Millionaire clients seeking fresh advice

(June 11, 2004) Financial professionals shouldn’t have to look far to find millionaire prospects, a new survey from Taddingstone Consulting Group suggests. The Toronto-based firm says nearly 25,000 Canadian millionaires are on the lookout for a new financial advisor every year.

The study also found that while full-service brokers remain the dominant investment advisor to the millionaire segment, only 55% of clients said they were satisfied with their broker. As well, just over 40% of the millionaires polled said they now trust their own financial skills more than those of their primary financial advisor.

Keith Sjogren, leader of Taddingstone’s wealth management practice, says there are definite opportunities for advisors who can offer the right value proposition to the affluent.

He says the millionaire market is growing by about 30,000 per year and many millionaires don’t want to concentrate on just a single supplier of financial advice and are willing to share their business, he says.

“The advice I’ve given to advisors is be prepared and develop a very clear understanding of what the millionaire wants. As economic circumstances change, their attitudes change as well. Some of the advisors don’t do enough listening, they do too much talking,” he says.

Advisors should also consider brushing up on their knowledge of alternative investments. Taddingstone found a rising interest among millionaires in products such as hedge funds, real estate and private equity. Hedge funds, in particular, are becoming a mainstream holding of the affluent, especially higher risk-taking segments such as entrepreneurs.

“It’s critical that advisors don’t just represent the traditional investment categories. If somebody wants to be the main financial advisor to a millionaire, they’ve got to go well beyond their RRSP. If they don’t, they just become a supplier and it’s much easier to sever a relationship with a supplier than it is with a key advisor,” he says.

Sjogren says millionaires are realistic in that they don’t expect their advisor to be an expert in every area, but they do expect them to know who to turn to for specialized advice. Millionaires favour experts, he adds, so the planner or advisor who hasn’t committed to focusing on the affluent will have a much tougher job.

“If your mainstream client list is made up of school teachers and shop owners and you’re also trying to hunt down the very wealthy, you’re not seen as an expert by the wealthy. You’re just somebody selling investments, you’re seen as a generalist,” he says.

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Martha Heighington, a director at Taddingstone, warns that while there are opportunities, the competition for millionaire clients is heating up. “The number of investment advisors in the market is outpacing the number of millionaires and that trend will continue. As a result, there is some dilution in the quality of advisors out there,” she says.

Heighington also notes millionaires themselves are providing some of that competition as they are becoming more competent in managing their own assets. “The change to self, instead of the full-service broker or private banker, has increased from a couple of years ago. Advisors need to earn back [millionaires’] trust,” she says.

Heighington says there are also opportunities for advisors who specialize in niche segments, such as entrepreneurs who own investment property or collect art. “If people are spending more time customizing their offer, they’ll be rewarded with increased share of wallet,” she says.

While many millionaires are willing to consolidate their assets with a single service provider, only 27% have taken that step, the survey revealed. One-third of respondents said they were concerned about limited objectivity of only having one advisor and the potential disproportionate focus on proprietary products.

Taddingstone compiled its findings from more than 700 16-page questionnaires submitted over the past three years by Canadian households with investable assets of $1 million. It also conducted panel discussions with hundreds of other millionaires across the country.

Geoff Kirbyson is a Winnipeg-based financial services writer.

(06/11/04)