More money, more problems? How to attract and serve high-net-worth clients

February 17, 2020 by Tuesday Willingale

More money, more problems? How to attract and serve high-net-worth clients by Advicent

about the author:

Tuesday Willingale

Account executive

Tuesday Willingale is an account executive at Advicent, the financial planning technology provider of choice for nearly 100,000 financial professionals.

The idea of having a book of business built primarily on high-net-worth (HNW) clients may sound exciting to most financial advisors, however, there are key considerations for advisors to make in order to properly serve this valuable client segment.

Identifying the market

While some may think that the HNW space is already saturated, there is still plenty of room in the market for advisors to acquire new HNW clients. According to a study done by Nationwide, 27 percent of all HNW investors and 22 percent of all ultra-high-net-worth (UHNW) investors in the U.S. do not currently work with an advisor. Furthermore, it was estimated that in 2017 there was $18.6 trillion in assets in the U.S. controlled by HNW and UHNW households alone. A study done by CNBC states that in the U.S. there are 145,000 households worth $25 million or more and over 10 million households with $1 million or more.

Attracting HNW prospects

With a significant slice of the HNW and UHNW market up for grabs and a new generation of investors ready to jump into this bracket soon, it is important that advisors know how to attract them. In the U.S., 50 percent of HNW and 38 percent of UHNW households list advisor experience as one of the top three factors to consider when choosing an advisor, followed closely by a holistic financial planning approach.

Using a tool like the NaviPlan client portal is one way to quickly improve the client-advisor experience. This tool includes account aggregation, a collaborative fact finder, as well as the ability for clients to access their financial plan anywhere at any time. These combine to deliver a superior client experience and increase the connection clients have with their advice, all of which work to improve the relationship between the client and advisor.

Additionally, advice presentation is an excellent opportunity to score points with clients. By leveraging the NaviPlan Presentation Module, advisors can craft more engaging client meetings by following a user-friendly advice delivery process with easy-to-understand presentations.

Catering to HNW needs and gaining their trust

Once an advisor feels confident that they can attract the high-net-worth clients they desire, it is essential to think about how to properly cater to their needs that often differ from other clients. Those in the HNW segment tend to have to deal with a wider array of concerns than mass affluent clients.

Their taxes are higher, their investment portfolios are larger, many have multiple properties or other unique assets, and most participate in philanthropic activities. These diverse needs require the careful management of a trusted advisor who can deliver a comprehensive financial planning strategy.

There are multiple steps that an advisor can take when dealing with clients to ensure that they maintain their HNW status for generations to come. Gathering all of a client’s financial data can be time-consuming, especially if the advisor has not been working with the client for long; they may not yet completely trust the advisor and therefore elect to keep some of their accounts hidden. And if an advisor does not have all of the client’s financial information, naturally the advice they are providing may not be accurate.

Introduce asset consolidation

One way to help gain rapport and trust with a client is to talk them through asset consolidation. Many clients may open investment accounts with multiple financial institutions, which makes keeping track of investments very difficult. There are many appealing reasons to consolidate: lower costs, streamlined administration, no duplication of investment efforts, and simplified estate settlements. An important thing to note is that diversification is about how money is invested, not where it is kept.

Conduct a portfolio audit

Another great way to build rapport with new clients is to conduct a yearly audit of a client’s portfolio to check for hidden and ongoing fees. This also protects them from unnecessarily losing money. Inherited assets or products that have rolled over since they were initially selected can have ongoing fees that may often be overlooked. By carefully inspecting mutual fund wrap programs, which are portfolios of mutual funds that are managed by advisory platforms, advisors may be able to create a similar portfolio without many of the fees that are included in most actively managed mutual funds.

Handle surplus assets

In many cases, HNW clients may also have surplus assets. There are two common ways to protect these surplus assets: gifting to family and donating to charities. Gifting surplus assets to lower-income family members is a great way to protect those assets. A client could gift some of these assets to underage family members because the taxes levied on capital gains will be comparative with their lower tax bracket. However, it is important to remember that the dividend and interest income will be attributed to the client and they will be responsible for those taxes. A second great way to protect those surplus assets is to donate publicly traded securities whose value has increased, to charitable organizations. On the topic of charitable organizations, if an advisor is dealing with a UHNW client, it may be in the client’s best financial interest to set up a charitable foundation.

Mitigate risk with insurance

An additional service that advisors can offer to their HNW clients is insurance. Financial Planning’s Financial Wellness Survey states that 30 percent of all HNW and UHNW individuals have no health insurance and 25 percent have no life insurance. This may be because they are more focused on protecting their assets than their health, however, insurance is a great way to expand the services that financial planning firms provide while protecting HNW clients and looking out for their best interest. It is important to take healthcare into consideration, as illness and disability can account for a major loss of income. By providing clients with long-term care and critical illness insurance, it is possible to minimize those risks. It may also be a wise risk management strategy to provide liability insurance for any potential lawsuits.

For more information on how NaviPlan is suited to help grow your firm’s HNW planning strategy, click here >