Financial planners aiming to grow might want to look where there aren’t many other advisors.
About one-third of affluent investors don’t work with a financial professional. Ditto the ultrawealthy, according to the Advisor Authority 2017 report.
Indeed, 36% of emerging high-net-worth, as well as 37% of HNW and ultra-HNW clients don’t work with a planner. (Emerging high-net-worth investors are defined as those with $500,000 to less than $1 million in investable assets, according to the survey, which was conducted by Harris Poll on behalf of Jefferson National, the advisory solutions business of Nationwide.)
So how can advisors find these prospects and turn them into clients?
First, don’t assume a client’s desires, experts say. For instance, contrary to conventional wisdom, retirement is not a top priority for these investors.
To be sure, 28% of surveyed investors say that saving for retirement is their main focus. But protecting assets and the cost of health care both ranked higher, at 33% and 30%, respectively. For the emerging high-net-worth crowd, that discrepancy was even wider: just 17% said saving for retirement was their top concern while protecting assets (43%) and the rising cost of health care (30%) were more important, according to the report, which surveyed 779 advisors and 817 investors.
Additionally, only 39% of the advisors surveyed say that saving for retirement is their clients’ main focus.
“That’s one example of a situation where an advisor could take this research and say ‘Maybe I need to reposition how I talk to people a little bit in an effort to attract different clients,’” says Craig Hawley, a leader of Nationwide’s advisory solutions business.
The research outlines the top three concerns for more affluent investors. Specifically, protecting assets ranked number one among emerging HNW (43%), HNW (41%) and ultra HNW (40%) investors. The cost of health care comes in second (30%, 40%, 22%) and taxes rank third (24%, 32%, 29%).
The data also shows that tapping into the expanding market of the emerging HNW is key goal for planners.
There is an opportunity for advisors to target those investors by understanding their current needs and, importantly, how those will change as more wealth is accumulated.
Fifty-four percent of affluent investors surveyed say they prefer to manage their own assets, but the poll also outlined the top three factors that would influence emerging HNW investors to work with a planner.
An advisor's level experience is the main consideration (54%), followed by the importance of a fee-based fiduciary standard (31%) and finally a personalized holistic approach (22%).
“Experience matters,” Hawley says. “[Planners] have to lead with experience.”
Of course, that approach may not suit young professionals, Hawley notes. Advisors that haven’t been in the industry for long should look into partnering with a more experienced planner and build a multi-generational team.
In order to embrace a fee-based fiduciary standard, advisors need to make greater choice and transparency a top priority, the research shows.
“Affluent investors want to know that the advisor is being transparent in the fees that they charge, the products they use, the breadth of choices that are offered and that their interests are going to be put first,” Hawley adds.
Investors also find a personalized holistic approach important. Yet some advisors can focus too much on asset allocation, Hawley said.
“Going beyond asset allocation to include risk management, tax optimization, partnering with CPAs, trust attorneys, estate planners, including the entire family in the process so there’s a multigenerational approach not only creates trust, but sets the advisor’s practice up for having the next generation of clients for their firm.”