NEW YORK — Insurers are launching marketing blitzes to win the investible assets of the wealthy, but many will fail because they don’t understand how rich people think, some consultants say.
NEW YORK — Insurers are launching marketing blitzes to win the investible assets of the wealthy, but many will fail because they don’t understand how rich people think, some consultants say.
The wealthy can’t be “prospected,” said Neal Baumann, a partner who specializes in private banking at Deloitte Consulting LLP in New York.
Prospecting, a skill taught by insurers, is a numbers game in which agents “seek people who might want to talk to them,” said Mr. Baumann, who noted that the wealthy are hunted through relationship networking and introductions at local clubs, private schools and other places.
The “true high-net-worth” gravitate to firms with brands synonymous with wealth, such as The Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc., both based in New York, noted Sunny Patpatia, president of Patpatia & Associates Inc., a Berkeley, Calif., consulting firm.
Changing names
Definitions of “wealthy” vary, but a minimum of $10 million in investible assets is a standard benchmark, consultants agree.
While the rich won’t hesitate to buy insurance from insurance companies, they may balk at entrusting them with asset management, investments and other financial services, the consultants said.
For that reason, many insurers have nixed the word “insurance” from their names, noted Mark Halverson, senior executive in the capital markets practice with Accenture Ltd. of Hamilton, Bermuda.
“Insurance” in a name can be a “brand inhibitor,” because it “typecasts” the company, Mr. Baumann said. Insurers “protect” things — whether income or property — and that marketing ploy doesn’t resonate with the wealthy, because they don’t view themselves as needing that kind of protection, he added.
That is why the “protect your income” approach that life insurers use to sell retirement products to middle-income and mass affluent baby boomers won’t work with the wealthy, Mr. Baumann said.
Many agents have also modified their professional identities — becoming “financial advisers” or “financial planners” — to downplay the fact that an agent represents the insurer, according to Mr. Halverson.
But name games may not be enough to entice the wealthy, because the rich generally don’t believe in one-stop shopping for financial services, Mr. Patpatia said.
“The wealthy like to distribute their assets — they buy insurance from one company, asset management from another, trust services from a third, and so on,” he said.
“Rich people are extremely demanding regarding service,” Mr. Baumann said. Insurers that provide service through call centers and bureaucracies won’t meet those expectations, he noted.
Also, some insurers don’t understand that the wealthy are even more price sensitive than less affluent clients and are more likely to switch companies when they get a better offer, Mr. Baumann added.
“Wealthy consumers expect a great customer experience — regardless of the selling channel,” said Milton Pedraza, chief executive of the Luxury Institute LLC in New York. Quick problem resolution is also important to them, he added.
Making inroads
Despite the obstacles, some insurers are successfully marketing investment wares to the wealthy.
Northwestern Mutual Financial Network in Milwaukee, as well as The Guardian Life Insurance Company of America in New York — despite its insurance moniker — are viewed as among the most successful in attracting wealthy clients, consultants say. Northwestern Mutual is better positioned than competitors, because it uses third-party marketing channels in addition to its own sales force, while Guardian has made a name for itself in trust services.
“Other insurers have penetrated the wealthy-consumer market by operating asset management firms that have established brands in their own right,” Mr. Patpatia said. Clients may not even associate these firms with the insurance company owners, he added.
Some insurers have attracted the wealthy by developing niche products, such as “private placement” insurance, said Alan Jensen, a partner in Portland, Ore., with the law firm Holland & Knight LLP of Tampa, Fla. These products permit the wealthy to invest in hedge funds while obtaining the favorable tax treatment of insurance products, he noted.
One way for insurers to jump-start their share of wealthy investors, according to Mr. Baumann, is to recruit marketing executives from other industries. Banks, he noted, have been “much more entrepreneurial” than insurers in marketing investments to the wealthy.
