Refining Your Firm’s Approach to the High-Net-Worth Market

Firms enjoying success with this sought after wealth tier ($5-25 million of investable assets) are doing so only after investing years of effort with a lot of refinement and focus. While small in number relative to households in general, the 920,000 HNW households in the U.S. represent a significant share of opportunity in terms of investable assets and financial advice needs. Once the domain of major “brand name” institutions, HNW clients are increasingly attracted to independent providers. Owners of independent advisory firms that target HNW investors can expect to generate income well above that of their peers.

Key Considerations

To successfully accommodate HNW clientele and reap these rewards largely depends on how well the firm is equipped with the following:

  • Well-defined value proposition—Defining what it is the firm will be known for and how it will best provide valued outcomes for targeted clients is important for any firm. This becomes absolutely critical for success when a firm is working within the HNW tier. Clients can be demanding, with nearly limitless needs for advice and assistance. The value proposition, working in combination with the firm’s growth strategy, helps to economize scarce firm resources by setting boundaries with regard to who the firm will work with and what will be provided.
  • Solutions and servicing that specifically addresses HNW needs and preferences—In general, HNW clients expect customized solutions, exclusive products, and timely responses to inquiries. Specific services that are occasionally made available to less affluent clients become mandatory for HNW clients. This includes support related to estate planning, investment consulting, charitable giving, and trusts, as well as private banking solutions that optimize management of a client’s entire balance sheet.
  • Elite-level staff—HNW-focused firms tend toward more experienced and credentialed team members. Roles are more specialized as well, often including attorneys, accountants, investment analysts, and dedicated managers. Across all positions, team members are deeply service-oriented.
  • Operations and technology that efficiently meets demanding requirements—For HNW servicing, a firm’s operational infrastructure is critical for meeting demanding needs in the most efficient way possible. The best systems smoothly integrate the flow of data and processes, minimize errors, provide flexibility for customization, facilitate timely results, and enhance the client experience.
  • Pricing that ensures profitability and accurately communicates value received—HNW clients expect more from their advisors than less affluent clients. Furthermore, these demands can vary greatly from client to client. As a result, HNW pricing requires careful evaluation and structure to ensure that each client relationship is a profitable one and that charges best reflect the value proposition of the firm.

Making the Transition

Thoughtful planning can greatly ease the challenges in adapting a firm to accommodate more affluent clients. When charting a specific course of action, firms would be well-served to prioritize the following four recommendations:

  • Narrow your focus. The HNW wealth tier sets boundaries around who the firm serves, but it is not a market niche. While affluent clients do have service-related commonalities, those firms that are truly successful recognize the need to cater to a particular HNW client type. Identifying a narrow market niche within the HNW wealth tier, in addition to distinguishing the firm from competitors, helps to limit the expertise and resources the firm will require for success. Focus is especially important for firms with limited scale that are least prepared to “be all things for all clients.”
  • Enlist external providers. HNW service expectations are high, yet few firms have the scale and resources to directly address all client needs. Firms should not feel compelled to directly solve every client problem, but they do need to provide a qualified and vetted referral for a professional that can. The most successful HNW-focused firms maintain a cadre of related professional service providers they can draw upon to help meet client needs. The smaller the firm, the more important a network of trusted external support providers becomes. If warranted, these services can always be brought “in-house” when greater scale makes it more cost effective to do so.
  • Staff deliberately. Good people are central to success for any advisory firm. This is especially true for those firms serving HNW clients. To develop an elite team that is truly HNW-capable, a firm needs a clear organizational plan. This plan will dictate required roles, responsibilities, and expertise, including a timeline for adding new roles. To better attract and retain valued personnel, firms also cannot overlook the importance of competitive pay and benefits, career paths, opportunities for equity, and a healthy working environment.
  • Be responsive. HNW clients expect issues to be addressed in a convenient and timely manner. Meeting this expectation for responsive service is a function encompassing people, processes, and technology. Relative to other firms, HNW-focused firms require additional investment in all of these areas to ensure requests are met in a timely manner.

In summary, the HNW wealth tier may be small in number but it is rich with assets and opportunity. High-net-worth clients have high expectations, and competition for them is intense. Real potential exists, however, to build success with these clients by refining your firm’s approach to meet their complex needs.

To download a complete copy of What Wealth Wants: Refining Your Firm’s Approach to the High-Net-Worth Market, visit the website of Pershing, a BNY Mellon company.

Pershing is a 2016 FSI Premier Sponsor.


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