The ability of financial advisors to explain their expertise and recommendations in a way that resonates with affluent clients is known as framing. Financial advisors can take different approaches to framing, and one of them is predicated on high-net-worth psychology.
“High-net-worth psychology can enable financial advisors to more powerfully connect with the wealthy,” said Brett Van Bortel, director of consulting services at Invesco Consulting. “This results in greater conversion of prospects to clients, greater client retention and the ability for premium pricing.”
The following are the nine high-net-worth personalities:
• Family Stewards are motivated by the need to protect their families over the long term.
• Phobics are people who—although they are wealthy—dislike thinking about money.
• Independents include people whose primary objective in accumulating wealth is to achieve financial independence and the accompanying security.
• The Anonymous are typified by their deep-seated—and sometimes irrational—need for privacy and confidentiality in all of their financial, as well as selected personal, dealings.
• Moguls are motivated to accumulate more and more wealth in order to achieve personal power (and, by extension, influence if not control).
• VIPs are motivated to accumulate assets and utilize their wealth, in part to achieve greater status and prestige.
• Accumulators seek to accumulate wealth out of an overriding concern for personal financial well-being.
• Gamblers believe their skills and competence will protect them from all significant threats.
• Innovators believe their analytical capabilities will sustain them and protect them from external threats.
Consider the following examples of how to talk about the need for retirement planning with three entrepreneurs:
• For a Family Steward: “By thinking longer term we can take all your assets into account—including your business—and make sure you will have the monies you need when you retire. It’s going to be very important to take into account how you want to be able to help your family financially—your top concern when you think about no longer running the business.”
• For an Independent: “By taking the approach to retirement planning we’re talking about, you’ll be able to pretty much retire early and live the life you want. You’ll be set and not have to be dependent on anyone.”
• For a Phobic: “As we discussed, in your situation putting a top-of-the-line retirement plan in place is probably a good idea. Why don’t I spearhead the project with your CFO and your accountant? You won’t have to do a thing until we’ve determined the best plan for you and your company.”
“There’s no question that high-net-worth psychology has proven exceedingly effective in enabling financial advisors to communicate the value of their expertise to the wealthy,” Van Bortel said. “While the underlying nature of the services and products do not change, when financial advisors connect their expertise to the core motivations of a the wealthy, this very often motivates them to take action.”
Framing is increasingly an essential skill for financial advisors, and it differentiates them in meaningful ways. Most importantly, framing helps affluent investors better understand the value financial advisors are delivering.
Russ Alan Prince, president of R.A. Prince & Associates, is a consultant to family offices, the ultra-wealthy and select professionals.