What Advisors Can Learn From Ultra-Wealthy Clients

High-net-worth investors demand a lot from their financial advisors. The ultra-wealthy, in particular, expect to receive a full-service platform from their wealth managers. They are seeking advisors who can offer them global wealth management services because many of them hold a great deal of their wealth outside the U.S.

Key Takeaways

  • Ultra-high net worth individuals (UHNWIs) are considered to be those who have over $30 million in investable assets.
  • In addition to high net worth, UHNWIs also have a more complex financial and tax situation than other investors.
  • Surveys show that UHNWIs place a high value on quality financial advice and expect in-depth explanations of how their money is generating returns.
  • The portfolio of a UHNWI may include tangible assets that their advisors should take into consideration.
  • A savvy advisor can make more money by serving a small number of high-fee clients, but they will have to provide a service to match the price.

Understanding the Needs of UHNWIs

While the "average" millionaire might consult a specialist to manage their portfolio of stocks, bonds, or REITs, UHNWIs are likely to have more complex investments. Many have at least one family business that is not liquid and is difficult to balance against. In addition, their portfolio may also include commercial real estate, hedge funds, and private equity.

UHNWIs are also likely to have sizeable tangible assets, such as boats, planes, homes, and artwork, and it is important for financial advisors to include these on the balance sheet. A 2021 survey by Chubb and the Wharton School found that 87% of the ultra-wealthy considered tangible assets to be an important part of their wealth, while only 53% of advisors see them the same way.

They are also more risk-averse than typical clients. After all, it's easier to lose UHNW status than it is to attain it. This means that the ultra-wealthy are also extremely cautious about their choice of financial advisors: 95% of those with over $50 million in assets prioritize coverage and service quality over price. For those with over $30 million, that figure is 80%.

HNWIs tend to be value sensitive rather than price sensitive. This means that there is room for advisors to charge higher fees, provided they also offer quality service.

This means that it's not enough for an advisor to have a good track record; they also have to provide in-depth explanations of how they are investing the client's money. Research by FactSet found that "quality investment information" is the most reassuring signal of credibility for UHNW clients, while less-wealthy clients are more likely to be influenced by first impressions or other factors. Moreover, the vast majority of UHNW clients would not work with an advisor who could not communicate effectively.

These complex financial needs also incur financial tax needs. In order to preserve their wealth, UNHWI clients may require bespoke tax services to move funds through multiple countries or shell companies.

How to Attract UHNW Clients

This means that there is a sizeable niche for advisors who specialize in serving the ultra-wealthy, provided that they are equipped to serve the needs of these clients. This may require a sophisticated team of investment specialists who are more familiar with the unique financial and tax needs of UHNWIs.

Many large investment houses offer elite services to their wealthiest clients. For example, Deutsche Bank’s wealth management group, Deutsche Asset & Wealth Management, offers structured financing solutions, allowing the wealthiest clients to borrow against their private aircraft. Morgan Stanley has a dedicated Art Resources Team to help their wealthiest clients manage their portfolio of art assets.

UHNWIs may require specialized tax services if their wealth passes through multiple jurisdictions.

But you don't need a full-sized investment bank in order to serve wealthy clients effectively. In fact, some suggest that many ultra-wealthy clients place a high value on receiving personalized investment services.

Sara Grillo, writing in Advisor Perspectives, recommends a "70 Deep" practice that focuses on quality rather than quantity. Instead of trying to serve as many clients as possible, she says, advisors can make more money in the long run by providing high-quality, boutique service to a select few.

This allows the advisor to devote more attention to each client, while also leaving more time to run other aspects of the practice. "Raise your fees so that they are ridiculously overpriced," Grillo writes, "and then ridiculously over-deliver!"

Of course, it won't be easy to impress an ultra-wealthy client. It is also important for the advisory firm to look the part–with clean, comfortable waiting areas, professional interior design, and sophisticated reading materials. One investment management firm recommends that financial advisors model themselves on family offices–everything the client sees should be polished and professional.

What Is Considered a UHWNI?

There is no formal definition of ultra-high net worth individuals, but most sources consider UHNWIs to be those with over $30 million in net investable assets. Some sources place the bar as high as $50 million.

How Many UHNWIs Are There?

According to the World Ultra Wealth Report 2021, there are 295,450 UHNWIs in the world, with a minimum net worth of $30 million. Collectively, their assets are worth $35.5 trillion. Over a third of them live in the United States.

What Do UHNWIs Invest in?

In addition to familiar assets such as stocks, bonds, and real estate, UHNWIs are also likely to invest in more sophisticated vehicles such as hedge funds, VC funds, and private equity. They may also have significant value in tangible assets, like fine art, vehicles, and collectibles.

The Bottom Line

Financial advisors that cater to the ultra-wealthy should consider expanding the sophisticated solutions they provide, improving client-advisor relationships, and offering global services in order to better attract and retain clients.

Article Sources
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  1. Chubb. "Chubb and Wharton Study Examines Ultra-High Net Worth Individuals Preferences on Financial Advising and Investment Management."

  2. FactSet. "What Ultra High Net Worth Clients Want From Wealth Managers."

  3. Deutsche Bank. "Structured Financing Solutions."

  4. Morgan Stanley Wealth Management. "Art Resources Team (ART) at Morgan Stanley."

  5. Advisor Perspectives. "How to Attract 70 Ultra-High Net Worth Clients."

  6. Exponent Investment Management. "How to Attract (and Keep!) High Net Worth Clients."

  7. Wealth-X. "New Report Reveals Global UHNW Population Grew 1.7% Despite Covid-19 Interruption."

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