Understanding today's affluent investor remains a hot topic for advisors. We see this by the ongoing stream of questions we get about our affluent research. This tells us that advisors are serious about retooling in order to better attract, serve, and develop loyal affluent clients.
Within this spirit, I've created the Affluent Investor Baker's Dozen, tidbits of information we've been sharing with our coaching clients in customizing their marketing plans and service models. Advisors who are serious about working with today's affluent need to become a student of the affluent. I hope you find the following ideas helpful.
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Be careful using terms like “high-net worth,” “wealth” or “affluent” in affluent social circles. They don't describe themselves using this language, and it makes them suspicious when they hear it from others — the last emotion you want to generate in affluent circles. Ninety-three percent of the respondents in our 2011 affluent research reported that they are self-made. They come from traditional American middle-class backgrounds, most have had part-time jobs while in high school and college; they've worked hard and have created lifestyles that are far more affluent than the ones in which they were raised, but they do not perceive themselves as being “affluent.”
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They have multiple advisors. Seventy-two percent of our respondents with $5 million or more in investable assets have two or more advisors, and 44 percent with between $1 and $4 million have more than one advisor. With the levels of dissatisfaction over advisor service still high, many advisors have not raised their game to become the primary advisor.
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They trust “elite advisors,” those meeting affluent clients' expectations in 16 important criteria. For the past three years our research has identified elite advisors as leading the field regarding trust for unbiased advice. Prior to the financial crisis, CPAs enjoyed the top ranking but fell by failing to provide real guidance during the crisis.
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A strong dislike of salespeople. The affluent like to be guided into making decisions; they do not like to be sold to.
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They are concerned about health care costs. Maintaining their current lifestyles is a major concern, which is why rising health care costs is the number-one worry of today's affluent. A close second is outliving their assets, again a lifestyle issue. Advisors need to be overseeing every aspect of their affluent clients' financial affairs.
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They want a “working” financial plan. No longer is a financial plan good enough; they want their advisors to “execute” the plan, make the necessary adjustments, and keep them on track.
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A business and social relationship is preferred. This is a crisis-related trust issue. The better they know their advisors on a personal level, the greater the trust and stronger the relationship.
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They will accept an offer for a second opinion on their finances if they encounter an advisor making such an offer whom they trust on a personal level and respect on a professional level. Conveying this level of trust and professionalism requires seamless sales skills.
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Today's affluent listen to the opinions of people they trust and respect, most notably family members, friends, colleagues, and other professionals. Making a good first impression on those groups is essential for positive word-of-mouth.
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Strong resistance to traditional marketing initiatives. Because investors are on guard against sales practices, traditional brochures are perceived as sales material, seminars as a buyer-beware sales pitch, and traditional television advertising as misleading. Marketing to today's affluent is all about relationships.
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Even though many have multiple advisors, they want a “go-to” primary advisor. The challenge for advisors is to re-position their services as this holistic financial professional.
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Decisions are made on their timeline. The sales cycle is longer when prospecting today's affluent, but the rewards are much greater. Loyal affluent clients will help an advisor by taking him into their centers-of-influence. Advisors must be patient since relationship marketing can't be rushed.
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Hidden fees are a mortal sin. Why? This is a trust issue. Today's affluent want full disclosure, but they will pay for value received.
Matt Oechsli is author of Building a Successful 21st Century Financial Practice: Attracting, Servicing & Retaining Affluent Clients. oechsli.com.
