in the details. Use the recommendations above to distinguish yourself and your practice from the competition, strive to raise your client service at the Family Office level, and you will eventually find yourself in the enviable position of having a sizeable chunk of your practice devoted to highly rewarding clients.