For years the most successful advisors have been gunning for the top of the money pyramid by tailoring services to the wealthiest clients.
However, with stagnation in the pool of available wealthy clients, many reps are assessing whether their efforts in competing for these rare birds might be better spent on different sorts of prospecting.
"The firms are really trying to push people to move higher and higher" on the net-worth food chain, says one independent advisor. "Where I am, there’s not a lot of those people–but there are a lot of the smaller clients."
According to Stephen Winks, publisher of the Senior Consultant newsletter, based in Richmond, Va., the numbers show that the pursuit of high-net-worth clients is a tough road.
"If you assume that each advisor handles 200 [HNW] clients, you’d have enough to support about 70,000 financial advisors," says Winks. Though about 650,000 people hold Series 7 licenses, Winks estimates only 250,000 are active advisors. Of these, he reckons about half have less that $100,000 in annual revenue, which means that about 125,000 advisors are competing for a pool of clients that should support far fewer.
For this reason, an increasing number of advisors are trying to land well-to-do clients before they attain high-net-worth status.
"There are getting to be too many advisors going after this small group of ultra high net worth ($5 million or more in net worth, excluding housing), neglecting this mass affluent group (up to $500,000 in net worth, excluding housing), which basically are going to be tomorrow’s affluent and ultra high-net-worth group," says Tom Winn, analyst at Spectrem Group.
As Winn points out, the increase of ultra-high net worth individuals over the next few years may be fairly slow. In 2002, there were just 610,000 of these people, a number that should stay fairly flat in 2003.
Though Winn says predicting HNW potential is somewhat of a "crapshoot," he points out "these mass affluent people are younger and will have many years ahead of them to be profitable both to the advisor and also to increase their wealth."