Not all financial advisors are interested in building a practice with the wealthy. So take a moment to consider how important affluent clients are to your business success. If they are indeed important, take another moment to consider how difficult it is to build a robust high-net-worth practice.

When we address these issues in surveys of financial advisors as well as other types of professionals working with individuals and families, we always find that the affluent are the ideal and preferred clients for the most successful professionals and those looking to fast-track to ever greater pecuniary achievements.

This is not at all surprising. When we “run the numbers,” we find it’s necessary for advisors to have a solid book of affluent clients in order to generate the revenues needed to create meaningful personal wealth.

The Value Of The Affluent
When it comes to the affluent, the math on the asset side of the profit and loss statement is pretty simple. Based on decades of research with the range of wealth from the lowly millionaire to the super-rich (net worth = $500 million or more), their value to various professionals can be simplified as follows:

• The affluent usually have greater financial and professional services needs and will likely need ongoing assistance and expertise. Overall, the affluent are going to use a broad range of services and products, and they’re going to use many of them consistently (e.g., money management) or repeatedly (e.g., tax planning). Furthermore, as their lives change—a given—their use of services and products should need adjustment, which means more business opportunities for a broad spectrum of professionals. Consequently, the affluent provide financial advisors with the potential for greater revenues initially and, in many cases, continuously.

• The affluent have the financial wherewithal to acquire the services and products they deem worthwhile. While the less economically endowed might have many of the very same needs and wants of the wealthy, it’s the well-to-do who can afford the quality know-how and deliverables provided by financial advisors as well as a diverse range of professionals. In effect, they have the financial resources to pay—and pay well—for expertise.

• The affluent have more extensive networks and are more likely to have strong influence within their networks. It’s the nature of wealth to directly and indirectly productively connect with others. In studying the wealth-creating mind sets and methodologies of self-made millionaires, we regularly find their facility at strategically networking to be a major factor in their success. In adroitly working with the affluent, financial advisors can position themselves to financially benefit from the relationship capital they’ve created.

Taken together, when we do the economic calculus, affluent clients generate a disproportionate amount of revenues compared with those less prosperous. Again, compared with those less well-heeled, they also provide superior means to increase the client base of financial advisors with high-caliber referrals. Together, this can result in you building a substantial and very profitable practice.

Let’s now briefly consider some issues on the liability side of the profit and loss statement:

• The affluent can be demanding clients. The wealthy usually recognize their value to the professionals they employ. In addition, they’ve often achieved their stature because they can focus the efforts to get what they want. For financial advisors, this means they can be difficult clients. There’s no question that financial advisors commonly need to have a very high-quality, proactive and responsive capability to work effectively with many of the wealthy.

• The affluent can be “cheap.” This is an all-too-common complaint among many professionals. Yes, some of them are cheap and will not pay for talent, knowledge or skill. However, most want “value” for their money, and many professionals, more often than not, fail to communicate the value they provide, leaving the wealthy to see only the cost. When financial advisors effectively communicate the value they provide and not just what it costs, they usually find the wealthy willing to pay appropriately.

• The affluent can be highly selective when it comes to the financial advisors they choose to work with. With so many financial advisors targeting the affluent, the wealthy can, if they choose, comparison shop. While there are some astoundingly effective ways to access the wealthy, such as sourcing them through centers of influence and by proactively generating high-quality client referrals, financial advisors need to be effectively positioned and adept at various business development approaches to win over wealthy prospects.

When you add up everything, it’s fair to say that building a highly successful practice predicated on affluent clients is not easy, but it can be tremendously rewarding.

Everyone In The Pool
In study after study, “sourcing new affluent clients” is almost always the No. 1 business concern of leading professionals—including financial advisors. This means you’re in the middle of a hyper-competitive environment.

One obstacle advisors are likely facing as they try to build their affluent clientele is the increasing overlap of services and products offered by various professionals. There was a time that investment advisors provided investments, life insurance producers provided life insurance and accountants restricted their services to accounting and tax advice, and so forth. Those days are gone. The ability of various professionals to deliver a wide array of expertise is more and more the norm. Moreover, a holistic approach is also a particularly attractive model for many of the affluent, as evidenced by the enormous appeal of multi-family offices.

With intense and intensifying competition, how do financial advisors gain the advantage? One fundamental characteristic you need to embrace—heart and soul—is being client-centered.

Client-Centered Professionals Financially Excel
What’s fascinating is that from a strictly financial perspective, there’s a dichotomy among professionals whose practices rank as the most successful. One type of practice is considerably more profitable, at least in the short term, but it’s the one you absolutely, incontrovertibly must avoid: the practice of the devious financial predator. The reason this practice is so profitable is that the only thing it really sells is vaporware. There are no real operational costs, so just about everything save “marketing expenses” goes to the bottom line—more precisely, into the pockets of the predators.

Financial predators are delivering a fantasy. Their success is generally based on skillfully conceived mendacity and misrepresentations. Financial predators have proved to be very capable in sourcing new wealthy clients. It tends to be relatively easy, as they can make outrageous promises—reality is not in the least bit a limitation. To find new clients, they must simply find somewhat gullible affluent individuals who buy in to their deceptions.

Client-centered financial advisors, in stark contrast, are put in check since they only engage in lawful activities and bright-line transactions. But those with a strong business development focus are the most effective legitimate professionals sourcing new affluent clients. By and large, financial predators can’t maintain their endeavors. While they’re very profitable at first, in time they’re highly likely to implode. When they do, their house of cards falls down.

Client-centered financial advisors, on the other hand, can build high-net-worth practices that go on indefinitely. They persist and expand because the welfare of their clients is the primary objective. Over the years, they create more in aggregate personal wealth than financial predators do.

We bring financial predators into the discussion because they’re the only ones who have the potential to build bigger high-net-worth practices than sincere, client-centered financial advisors, if only in the short term.

Conclusion
There’s no question that, by and large, competition for affluent clients is extreme. Even though there are more of them, and they have more wealth, the competition is going to get worse as the industry faces technological disruptions and specializations become blurred. It’s just going to get harder for most advisors to do very well economically. But that need not be your problem. There are still a number of systems and methodologies you can use to create and grow an exceedingly profitable practice with the affluent.

Russ Alan Prince is president of R.A. Prince & Associates Inc. and executive director of Private Wealth magazine.

Brett Van Bortel is director of consulting services for Invesco Consulting, the sales consulting group within Invesco Distributions Inc. The opinions expressed are those of Russ Alan Prince and Brett Van Bortel, and are based on current market conditions and subject to change without notice. These opinions may differ from those of other Invesco investment professionals.