How Advisors Can Avoid the High Net Worth-Only Trap

How Advisors Can Avoid the High Net Worth-Only Trap

Advisors need to provide the high-quality client experiences younger investors expect, but do so in very efficient ways.

In his book, The Innovator’s Dilemma, author Clayton Christensen explains how successful companies can become so focused on preserving their existing business with current customers that they ignore innovations that could help them reinvent their offerings to meet the needs of future customers in new and different markets. Their failure to adapt and change eventually makes them fall behind. That is precisely what is occurring today with many wealth management firms and their advisors who are realizing that they’re in a ‘high net worth only’ trap.

This trap was built with the old wealth management model where advisors would only pursue high net worth clients – those who already had sizable investable assets at their disposal. In general, the ante was a mid-six figure investment account. Since relatively few young people have asset of that size at their disposal, many advisors’ books of business are made up primarily of wealthy, older clients.

Focusing exclusively on these clients’ needs has been good business for these advisors.  It also afforded them the luxury of largely ignoring developments happening elsewhere in the advice market. But now, with their aging clients drawing down their assets, and younger prospects going elsewhere, firms and their advisors are struggling to finds ways out of their high net worth only traps.


The Trap Gets Tighter

Whether they operate on a commission-based model or a fee-only arrangement, advisors whose aging, HNW clients are de-accumulating assets face real trouble with their practices. Staying the course with a declining book of business isn’t a viable strategy for any advisor.

The core problem here is that these advisors have ignored and dismissed prospective clients in younger age brackets and lower net worth circles for so long, they now have very little understanding or appreciation of this pool of prospective clients. Whether its millennials, Gen Xers, or even younger baby boomers, their needs, preferences, and behaviors – the ways they obtain information, communicate and conduct business – is unfamiliar territory for many traditional advisors.

Further complicating the picture are the disruptive technologies, competitive changes and demographic shifts that have occurred in the advice over the past several years. One major development is the advent of robo-advisors, the low-cost, automated platforms that offer investment advice in the form of algorithm-driven portfolio construction and rebalancing functions. Another is the explosive growth in registered investment advisor (RIA) channel, with hundreds of independent firms and thousands of advisors competing aggressively for business. On the demographic front, the big story is the enormous millennial generation entering the workforce, and bringing with them their strong preferences for online, mobile and social interactions.

These and other trends are creating fee pressure on traditional advisors, and forcing them higher up the high net worth scale where their costs can still be rationalized and tolerated by fewer and fewer HNW clients. That’s why the trap is getting tighter for advisors.

Make Changes to Avoid the Trap

To avoid the high net worth only trap, advisors need to make a couple of major changes in their businesses. First, they must refocus their practices on younger investors, and in particular, on young professionals who have solid incomes and good career prospects. Most of these new clients will have relatively low net worth totals at present, so the key is not just to attract and win their business, but to keep them over the long term as they build up their investable assets.

To do that successfully, advisors need to provide the high-quality client experiences these younger investors expect, but do so in very efficient ways. Following are some of the actions advisors can take to adapt their practices to this different model.

  • Change their fee structure – Instead of operating on commissions or a percentage of AUM, offer more flexible pricing options, such as a flat monthly fee or even an hourly rate. With more pricing options, advisors will be able to deliver services and be compensated in ways that make sense for them and for more of the younger investors they’re trying to attract. .
  • Invest in technology and training – Purchase and get up to speed on the modern systems and devices with which younger clients prefer to communicate and conduct their business. Must-have in this area include:
    • Strong online presence – a vibrant website that provides compelling and frequently updated content that engages younger investors and gives them reasons to come back
    • Social media savvy – younger investors obtain a lot of their information and communicate frequently in social media environments like LinkedIn, Twitter and YouTube. Advisors need to embrace and become active on these platforms.  
    • Mobile friendly – Instead of the traditional quarterly or annual meetings at advisors’ offices, younger investors are likely to prefer less formal interactions. Whether that’s at the client’s home office, a coffee shop or some other location, advisors must be able to accommodate these types of interactions and deliver high-quality experiences using mobile technologies such as tablets.
    • Content marketing – To solidify their position as a knowledgeable and trusted confidant, advisors should be frequently sharing interesting and compelling information with them. To do this efficiently, advisors must build up their content marketing expertise, which involves curating, repurposing and sharing content from many different sources.


These are all fairly major departures from the traditional ways advisors have run their practices, and for many advisors, they won’t be easy changes to make. But if they want to avoid the high net worth only trap, and have healthy and growing practices that are set up for long-term success, advisors really have no other choice. They must make these changes, and the sooner they get started, the sooner advisors can start infusing more youth into their practices.


Doug Winter is CEO of Seismic, a provider of cloud-based content automation platforms for the financial services industry.

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.