Changes in demographics, technology and regulations have commoditized traditional core client-service offerings among retail financial advisers. Everything from asset management to fund selection to asset allocation strategies are no longer areas where most retail financial advisers can add exceptional value to clients.
Not surprisingly, many independent advisers who have traditionally targeted more of a mass affluent client base are now actively trying to transition to high-net-worth client relationships that offer potentially greater pathways for growing their business.
But it's one thing to target this market. It's another to be able to serve it capably. Here are four key steps to position your practice to attract more high-net worth clients.
1. Partnering up. Regardless of the ultimate fate of the Department of Labor's fiduciary rule, it's clear that the industry will continue its current trend toward offering the marketplace more transparency. That means the emphasis will be on planning and customization, with advisers seeking to integrate the full scope of a client's needs — including insurance, estate planning, tax planning, asset management and retirement planning — into one fully personalized, holistic plan.
While some firms have shifted their service model in recent years in anticipation of this new normal, solo practitioners and smaller adviser teams will have a more difficult time acclimating. Most of these advisers are unable to shoulder the cost of hiring additional staff to offer such a comprehensive suite of services. A better approach, therefore, is to partner with other similarly sized advisers or teams who have complementary, highly technical skill sets. That way, they can add scale, improve service offerings and attract higher-value client relationships.
2. Retirement plan expertise. Many firms have neither the staff nor the expertise to act as an adviser to a small business retirement plan, like a 401(k), profit sharing or pension plan. This tends to be a low-margin business that doesn't add much to an advisory practice's bottom line. But offering this specialized service can help advisers attract high-net-worth clients.
Such plans, if structured correctly, often provide small business owners (many of whom are high-net worth) an array of benefits, including the ability to defer a significant portion of their income to retirement age. That's a great carrot to present to clients who are seeking to exhaust all available tax mitigation strategies. It also creates a crucial competitive advantage for advisers trying to distinguish themselves in an increasingly crowded marketplace.
3. Incorporate the family. Invite adult children to client review meetings. Naturally, they will be very interested in their family's financial situation, and as a practical matter it's also important to get up to speed with everything in their lives, provided they are beneficiaries. However, don't stop there: Offer them complimentary financial planning advice relevant to their own situation, including a cash-flow analysis and other basic services.
If nothing else, a chance to show younger investors (who are likely to become high-net-worth clients themselves) what you have to offer and hopefully to keep the bulk of that business for generations. At the same time, this approach will reinforce the relationship with the primary client and let them know that someone will be there to help their heirs when they pass on.
4. Concierge services. Make yourself available at any time for any aspect of a client's financial life. In effect, be their chief financial officer, vowing to give counsel concerning matters that typically transcend core financial planning offerings but which are nonetheless important, such purchasing a car, planning a vacation or making home improvements. Clients can terminate a relationship at any time, so advisers should be incentivized — especially in this era of digital, low-cost offerings — to provide a greater level of service than ever before.
None of this, of course, necessarily means that advisers should abandon the mass affluent segment entirely. Given current trends, however, it's hard to deny the importance of high-net-worth investors, and, in many cases, independent advisers will need to make modifications to their service model to compete effectively within that space.
Jonathan Albano is a partner at CCR Wealth Management, an independent financial planning and investment management firm.
