There has been a trend forming in the world of financial advice: advisors are spending more of their time on their wealthiest clients. This has led to significant downsizing of client rosters across the country. The shift is allowing advisors to be more productive and give more personal attention to each of their clients. Is it a change that every financial planner should consider? If you charge a fee based on the assets under management (AUM), it is most likely in your best interest to focus on clients who have the most funds to invest.
Attracting the Wealthy
How do you attract wealthy clients in the first place? Will Lipovsky, of First Quarter Finance, believes that advisors who want wealthy clients need to be where those clients already are. You can’t expect people to come to you if there are other options closer to them. “Financial advisors should live in communities overflowing with money,” says Lipovsky, “if you want to serve the wealthy, go to the wealthy.” (For more, see: High-Net-Worth Client Tips for Financial Advisors.)
Try narrowing your search in order to really focus on the kind of client you’ll be best at attracting. If you have a history of working well with entrepreneurs, financial executives or lawyers, use that specific experience to attract those types of people.
Certified financial planner (CFP) Natalie Bacon, of NatalieBacon.com, suggests if you currently charge commission for each product sold to your client, consider becoming a fee-only planner. “Wealthy clients seek planners who charge a fee based on assets under management, not based on commissions,” she said. There are benefits for both advisors and clients in the fee-only model, and the public perception is that fee-only planners provide more value at a better price. (For more, see: Finding and Retaining High Net Worth Clients.)
Keeping the Wealthy
Once you have your wealthy clients, you have to retain them. Even though advisor turnover is generally low, you don’t want to get complacent. Continue to treat them as if you were in the courting process, because at any given time they could be courted by another advisor.
Wealthy people get that way by savvy, shrewd financial decision making. These are the type of people that will drop you at a moment’s notice if they feel your services aren't making the grade. Respect that commitment to financial growth, and challenge yourself to continually satisfy and impress your clients. (For more, see: A Look at How the Ultra-Wealthy Invest.)
Creating the Wealth
Being able to create wealth and improve your client’s portfolio balance is extremely important. If you are looking to attract wealthy clients and retain any you may already have, focus on coming up with wealth creation strategies. “A properly aligned investment philosophy involves a three-dimensional portfolio that seeks to achieve three objectives: wealth preservation, liquidity and wealth creation,” said Bill Militello, CEO of Militello Capital. “Most advisors are only satisfying two of these objectives - wealth preservation and liquidity - because they generally constrain the asset allocation debate to only stocks and bonds.”
If you can provide nuanced strategies on wealth creation, current and prospective clients will see how valuable you are or could be to their portfolio. This will make you stand out to wealthier clients, who are open to new and unique ideas on how to grow their money. Most advisors can give them ideas about how to preserve their assets and how to structure their portfolio, but according to Militello, an advisor who can provide ideas on wealth creation makes himself invaluable. (For more, see: Advisors: Don't Overlook Not-Yet-Rich Millennials.)
The Bottom Line
There’s a hefty crop of wealthy investors out there, and nearly as many financial advisors who are eager to add them to their roster. You need to figure out what unique services you can offer these potential clients and demonstrate that your ideas work in practice. What will set you apart? (For more, see: Global Wealth is Up and Continues to Rise.)