How to access the high-net-worth space

Advisers who want to move upmarket should educate themselves about such topics as tax optimization, income planning and estate planning

Feb 7, 2018 @ 12:15 pm

By Michael Kim

As industry pressures intensify for advisers, high-net-worth investors represent a "sweet spot" given their substantial investible wealth, which can provide a great boost to advisers' businesses.

However, competition is steep: while 13 percent of advisory firms report an increased focus on high-net-worth clients, those with $1 million or more in liquid assets, they may not realize that this demographic accounts for less than 1 percent of the overall U.S. population. Competition for this slice of wealthy clientele is not expected to diminish, so it is important that advisers master the range of skills necessary to serve high-net-worth investors, set themselves apart and move upmarket.

Confidence Is Key

To begin tackling the transition into the high-net-worth space, advisers must feel confident in their abilities to address this demographic's unique range of needs.

Many advisers are already well-versed in the financial planning needs of the mass affluent, leveraging investments, insurance, cash flow or goal-based strategies and more to craft comprehensive financial plans.

However, advisers often feel less empowered approaching high-net-worth clients' specific, nuanced needs, which include additional dimensions such as tax optimization, income planning and estate planning.

Given that confidence is a function of expertise and knowledge on a topic, seeking high-net-worth-centric education through personal research and conversations with peers and third-party experts in the field will help advisers gain the self-assurance needed to venture upmarket.

Working with high-net-worth clients requires a more technical knowledge base than planning for the mass affluent, so it's even more critical for advisers to have a comprehensive understanding of topics such as the legal implications of a generational wealth transfer, the technical aspects of responsible investing, and the ways in which different types of trusts can be created to meet a high-net-worth family's specific tax goals, to name a few.

(More: 8 top tax and estate-planning tips)

'General Contractor' Model

Attracting, retaining and best serving high-net-worth investors also requires that advisers reimagine their typical perception of the role of a holistic planner.

Many mass-affluent advisers may not be familiar with the ultra-high-net-worth "general contractor model" in which a family's financial adviser is expected to serve as a point person for every aspect of their financial lives. Just as a typical general contractor coordinates with electricians, engineers and plumbers to build a functional and seamless home, a financial adviser for high-net-worth individuals must oversee accountants, attorneys, property managers and insurance agents to holistically manage their clients' unique needs.

This may seem overwhelming — but advisers can take the first steps in this direction by offering existing, trusted clients the service of aligning their checking accounts, mortgage products and lines of credit with their larger investment goals to become more comfortable with acting as a "financial hub" and collaborating with external agents and vendors.

(More: Personal client communication shows your value)

Expand Product Offerings

Finally, advisers must recognize that there are certain products and strategies that are more germane to high-net-worth clients than mass-affluent clients, and ensure that they have access to these offerings to provide the best service possible.

For example, while mutual funds and other "pooled vehicle" types of portfolios are a popular and efficient way of meeting clients' goals at the mass-affluent level, these strategies won't necessarily have proper impact upmarket. Instead, advisers should leverage individual equities, individual bonds, tax overlay strategies and other alternative investment positions to provide customization and liquidity to meet the high-net-worth investors' needs.

By leveraging these strategies for moving upmarket, advisers can cement their expertise with high-net-worth clients while growing more confident in their abilities to serve this client group. Success breeds success — if advisers can demonstrate their unique value to high-net-worth clients, they will facilitate the success of their own businesses for the long term.

(More: Tax reform creates opportunities for advisers)

Michael Kim is executive vice president and chief client officer at AssetMark Inc., an SEC registered investment adviser.


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