Seven high-net-worth acquisition strategies
By Brian Lucius
Gradient Financial Group
Oftentimes, it's not what you're doing; it's what you're not doing. "I only work with high-net-worth clients." This is something we have all heard from advisors and would like to believe. Unfortunately, most of the time, it just isn't true. However, some advisors have created the recipe to attract, acquire, and maintain both high-net-worth (HNW) clients, and most importantly, their referrals. Remember, "A" clients run in the same circle with other "A" clients.
Businesses are demographically set up to be run completely by referral. A recent study found that 78 percent of people trust peer recommendations, whereas only 14 percent of people trust advertisements. The secrets used to acquire high-net-worth clients are the very same secrets used to generate a solid referral base. Implementing the ideas in this report will help you cut down your advertising costs and increase the net worth of your clients. Make more, spend less; the true American Dream.
1. Tell me something I don't know
Terms like "safe money" and "you can't afford to lose 20 percent of your savings" simply do not motivate high-net-worth individuals. They know where they stand, and they do not have the same risk tolerance as the majority of your clients.
Stop pushing mutual funds. HNW individuals have been around mutual funds their entire lives through their 401(k)s, IRAs and, yes, they can use Morningstar also. If they needed mutual fund recommendations, they would use T. Rowe Price.
You need to offer real solutions that they can't get elsewhere. "One of the most popular investment strategies I have used is managing a portfolio of ETFs (long and inverse) utilizing a covered call overlay," says ETF strategist Kevin Simpson. Or how about pulling in a premium finance expert for advanced estate planning? Remember, you need to offer something that others do not! 2. Be the financial coordinator, not just their financial advisor
Family CFO, financial quarterback. We've all heard the terms people use to describe themselves as the complete advisor to the client. It is one thing to say this to a prospect; it's another thing to actually fill that role. The first thing you'll learn about HNW people is that most of them didn't get to where they are by not paying attention. If they feel you are trying to sell them on the fact of being an all-encompassing advisor, they are going to test you to see if it's true.
In order to demonstrate your ability to be a financial coordinator, you should meet three criteria that will make an accredited investor believe your claim.
First, you need to be able to offer both insurance and securities -- specifically separately managed accounts. Whether or not you have preference toward one product or another, simply being licensed to use them shows a HNW client that they really do have options.
Also, if you succeed in gathering their assets, use a professional money manager. Clients know the difference between a broker, an insurance agent, and a true money manager.
Last, you need to utilize a CPA that you know or that your HNW prospect knows. There is no way, as an advisor, that you can assure the tax planning and tax advice you give will not affect their overall situation. Stay in your bucket, give financial advice, and let the CPA and money manager do their job.
3. Five-Star treatment is expected
HNW individuals do not expect too much, but they do expect to be treated with respect and a little service. They have worked hard to have nice things and to live a life that they have dreamed of. They appreciate and respect others that work hard and are successful. "HNW individuals are really not any different than you or I. It's not like a high-net-worth client walks into the office expecting to be treated a certain way," says P. Michael Valley II, President and Founder of Estate Planning Professionals in Ohio. "We treat our HNW clients just like we treat every other client."
Mike has built a 100 percent referral-based practice, and attributes a lot of his success to "the little things" they do for their clients. Walking into Mike's office, you are greeted by a smiling "director of first impressions". The HNW individual's name is written on the lobby sign, welcoming them to their appointment. Before you meet with Michael, you are presented with a menu to choose a beverage from. "Just be careful if you begin offering that level of service, because your clients will expect it from you every time and you have to deliver." 4. It's about earning referrals, not asking for them
Every advisor says they are going to make referrals a focus of their business. There are several "systems" out there that offer methods for increasing referrals. The truth is, you need to earn referrals first. Referrals come from what you have done for clients, not what you will do.
Customer service means getting things done when you say you will. It means meeting with customers every quarter to see how they are feeling and how their investments are doing. Advisors in the high-net-worth arena are using technology to take this one step further. Using a good customer relationship management system (CRM) will allow you to automate marketing campaigns and segregate groups of clients. Imagine all of your clients automatically receiving monthly newsletters, birthday cards, and anniversary cards. Some advisors are setting up mailing campaigns based around RMDs and annual free withdrawals. Several are even using a CRM that updates values of investments and fixed indexed annuity values every quarter. Showing a client this type of accurate and timely report is exactly the reason they will leave all their assets with you.
5. It's not how much you're paid; it's how you're paid
Clients with greater than one million dollars of investable assets fully realize you do not provide services as a hobby or charity. Nor do they believe that your seminars are "educational workshops" and that "nothing will be sold". They know exactly what you do, but they are always asking, "How do you get paid?" They are not asking, "How much do you get paid?" What they really want to know is, "How are you paid, and are you going to tell me how you are paid?"
Luckily, for those of you that are investment advisors, full disclosure is provided in your Form ADV. As an advisor, you can tell them exactly how you will be compensated, because payment will come directly form the HNW individual's pocket book. For the rest of you, you may have to explain things a different way. Please do not think your HNW prospect will believe you when you tell them, "You do not owe me anything. The insurance company (or fund company) will compensate me for our time." I can assure that you they know they are paying for it in some way. 6. If you are a professional, look like one
There are so many advisors that lose business because of their corporate and personnel image. They may not think of themselves as having a corporate image but believe me, you are developing a brand. A brand is how people think of your business. Your business cards, brochures, and Web site will either impress people, or turn them away. I can't express how important your professional image is. If you are not taking this seriously, start now. Most HNW individuals give back to their community and are actively involved. Make sure you are doing the same.
7. Educate yourself
You do not have to be a CFA or an MBA, but you do have to be able to hold an intelligent conversation with HNW individuals on various subject matters. The stock market and the economy are bound to be two major areas of focus. Most HNW individuals will have investments such as private placements, stocks, options, and REITs. They are coming to you for your opinion on their situation, you better have an answer.
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