Every financial professional understands that high net worth clients are extremely valuable in the long term. These individuals have more assets to invest than anyone else, and that makes them ideal candidates for extensive financial guidance.
At the same time, many of these individuals became successful because they are highly independent and self motivated. Financial professionals who want to attract high net worth clients need to demonstrate a compelling value proposition.
Financial professionals can’t wait for high net worth clients to approach them. Instead, they need to present these valuable individuals with a compelling reason to seek financial counseling.
A difficult task
While attracting new high net worth clients may be appealing for financial professionals, it may not be pragmatic. According to a survey conducted by LIMRA, around 40 percent of high net worth consumers do not currently work with a financial professional. Financial professionals might find, however, that pursuing these unadvised individuals is a losing game.
LIMRA noted that high net worth consumers who have struck out on their own generally feel completely confident in their ability to manage financial decisions, and don’t want to spend money on a financial guide. More problematically, the vast majority of high net worth consumers who do not work with a financial professional have worked with a producer in the past and are now distrustful of financial guidance.
This puts financial professionals in a tricky position. A huge portion of the most lucrative market segment remains available, but the individuals in that space are extremely difficult to convert. For many financial professionals, it may be smart to focus on existing clients rather than seeking new high net worth business. If a professional wants to win new high net worth business, they will need to apply specific strategies that appeal to this demographic.
How to attract these individuals
Simply, financial professionals need to create a trusting relationship with the high net worth investors who have decided that financial guidance is not worth its cost. The best way to develop trust is through transparency. Spectrem’s quarterly report – Advisor Relationships and Changing Advice Requirements – took a look at Ultra High Net Worth investors, individuals with a net worth between $5 million and $25 million. The majority of these clients preferred to have an advisor who operates transparently and keeps in touch consistently about the state of their investments and financial plan.
According to LIMRA, transparency is based on making realistic promises about performance. Many high net worth individuals withdraw their money from a financial professional and either take their business elsewhere or manage things themselves because they feel that the producer did not provide an accurate depiction of their assets’ performance.
The potential upside
While courting these clients is difficult, it comes with considerable benefits. These consumers are especially loyal, and that can be a boon for financial professionals in the long term. Because successful producer relationships with high net worth individuals occur when the client interacts with a single point of contact, these consumers are likely to follow that producer if the financial professional changes firms or goes into business for themselves, according to LIMRA.
This indicates that the work required to attract these clients may be worthwhile, because they provide long-term business for producers. At the same time, a financial professional needs to consistently nurture relationships with high net worth clients to ensure that these individuals remain satisfied. Open communication with high net worth consumers should foster the loyalty and trust required for a relationship that benefits both parties.
Many high net worth individuals travel in the same circles, and delivering strong performance for one client may lead to increased business from other consumers down the line.