Investors with up to $5 million in investable assets tend to be the most difficult to convince that they require a financial advisor because they are accustomed to doing most of their savings on their own, according to new research published by Berwyn, Pa.-based Envestnet | PMC.

“If an advisor is more equipped to have the right tools and subject matter experts on their team to engage high-net worth investors, then that’s going to be a better experience for the client,” said Michael Featherman, head of Investment Consulting and Distribution at Envestnet | PMC.

The research, which was gathered through an online survey of almost 430 investors, divided them into three groups. The first is what the firm referred to as the millionaire next door. Those individuals, usually white-collar workers, have $1 million to $5 million and have been mostly savers their entire life having invested most of their money in passive accounts without the help of an advisor.

The challenge for advisors with this group is trying to convince them they need an advisor, according to Featherman. It is the advisor’s job to prove their worth to those potential clients, he added.

The second group are the mid-tier millionaires who are generally small business owners with $5 million to $30 million in investable assets. They have taken more risk to get to where they are and thus more open to institutional portfolio management and risk-based investments because they’ve taken the risk in their business, Featherman explained.

Advisors looking to serve that segment will have an easier time convincing them that they need an advisor, but Featherman pointed out that they need to come to the table with more than just asset management. They need to either have access to or offer services including tax planning, estate planning, among others, as well as willing to work with private assets and know how to incorporate them into the overall investment.

“Coming with this kind of offering of services and being able to articulate them becomes critical for going after that [$5 million to $30 million] segment, which is the most under-served segment,” he said.

The final and most competitive group is the ultra-high-net worth investor. They are entrepreneurs who have either sold or run multiple businesses. Given their asset level, they are looking for more sophisticated investment management, Featherman explained.

In terms of investments, they are looking to reduce downside volatility and want illiquid investments and cash flow protection. They are also seeking the same non-investment services that appeal to the mid-tier millionaires, but on a much more complex level. 

“It becomes a multifamily office kind of look and feel for what the advisor needs to have in order to complete in that space,” Featherman said.

The firm's research also divided the wealth segments by generation, so advisors understand what each one needs. For instance, baby boomers, who hold more than half of the total wealth in the U.S., pioneered the buy now, pay later mindset and therefore may have more debt to contend with.

Generation X is also facing heavy debt from school loans but is also facing major expenses including purchasing a new home, a new car, and saving up for their children's education, the firm said.

Meanwhile millennials and Generation Z are better savers than their parents' generations and are looking for opportunities to save where they can. 

The firm is making the research available to the more than 100,000 advisors it works with in the hope that those looking to expand their business into the next tier will understand the work required, Featherman said.

“For advisors looking to enter the HNW space or grow their book of HNW clients, we created practice management and thought leadership content to help these advisors better understand, attract, and retain today’s diverse group of HNW individuals,” Featherman said.