Nov 01 2023 / Round the Table Magazine
By Kathryn Furtaw Keuneke, CAE
Attracting high-net-worth (HNW) clients seems like the key to unlocking success for your practice, but this market often feels just out of reach. As attractive as HNW clients appear to advisors who want to grow, these prospects seem elusive, thanks in part to some widely believed misconceptions. We spoke with members from around the globe to debunk myths about HNW prospects and clients.
Myth: They fit a clear description
Truth: If you’re interested in attracting HNW prospects, what do they look like to you? The definition for what qualifies as HNW is as varied as the advisors around the globe. Factors such as the net worth of your existing clients and the cost of living in your area will help define who your prospecting targets will be at the next level. While one advisor might target a net worth of $1 million to upgrade their client base, another could be seeking prospects valued at $10 million.
When you factor income and investable assets into your definition, the picture gets cloudier. A larger net worth isn’t always better. Robert J. Hack, a 15-year MDRT member from Vancouver, British Columbia, Canada, recommends considering the prospect’s age. “Someone in their peak earning years holding investable assets of $2.5 million is a much stronger prospect than someone already retired and drawing on $5 million of assets.”
After you take some time to define what HNW means to you, follow the guidance of your MDRT peers in various parts of the world to sidestep the following myths and successfully engage these prospects.
Myth: Their needs have been met
Truth: It would be easy to look at a HNW individual or couple and assume they have already fully planned for their financial future. Not always, said Joyce Chan, a five-year MDRT member from Singapore. She has found that the turnover experienced in the financial services profession, from banks to insurance agencies, can leave a client with a stack of policies but no one to turn to for service.
For individuals currently working with one or more advisors, sometimes those pieces of their overall planning are uncoordinated, said Bobby James Ning, CFP, BA, a 17-year MDRT member from Vancouver. He looks for opportunities to take well-planned pieces and tie them together for the client. “Many times, what they don’t have is a written plan that lays out everything they have: business, real estate, financial plan, insurance and so on,” he said.
Life insurance is a very important component of financial planning that might appeal more to HNW individuals than you’d expect, said Bharat Vadilal Parekh, a 31-year MDRT member from Nagpur, Maharashtra, India. “Risk management is a priority,” Parekh said. “They have earned their money — and many have worked very hard to do so — and they have no desire to take on extra risk to earn a lot more. What they want is to preserve the capital that is already there and generate a cash flow that meets their specific lifestyle needs.”
If you encounter a HNW prospect whose needs have been fully met by another advisor, keep in touch. They may have peers they’d like to refer to you, or they may be looking for a change. Scott Alfred Grant recommends finding out how their current advisory relationship is going. “Sometimes, they never hear from the person,” the 23-year MDRT member from Vancouver said. This helps Grant see their expectations for working with an advisor and gives him the opportunity to meet their needs and win their business.
Myth: They require specialized advice
Truth: Many HNW clients who Chan works with are experts in the areas where they’ve built their own careers, but they are not well-versed in personal finances. “This is understandable given that these individuals take years to hone their expertise in their fields,” she said.
Ning agrees, pointing out that being financially literate is not the same as knowing what to do with the wealth they’ve built. “Just because they know how to run a business — and in a lot of cases, make a lot of money — doesn’t mean they know how to financially plan for their family,” he said.
Timothy W. Murphrey, CFP, J.D., treats HNW clients much like the rest of his clients: His process is dictated by the client’s needs. If their needs are more complex, then they might require additional meeting time. As an example, the 35-year MDRT member from Sacramento, California, USA, received a referral to two retiring physicians. Murphrey developed a full-blown plan for both doctors involving life insurance, long-term care insurance, income planning with annuities, and management of assets being rolled out. The thorough process took three months and resulted in his clients thanking him for his planning and implementation.
Myth: They are difficult to work with
Truth: HNW clients demonstrate the confidence that comes with experience and exposure to the business world. Piyachat Masuwan once thought HNW clients were difficult and self-centered but realized he had come to the wrong conclusion. “I have learned that, because of their wealth, they are just highly self-confident,” said the seven-year MDRT member from Bangkok, Thailand.
Chan finds her HNW clients demanding, but not unreasonably so. “While they have higher expectations of service quality and response efficiency, my HNW clients are easy to work with,” she said. “They normally don’t demand anything extra from me and just require me to be a financial consultant who can be there for them through the years.”
These prospects are looking for a professional they can trust to underpromise and overdeliver, Audrey Adeline Yap Mui Ling said. The five-year MDRT member from Kuching, Sarawak, Malaysia, said that you create value with HNW clients through consistency and being available when they need you. “Along the way, I realized all they want is for us to get straight to the point and solve their concerns or problems faced in the simplest, most efficient way,” she said. When it comes to their money, they are not impulsive. They want to know as much as possible before committing to a product or service. “They may take some time to reach a decision, but once they do, they are locked in,” she said.
Decisiveness with this market has paid off for Phua Xin Hui, who proposed a life insurance policy for each of a couple’s three children for a total of 200,000 ringgit in premiums. “Initially I thought they would ask questions, but they didn’t,” said the four-year MDRT member from Kuala Lumpur, Malaysia. “They just discussed among themselves how to divide the premium portion, and they agreed. Many think HNW are the hardest people to deal with. However, they are the easiest clients to deal with. They are open to listening.”
Best practices for engaging with HNW prospects
HNW prospects are looking for someone to trust. When you’ve scheduled a meeting with an individual or couple, approach them with curiosity and clear communication, and don’t hesitate to consult other professionals as needed.
Be curious in learning about their needs
- Don’t assume anything — ask questions to learn what money means to them.
- Find out what keeps them awake at night.
- They may have multiple priorities — ask how they want to approach them.
- Empathize with their challenges, and resist jumping to an immediate solution.
- Use what you’ve learned about them to guide how you deliver advice.
- Choose your words to convey your knowledge of their challenges.
Collaborate with experts to meet their needs
- HNW clients need help finding solutions, even if you have to refer them out to other professionals.
- Bring experts in for a second perspective as needed an manage the relationship.
Michael DePilla contributed to this article.