Successful advisors establish themselves as “sticky hubs:” the go-to resources for their clients’ financial needs, questions and concerns. To do that effectively, they must relate to clients’ mindsets and expectations.
Demographics provide several helpful cues for getting started. Advisors can build upon that information to understand each client on a deep, individual level. This enables them to establish “sticky” relationships—where clients bond with the advisor and rely continuously on him or her for education and guidance—and become the indispensable “hub” that directs clients on every aspect of how they manage their money.
The Basics: Characteristics of Mass Affluent and HNW Clients
Competition for clients in the high net worth (HNW) segment is fierce, as most advisors recognize them as the “sweet spot” in terms of preferred client demographics. Generally speaking, these investors have a robust net worth (between $1 and $5 million) and a positive outlook on their financial futures. They need holistic financial planning support, but don’t require highly specialized services or extremely frequent contact like those in the ultra-high net worth category. Many are nearing the end of fruitful careers, or already enjoying retirement.
The mass affluent segment, with assets between $100,000 and $1 million, tend to be younger than their HNW counterparts. They are still working, favor a do-it-yourself approach, and are also considerably more fee-sensitive. Savvy advisors know that today’s mass affluent investors are tomorrow’s HNW clients, so engaging both segments is critical to building a successful long –term practice.
Addressing Needs, Wants & Worries
Relevant dialogue and education are the primary ingredients of “sticky” relationships, and delivering them requires understanding clients’ needs, wants and worries. Every client is different and has his or her own unique circumstances and story; however, there are common trends to each demographic that advisors should keep in mind:
- HNW (and ultra-HNW) investors typically need help with legacy and next-generation planning, and more than 60 percent are comfortable taking risks that could lead to loss in principal.
- Most mass affluent investors are primarily concerned with maintaining their financial situation and paying for potential health issues.
- The mass affluent group is also fairly risk averse, with less than half reporting that they are comfortable risking loss to their principal investments (Source: Vanguard, Spectrem, Insights on Affluent Investors, 2013).
- More mass affluent investors (40 percent) report that they value social responsibility in investments than do wealthier clients (Source: Spectrem Affluent Market Insights, 2013).
Again, these are broad generalizations based on survey data, and so the degree to which they apply to individual clients will vary. But particularly when engaging with new clients, keeping in mind common preferences is a prudent and useful tactic for getting started on the right foot.
Expectations for Engagement
Clients’ expectations for engagement with their financial advisors also tend to correlate with the demographic segment to which they belong. To put it simply, the higher a client’s net worth, the more (and more prompt) attention they expect to receive.
Regardless of demographic, all clients demand responsiveness of their advisors. In fact, twice as many clients polled in the 2014 Spectrem Affluent Market Insights study would fire an advisor for failing to meet their engagement expectations as would fire an advisor due to losses over a two- or five-year period. More than half expect their advisors to follow up on a question or request within 12 hours.
Practically speaking, this translates to the “AM/PM Rule.” If a client contacts you in the morning, respond before the end of that same day. If they reach out in the afternoon, reply no later than the following morning. It can take years to build a strong client relationship, but only 12 hours to lose it.
“Sticky” is bad when it’s on the bottom of your shoe, but priceless when it comes to building lasting relationships. Being mindful of clients’ needs, wants, worries and expectations is the first step in achieving that valuable “sticky hub” status.
Matt Matrisian is Senior Vice President, Practice Management & Strategic Initiatives at AssetMark, Inc. (www.assetmark.com), an independent provider of investment and consulting solutions serving financial advisors, and author of “The Power of Practice Management: Best Practices for Building a Better Advisory Business.”