Growing Competition For Wealthier Clients

In a related vein, about nine out of 10 of the financial advisors identify the affluent (those with investable assets of $1 million or more, or individuals with a net worth of $10 million or more) as preferred clients. This is characteristic of financial advisors regardless of the business model they have adopted.

As they all try to concentrate on the wealthy, competition among financial advisors is intense (something reported by almost nine out of 10 of those surveyed). More than 90% of investment managers, 84% of wealth managers and four out of five financial advisors in multi-family offices feel this way. 

When we dig deeper into the data, we find a direct relationship between the range of services offered and the perceived level of competition. Being able to proficiently deliver a sleeve of high-quality services desired by the wealthy can be a distinct competitive advantage. This regularly enables financial advisors to address things besides money management. Also, it can be very appealing to the wealthy if the advisor can deliver a broader range of solutions than peers can—especially to the ultra-wealthy.

While the “ideal” clients for financial advisors are affluent, the question becomes: “How wealthy are the affluent?” For many advisors, the super-rich (those with a net worth of $500 million or more) are out of their league.

The Super-Rich Are Likely To Be Poor Clients For Many 

The ranks of the super-rich are expanding, and four out of five of those surveyed are very or extremely motivated to work with them. Such clients have significant assets to invest, are regularly looking for legitimate ways to reduce their taxes and are very good referral sources.

But several things offset these advantages. The super-rich, through their family offices or more directly, are strongly inclined to negotiate the costs of services and ask advisors to compete for their business. They might very well have hundreds of millions, if not billions, to invest, but the investment management fees are often more in line with those of institutional investors and can even be lower.

Another problem is gaining access to them. While there are proven methods (content marketing and street-smart networking) relatively few financial advisors are effectively employing these processes.

The super-rich can be very demanding clients. While they might not be the best clients for the amount of fees charged, in gross dollars they can be astoundingly good sources. But the way they often approach business situations can make them difficult for many advisors to work with. Being able to deliver both exceptional expertise and service is always a requirement. Thus, your operational efficiency is essential, or little of the revenue will make it to your bottom line. 

Despite the appeal of ultra-high-net-worth clients, some advisors will not be able to gain access to them or profitably work with them. But those advisors that truly understand this segment and can provide high-caliber financial solutions will find the super-rich to be remarkably lucrative clients. 

What is critical is that an advisor adopt the business model that works best for him or her. 

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