So what makes the high net worth client different from the average client? Because of their financial situations, these clients tend to have much more complex needs than do lower income clients. Hence, the adviser working with wealthy clients needs to possess a high level of awareness and knowledge related to insurance, investment, income tax, retirement, and estate planning techniques that are of concern to those of high net worth and often not covered in other financial planning education programs.

Advisers to high net worth clients also need to be team players, as a high net worth client is likely to have a CPA, a lawyer, and/or other professional he or she is already using. As a PriceMetrix study of wealthy clients (2013) concluded: “…high net worth investors tend to spread their investments among account types and advisers.” Only 28% of wealth advisers consider themselves to be the primary adviser for their client. This is particularly true of younger clients, who more often use multiple advisers. It is important in these team situations to be able to determine when to take the lead and when to defer to another specialist.

These clients may also have complex family dynamics in which family members do not agree, as well as possibly some negative money behavior having been learned. Therefore, an understanding of behavioral finance is a must for advisers working with these clients.

On the technological front, these clients are likely to be tech savvy and may have digital preferences for contact, especially with those clients likely travelling frequently. You may need to be linked through Facebook, Twitter, and LinkedIn, among other platforms. Of course, the adviser of wealthy clients should ask and be prepared for meeting their clients’ needs through methods preferred by those clients; these preferences often vary by age of the client, with younger clients, naturally, more predisposed to using digital means for contact and account access. Polished presentations are also necessary to concisely and professionally present to high net worth clients.

The PriceMetrix study also found that “seventy five percent of high net worth clients were high net worth from the very beginning of their relationship with their adviser.” This means that advisers with high net worth clients largely have clients that they gathered, not clients they had who grew their wealth during the adviser’s relationship with them. Though needing fewer clients with the larger number of transactions with a wealthy client, advisers need to keep the clients they have and seek new and younger clients as well. One strategy is for an adviser to work with the adult children of a wealthy client, well before those children reach the level of wealth in which the adviser normally works.

Interestingly, those advisers with several high net worth clients have fewer small household clients than other advisers. Keeping small household clients to no more than 40% of the client base is key to having time and energy resources to care for high net worth clients. In addition, discounting adviser planning fees was not found to be a factor in attracting and keeping high net worth clients. The concluding key findings of the PriceMetrix study include:

Developing trust in a relationship with a wealthy client is a key to success. Working against general mistrust of the financial industry, wealth advisers must always act in the client’s best interest and follow any regulations regarding general fiduciary standards, and that of the AWMA designation and any other designations or certifications the planner has obtained. Figure 1 outlines the Wealth Adviser Financial Planning Process, an enhancement of CFP Board recommended steps for financial planners. As seen in the chart, wealth advising entails particular processes applicable to high net worth clients.

Following this process will help ensure that you are developing trust and acting in the best interest of your high net worth client.

Author: Cindy Shnaider, MSF

Cindy Shnaider, MSF is an associate professor at the College for Financial Planning. After earning her master’s degree from the College, Cindy began developing and teaching finance and financial planning courses in the College’s graduate degree program, and has continued to do so for over five years. Some of those courses include advanced corporate finance, behavioral finance, and portfolio management. You can contact Cindy at cindy.shnaider@cffp.edu.

Complexity Level: Intermediate