Improve relationships or risk losing wealthy clients, advisors warned

(March 25, 2003) The love affair between advisors and high net worth (HNW) clients is ending, according to one speaker at the 83rd annual Ontario Sales Congress of the Peel Institute of Applied Finance in Toronto. But there are opportunities for advisors to build a fence around their affluent clients by developing true partnerships and meeting heightened expectations, says Paul Allan, head of Mackenzie Financial’s Private Trust Group.

“About 30% of high net worth relationships are in jeopardy,” Allan told a roomful of advisors last week. He calculated this number from results of recent millionaire surveys. A Taddingstone survey for example, asked 400 millionaires if they had fired an advisor in the previous year. Ten per cent of respondents said yes. Another 22% said they were unhappy with the relationship they had with their advisor.

Though many advisors recognize the opportunity, Allan says many don’t understand the HNW market. HNW investors have also acknowledged this disparity as many surveyed by Taddingstone identified themselves as primarily do-it-yourself investors. “Advisors are not meeting client needs or even understanding those needs,” explained Allan.

Tips on how best to address the HNW market, can be found by looking to the U.S., said Allan, who referred to an Advisor’s Edgecolumn by Nick Murray, which noted that Canada lags behind the U.S. by 12 to 18 months.

U.S. surveys suggest HNW investors are looking to partner with their advisors. “They want a relationship manager with sound expertise,” Allan said. “They want to the advisor to have knowledge as to how they can best manage, protect and grow their family wealth.” Often advisors only focus on the individual rather than the family, Allan added.

For the wealthy, a cut above is the base expectation, said Allan. “It’s mandatory to have structured, predictable communication.” In the U.S., HNW investors demand to be involved in the process, Allan added. There is a power shift from dealers to advisors as millionaire clients also want impartiality and objectivity — meaning that as a term for doing business, proprietary products must be put on the same shelf as independent products.

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However, HNW clients will also blame their advisors for items they have no control over — such as investment performance. “You have no control, but you are responsible anyway,” Allan explained. He suggested the best solution is to communicate to the client that you are paying attention to the portfolio and ready to act, if need be.

For services the advisor can control such as hours of operation, speed of response, frequency of proactive communication and depth of execution, millionaires expect top-notch treatment. “HNW expect extended hours, that you will be able to respond when they need you and that you will have the complex solutions they need for the portfolios.” They also want to be contacted by their advisor frequently — where quarterly communication might be the norm for average investors, millionaire clients want to be contacted at least once a month.

Allan expects that Canadian HNW clients will soon be seeking the same level of service, “so why not get a head start before they start asking for it?” There will be a million Canadian millionaires by 2010, Allan noted. Opportunity abounds for advisors who can crack the Canadian HNW market and provide the service that the wealthy expect.

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Check out March’s Advisor’s Edge for columnist Thane Stenner’s column “The spirit of ‘co-opetition'”. Stenner’s column “True Wealth” appears nine times a year in Advisor’s Edge where he discusses how advisors can better attract and service the high net worth. Click here to read Stenner’s February column called “Service first.”

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What strategies do you use to attract and retain HNW clients? Are they more demanding than your other clients? Any advice you’d like to share with your fellow advisors about meeting the needs of the affluent effective? Post a message to the “Free for All” forum of the Talvest Town Hall on Advisor.ca on this topic or any other that affects your industry.

Filed by Jennifer McLaughlin, Advisor’s Edge, jmclaughlin@rmpublishing.com

(03/25/03)

Jennifer McLaughlin