Independent advisors were also well represented, though less so at the higher end, because of the perception that they did not have the same access as brokers and were not as adept with such complicated issues as restricted stock.
Accountants, working mightily in recent years to expand their service menu and attract more of their affluent clients' assets, were the only other group in double figures for the executives as a whole. Again, though, they were almost invisible at the higher end, because of the concerns about the depth and breath of their products, services and knowledge. Money managers, concentrated at the higher end, grabbed 12.7% of the wealthiest segment.
Referrals From Co-Workers
When it came to how the executives had found their primary advisor, co-workers and professionals commanded the field. Their fellow executives, of course, had to deal with many of the same issues related to their company stock and would gladly refer an advisor who had helped them out. But the more money the executives had, the less likely they were to rely on such referrals. Indeed, over two-thirds of the wealthiest executives found their primary advisor through a referral from the only other contenders of any consequence, accountants and attorneys.
Centers Of Influence
As we have observed in previous columns, these accountants and attorneys who work with the affluent-"centers of influence"-are an increasingly important source for client referrals. A series of surveys that we conducted in 1997, 2000 and 2003 underscore this trend (Exhibit 3). In each of those three years, we asked hundreds of financial advisors how they had landed their top 20 clients in the previous two-year period. Referrals from clients and from centers of influence dominated to the near exclusion of every other form of prospecting, which never added up to more than 5% of the total.
However, over that period client referrals precipitously declined while those from centers of influence nearly doubled. Part of this shift can be explained by the downturn that gripped the market from 2000 through early 2003. With almost every client having lost money during that time, they were unlikely to be recommending their advisors. Investors instead turned their ear to the attorneys and accountants with whom they worked on estate plans or tax management; in short, who offered them tangible services. Accountants and attorneys also had a better idea of a client's assets and financial needs than friends would-who tells friends their real net worth, after all-and the names they handed on would therefore be more qualified prospects. In addition, they tend to work more with the affluent and are also regularly in touch with those clients. Best of all, we found that they were on the lookout for top-notch advisors to recommend and work with.
Next Steps
Based on our research, financial advisors who want to connect with affluent executives (or who already have them as clients) must: 1) be able to demonstrate a thorough knowledge of strategies for diversifying and tax-efficiently managing stock options, as well as restricted or concentrated stock; 2) make sure they have ready access to a range of products, services and other experts, either through their firm or their professional network; and 3) actively cultivate contacts among attorneys and accountants.
Hannah Shaw Grove is managing director and chief marketing officer of Merrill Lynch Investment Managers. Russ Alan Prince is president of the consulting firm Prince & Associates.