How to snare high-net-worth clients

“The next generation of wealthy clients is going to be much more demanding,” says the CFA Institute’s managing director

How to snare high-net-worth clients
As client expectations continue to evolve and scrutiny on the industry increases, advisors are under more pressure than ever to rethink their business models. High-net-worth individuals, in particular, are a group that are already skeptical of the value of financial advice and the general competency of the advisor community. If advisors don’t shift their approach they will miss out on this highly lucrative demographic.

“The next generation of wealthy clients is going to be much more discerning, demanding and cost-centric than previous generations,” says John Bowman, Managing Director of the Americas for CFA Institute. “Going forward, advisors are not going to be able to get away with the current business model. That came through loud and clear in our recent research study. Advisors are going to have to work harder.”

The CFA’s study, The Value of Premium Wealth Management, sought the opinions of 4,000 mass affluent and high-net-worth individuals living in Canada and the United States. One of the key findings was that, in order to continue meeting customer needs, advisors will need to combine technical investment know-how with the softer, interpersonal skills.

“You can have great investment acumen and deep understanding of asset classes, but if you don’t have those people and communication skills and the ability to hold peoples’ hands and make them comfortable, then you will struggle to sustain relationships overtime,” Bowman says. “The typical pitfalls that await wealthy individuals can be avoided with a really strong advisor. Sometimes, in the midst of a storm, helping them avoid a rash decision can be the most important advisory insights they ever get.”

Advisors are also going to have to work at becoming more holistic financial planners, according to the CFA’s findings. Those advisors who focus solely on their ability to outperform the market will struggle to justify their value going forward.

“With fee pressures and passive investment options growing in popularity, it will be hard in the long-term to argue that you should pay five times as much if your value proposition is just about performance,” Bowman says. “Advisors should try to become broader and more holistic, like a personal CFO, and offer advice around things like refinancing a mortgage, intergenerational estate planning and private equity deals.”

One in four high-net-worth investors does not currently have an advisor and, according to the CFA’s research, there are two main reasons why. Firstly, this demographic does not think advisors are worth the money and, also, they don’t believe an advisor will necessarily have their best interest mind. The concept of creating value and building trust is obviously key, and advisors need to use all the tools at their disposal to make that a reality. Embracing technology is fundamental to this forward-thinking approach.

“Advisors that can bring digital tool sets to their traditional model are going to be best placed to defend against the fintech onslaught,” Bowman says. “Wealthy investors still value having someone looking out for their interests who can put together a bespoke solution for their individual or family needs. We found that investors are not looking for an either-or proposition with regard human and robo advice, they are looking for a combination.”

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