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Advisors Target the Merely Rich Instead of the Really Rich

Troels Graugaard | E+ | Getty Images

The Holy Grail for most financial advisors are ultrahigh-net-worth clients—often defined as households with at least $10 million in investable assets. The fact is, though, it's an intensely competitive market that's not for everyone.

More accessible are affluent-to-high-net-worth clients, with $500,000 to $2 million to invest. But what's the best and most effective way to reach that group? Many advisors are asking that question, for a number of reasons.

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For one, there are far more affluent than super-rich prospects. At the end of last year the number of households worth $25 million or more was 117,000, versus about 9 million with at least $1 million, according to Spectrem Group, a Chicago consulting firm.

The very wealthy are difficult to deal with, as well. They tend to demand a lot of handholding and an array of complex services, from in-depth estate planning to customized reporting—tasks that can require perhaps "twice as much time, or more" than serving a merely affluent individual, said Brian Lauzon, managing principal at AdvisorAssist, a consultant in Pembroke, Mass., that specializes in financial services.

"The $10 million client wants more concierge services," said Mark Snyder, who heads Mark J. Snyder Financial Services in Medford, N.Y., and whose 200 clients largely fall into the $500,000 to $2 million category. For instance, he said, when clients need guidance on estate planning, he sends them to an attorney he's vetted rather than have someone with that specialty on his staff.

Nonetheless, serving that market has challenges. It's still vital to have a certain number of contacts with clients each year, including in-person meetings. Existing accounts are perhaps the best source of referrals—and face-to-face contact is an important part of any effort to encourage them.

"I know the more people who come in for reviews, the more referrals I'm going to get," said Marc Massari, a first vice president and advisor with Raymond James & Associates in Rolling Hills Estates, Calif., who focuses on affluent and high-net-worth clients.

Advisors can also expect to spend more time with clients at the wealthier end of the spectrum, which will include more meetings and perhaps other activities. Snyder hosts an annual dinner dance for all his clients and a year-end brunch at a French restaurant for his top accounts.

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Some advisors increase the efficiency of their client contact through technology. Massari holds half-hour monthly conference calls for clients on topics such as the Federal Reserve or refinancing.

"They offer my clients the ability to hear my voice while they're driving home from work," he said. They also provide a way to head off a spate of worried phone calls after a troubling event. After the 1,000-point market "flash crash" in May 2010, Massari anticipated his clients' concerns and held a conference call to explain what happened and answer questions.

Perhaps the key to using an advisor's time efficiently is managing expectations from the very first meeting. That requires first determining what services the advisor should provide and which will be delegated to staff members.

"You must define the elements of your service model for yourself and the client," Lauzon said.

Take Colleen Schon, senior vice president of investments with Raymond James & Associates, in Clarkston, Mich., specializes in clients with assets in the "$1 million range." About eight years ago, she analyzed her strengths and pinpointed the tasks for which she was best-suited and those she wanted particular employees to take over.

Schon now give all new clients a document explaining services, including what she provides personally (portfolio management, for instance) and contact information for staff members for help with other tasks (insurance paperwork, etc.). "I spell it out," she said.

Of course, part of the process also requires deciding which services clients will receive. That generally means dividing accounts into categories according to criteria such as net worth and whether they provide referrals.

Schon phones her $500,000 to $1 million clients quarterly, with once-a-year meetings, and contacts the $1 million-and-over crowd monthly. She also holds an annual face-to-face portfolio review. "It comes down to making your clients, no matter who they are, feel important," she said.

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