High net worth clients are the bread and butter for any financial professional’s practice, and these consumers are prized as great sources of long-term success for financial firms that can bring them in. Unfortunately, some financial professionals may be blinded by the allure of high net worth clients, which can be a problem for long-term growth. Generally speaking, high net worth consumers are established and from an older generation. That means financial professionals who build a client base that mainly consists of high net worth individuals may find their clients are nearing retirement. These firms haven’t created a strong base of younger clients to fuel future expansion.
A growing issue
Wealth Management magazine highlighted problems with becoming overly focused on the high end of the market in a recent article that examined the main issues facing organizations with aging clients. The biggest issue is simply that these individuals no longer need the services offered by financial professionals. As people age, they start getting rid of assets to pay for their retirement. They’re no longer a good source of new business for financial professionals.
The number of firms facing this issue is getting larger as the boomer generation enters retirement and leaves the workforce. Unfortunately, too few financial professionals have made an effort to court the next generation of consumers proactively. As a result, many financial professionals are not sure how to engage younger consumers and that’s putting them at a disadvantage now that their older clients are moving on.
The difficulty in attracting new clients
Pulling in the next generation can be difficult for firms that have focused on high net worth individuals because many young people have already settled on a place to get financial advice. This could be robo advisors or a different low-cost alternative to traditional financial guidance. No matter where competition is coming from, it’s created an environment where younger consumers have an established system for financial information. This makes producers’ job more difficult, because they need to connect with clients and demonstrate that their services are worth the client leaving their current situation.
The value in the next generation
It may seem like there are few young people with a high net worth, but that’s changing rapidly. Financial professionals need to create relationships with these consumers quickly, however, because many eschew traditional financial guidance. According to a survey from the Spectrem Group, millennials are more likely than any group to categorize themselves as being very knowledgeable about financial matters. With that in mind, financial professionals have an uphill climb to demonstrate their value to this generation.
The need to provide information
It’s important for financial professionals to connect with the next generation by playing into these consumers’ self-reliant natures. By establishing a blog that provides information about the financial planning industry for free, financial professionals can create a perception that they are a trustworthy source for curious people who need help with their financial strategy. When these individuals who visit the site find a situation that overwhelms their ability to plan, they will turn to a financial professional who has provided them help for no charge in the past.
Financial professionals need to widen their efforts to attract new clients, and should specifically focus on parts of the market they have neglected in the past. By reaching out to the next generation of high net worth individuals, producers can lay the groundwork for their organization to grow far into the future. Connecting with these clients will require using channels that may feel unorthodox to some producers, but the payoff should be worth it.