7 Ways to Create an Exceptional High-Net-Worth Client Experience

If you’re planning to serve high-net-worth (HNW) clients (those with a net worth of at least $5 million), you’ll need be ready to address a distinct and highly specialized set of needs. In many cases, HNW clients are business owners, C-suite executives, partners, and holders of legacy wealth who are looking for solutions to further diversify, mitigate taxes, and streamline complex estates. Each is unique and requires an especially thoughtful approach.

Are you prepared for this growth avenue? Here are seven ways to create an exceptional HNW client experience:

1. Design Portfolios Strategically

HNW clients are looking for tax efficiency, portfolio diversification, and tailored solutions. Think about:

• Separately managed accounts. Construct portfolios using individual stocks and bonds with an institutional money management overlay.
• ETFs. Access diversified baskets of investments while maintaining the tax-efficient characteristics of stock ownership.

Your clients will tend to have more flexibility for tolerating a lack of liquidity, so consider the following unique investing approaches and alternative investments:

• Hedge funds. Increase a core portfolio’s diversification while offering the potential for outsized returns with low correlation.
• Structured products. Offer downside protection tied to other investments’ performance. Build them around a concentrated position or provide an insurance element in volatile markets.
• Private equity and venture capital. Present majority equity ownership while strengthening an existing business that isn’t yet publicly traded.
• Real estate investment trusts. Provide a nonmarket or fixed income–correlated income stream with upside potential.
• Initial public offering. Invest in companies that are just becoming publicly traded, offering growth potential and momentum.

Bear in mind risks such as equity concentration and personal liability. Mitigate them with solutions such as asset allocation and diversification, insurance, and trusts.

2. Secure Their Legacy

Reducing taxes and creating a legacy is vital for HNW clients moving into the next phase of life. Key areas of focus are generational wealth transfers, efficient income distribution, and trust planning.

You’ll work with their estate attorneys and CPAs to ensure their goals align with the chosen trust vehicle and that the trusts follow best practices and current law. Be sure to discuss target tax rates as well, and choose an appropriate and independent trustee or trustees to carry out your clients’ objectives.

During the trust review process, you’ll want to think about:

• Working with your firm partner to conduct an independent trust review
• Engaging a personal trust service provider
• Expanding your knowledge base through additional education (e.g., CFP, CPWA)

3. Keep It in the Family

Family is especially vital to HNW clients looking to secure their legacies. Consider their next generations’ goals and how can you actively engage them. Start by:

• Holding a family meeting. Delve into your clients’ values and how to retain them across generations.
• Including stakeholders in their parents’ vision. Your clients will be able to express their vision while giving the next generation space to voice aspirations and concerns. The result will be an enduring financial plan.
• Developing a direct relationship with family members. Educate them about how you can be both the steward of the family’s wealth and a resource for their individual financial needs.

4. Create a Charitable Giving Plan

A carefully designed charitable giving plan will reduce taxes, provide control over timing, and give back in a way that aligns with the family’s goals. Consider including:

• Donor-advised funds. The client becomes the grant advisor on the funds and receives a deduction for transferring cash or appreciated securities into the account.
• Charitable remainder trusts and charitable lead trusts. Return a stream of income to the grantor (or to the charity in the case of a charitable lead trust) over a specified number of years or for life. The charitable deduction is based on a calculation of the anticipated remainder or the stream of income for charitable lead trusts.
• Qualified charitable distributions. Gifts are made directly to a charity from an IRA up to a maximum annual limit of $100,000 (indexed for inflation under SECURE 2.0). The amount transferred can be used to offset the client’s required minimum distribution from their retirement account for the year. No taxes are due on the distributions, but there’s no tax deduction available for making the gift.

5. Provide Lending Solutions and Guidance

Lending can be a great way to fund major purchases, as well as bridge loans for tax bills and real estate investment. These lines can be unsecured or secured by existing portfolios. These approaches address both sides of the balance sheet.

6. Grow Business Sustainably

Help your HNW clients recruit, retain, and reward key employees by:

• Implementing retirement plans that entice top talent to stay.
• Augmenting their 401(k), profit sharing, and cash balance plan offerings (such as with stock options, employee stock purchase, and employee stock ownership plans).
• Ensuring that your clients have a formal succession plan in place to monetize or transition their business.

7. Leverage Robust Financial Planning Software

Using comprehensive financial planning software enables you to map out different goals and planning scenarios for HNW clients, capture all facets of their financial situation, and illustrate both current and future states.

Some of the market’s top financial planning tools include RightCapital (cash flow-based financial planning software that includes retirement planning, student loan debt planning, and social security optimization), eMoney (cash-flow planning software tool with tax and estate planning modules), MoneyGuidePro (goal-based financial planning software), and Holistiplan (tax planning software).

Get Ready to Exceed Expectations

It’s clear that HNW clients require a unique approach to meet their needs—and you’ll need a diverse set of skills and resources available to meet and exceed their expectations. To create a truly exceptional experience for your HNW clients, take the time to really understand their goals, then work with your firm partner to provide a financial plan that secures their legacy.

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This post originally appeared on The Independent Advisor, a blog authored by subject-matter specialists at Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser.

This material is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Commonwealth Financial Network® does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.

Investing in alternative investments may not be suitable for all investors and involves special risks, such as risk associated with leveraging the investment, utilizing complex financial derivatives, adverse market forces, regulatory and tax code changes, and illiquidity. Diversification does not assure a profit or protect against loss in declining markets, and no strategy can guarantee that any objective or goal will be achieved.

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