Do you really want to work the high-net-worth market?

By SteveLewit

Wealth Financial Group


If you want to enter the higher-net-worth market, be prepared to spend more time on the social scene, winning business through relationships built over a long period of time or from referrals from other members of the "club." Unlike the mid-market, this is not a 1-2-3 appointment process.

Many financial professionals strive to increase their average sales volume by attracting high-net-worth clients. By high-net-worth, I mean clients with $3 million or more in investable assets. My experience is that clients with over $3 million, in general, have a very different investment attitude and different needs than those with less. They need to be sold very differently than folks with more modest sums of money. Moreover, the attitude for clients with even higher net worth, let’s say $5 million and up, are very much the same as those with $3 million, just a bit more amplified.

The professionals who enter this market often are surprised by the different attitudes and needs of more affluent investors. Before you make that leap, take a step back and take a closer look from my point of view.

I recently had a conversation with a highly successful agent who, at the beginning of the year, took a giant step into the more affluent market. Now, based on this person’s level of achievement, it is obvious that he can market, sell and run a good business. Yet, his success in the affluent market was falling short — way short. In fact, in the first three months of the year, he had closed less than $1 million of business in this market. Why?

Most financial professionals, including my friend here, fail to recognize that higher-net-worth individuals have a different psychology than those who are in the middle market. The difference is that high-net-worth or affluent investors:
  • can afford to lose money without it affecting their quality of life
  • have grown accustomed to riding through the ups and downs of the markets, without freaking out
  • hang out with other wealthy people likely to refer them to their "fantastic" advisor who has made a lot for them
  • like to talk money at social gatherings — about their great buys, the fish that got away and how good their advisor is
  • are being chased by every Tom, Dick and Harry from the banks and brokerage houses
  • are wined, dined, golfed and partied ad nauseam by other financial professionals who earn the client’s business more from a social context rather than a performance context
So, back to this successful agent who went into the high-net-worth market thinking that he could use the same selling methodology as he did with his other clients. He thought that these folks would:
  • want to make the best decision for their money
  • would understand if they had too much money at risk or did not have enough guaranteed income
  • would understand that they could fix this with annuities or a more efficient mode of money management
No way! What he discovered, unfortunately, was that most high-net-worth people are making financial decisions based on social context, relationships, etc. and not on doing what is reasonably the best for them. For example, many of these folks don’t like annuities because they are boring, and they can’t brag about them to their friends.

Conclusion

If you want to enter the higher-net-worth market, be prepared to spend more time on the social scene, winning business through relationships built over a long period of time or from referrals from other members of the "club." Unlike the mid-market, this is not a 1-2-3 appointment process. There’s just too much other scenery that paints itself into the picture in which decisions are made.

If you’re headed down this path, you can succeed. But get ready to fish in a very different ocean, with a whole new set of fishing gear and a unique, more challenging set of weather patterns.