Let's face it: In general, high-net-worth clients are a picky lot. Studies have shown that HNW individuals are dissatisfied with the performance of their portfolios and with those who have advised them. That dissatisfaction is an open invitation for you to step up with a fresh approach.
Here are three steps to establishing a successful presence in the high-net-worth arena — even in this ultra-competitive environment.
Step 1: Go To What You Know
High-net-worth prospects typically fall into one of three categories: generators (which includes entrepreneurs, self-employed professionals, entertainers), earners (key corporate employees, high commission salespeople) and receivers (retirees, divorcees, inheritors). Your first task is to focus on a specific niche within one of these segments.
You've arrived at the general sort of group you'd like to target, narrow the focus even further. Consider Robert, a financial advisor with 350 households and $145 million in assets. Having some basic experience in the area, Robert believed he could be successful with self-employed professionals. When he took into account his expertise in complex insurance solutions, his working knowledge of trusts, his current client list (which included four prominent physicians) and his wife's nursing background, Robert decided to target self-employed medical professionals.
But before you make a commitment, ask yourself: Are there enough true high-net-worth prospects in this niche? Do I know someone with influence that can open client doors?
Step 2: Expand What You Know
Once the niche has been chosen, do everything you can to learn the nuances of providing financial services to members of the market. This requires a lot of face time with clients, because it's during such conversations that you can learn details that will help you craft the proper financial plans or a specific vehicle that might help that group (such as cashless collars, for example).
When seeking to understand the challenges confronting your prospects, use the following seven areas to make sure you know their business:
Customers/Clients/Patients — Learn how they attract, collect payments and deliver services.
Promotions and Endorsements — Become familiar with how new business is developed. You might be able to offer marketing advice.
Suppliers — Knowing your client's suppliers could open another niche.
Financing — You might be able to help with buy-sell agreements, lines of credits, tax shelters, trusts, etc.
Environmental/Legal Challenges — Knowing real-time, niche specific, government regulations, tax laws, etc., will play a vital role in providing financial advice.
Internal Challenges — Understanding the human resource challenges of your niche makes your advice more pertinent.
Family — Linking family considerations unique to your selected niche serves to solidify the relationship and enables you to work with family members.
In Robert's case, it didn't take long for him to realize the issues facing his target clients: HMOs were squeezing cash flows, collecting receivables was increasingly difficult and the threat of malpractice lawsuits was ever present.
Step 3: Become the Go-To Financial Advisor
Now Robert could turn his attention to dominating his chosen niche. He started by meeting with his four doctor clients, which taught him about the challenges physicians face in today's environment.
He stressed to them that he could advise them from both a financial and business perspective. This was not simply a tactic for gathering referrals, but rather a method of gathering information and recruiting internal advocates who could play a role in his efforts to dominate this niche.
With his expertise in trusts and in complex insurance solutions, Robert was able to present an attractive solution to this niche. Two of his doctor clients served on hospital boards and asked if he would give presentations — first to their board, then possibly to other physicians in their hospitals. His quest had begun.
This all sounds easy. But the path Robert followed required discipline, focus and a sense of urgency. When done properly, there is a real payoff: You get so proficient that others have trouble competing with you at all. How many financial advisors do you know who are in that position today?
Matt Oechsli is author of Building a Successful 21st Century Financial Practice: Attracting, Servicing & Retaining Affluent Clients. oechsli.com/rr