Engaging the HNW investor

Grant Shorten is director of Strategic Insights at Renaissance Investments. This article was sponsored by Renaissance Investments.

According to industry researcher Investor Economics, the number of high-net-worth households in Canada is set to nearly double by 2018. It’s also expected that, by 2018, a whopping two-thirds of all personal wealth in Canada will be controlled by the affluent segment of the marketplace.

The opportunities for the advice channel are staggering, but the competition for these assets will resemble a battleground with clear winners and losers. Investment advisors and financial planners will need to have more than just sophisticated product solutions at their disposal in order to effectively differentiate themselves and capture the attention of the affluent investor. They will first need to gain a deeper understanding of the psycho-emotional makeup of the high-net-worth mind.

Unfortunately, there is still a measurable disconnect between what the advisory community assumes to be true and what the wealthy are actually thinking and experiencing on a day-to-day basis. High-net-worth investors bring with them a surprising set of fears, challenges, dreams, wants and desires.

Ultimately, however, all of these internalized elements percolate to the surface and translate neatly into a set of expectations for their investment advisory team. In my experience, there are five primary ‘demands of the affluent’ that extend out to virtually all of their key business relationships.

Complete objectivity

The affluent are leery of all things investment related—especially following the meltdown of 2008—and are therefore seeking unbiased and conflict-free advice.

When high-net-worth investors evaluate an advisor’s approach, they need to be absolutely certain that the decisions made with their hard-earned wealth will be driven solely by their best interests, unblemished by compromising influences.

Remove any doubt around potential conflicts of interest by openly demonstrating your objective approach to financial planning, estate planning, portfolio construction, and all other aspects of your business practice. You can achieve this by strategically initiating a discussion on the importance of objectivity in your work with your trusted clients, and explaining exactly how your philosophy is implemented on a day-to-day basis.

Full transparency

Investment advisors who successfully build and maintain deep, lifelong relationships with their high-net-worth clients do so by operating with full transparency from the start of the relationship.

Unconstrained openness is the best way to accelerate the rapport-building process, and establishes a free-flowing communication dynamic for many years to come. Wealthy investors understand things like fees, and will pay handsomely for perceived value, but they don’t appreciate hidden costs or unexpected surprises.

Proactively display your ‘see-through’ business model by volunteering the details of your compensation structure, total fee to the investor, client service expectations, and all other potential sources of objection, cynicism or mistrust.

Competitive advantage

More often than not, high-net-worth clients achieved their wealth by creating (or being exposed to) a series of competitive advantages along the way. This is no secret to the wealthy and as a result they are keenly aware of the presence (or absence) of competitive advantages within your business practice. They want to know what makes you special and the definitive edge you will be bringing to the relationship.

Confidently showcase your specific points of differentiation—those critical elements that separate you from the myriad of other professionals who claim to provide a similar service. As you deliver these points to the high-net-worth client or prospect, ensure that you directly and unapologetically address their unspoken question: ‘Why should I do business with you?’

Defined process

The affluent are drawn to the stuff of structure and discipline. As a natural byproduct of their journey to wealth, the high-net-worth investor has come to value the critical importance of a defined process. The wealthy have little tolerance for flimsy, wishy-washy business models and will quickly lose faith in the presence of indecision.

We can take strong cues from some of the largest institutional money managers and private wealth counselors, who have discovered the power of employing a stringent mechanical process in their work with wealthy clients. Become a master of a single-defined process.

Instill massive clarity in the mind of your high-net-worth clients by articulating exactly how your process operates and what they can confidently expect at each stage along the way.

Brilliant service

Due to the complexity of their financial affairs, high-net-worth investors expect more attention from their advisory team than ever before. Virtually all key industry surveys tell us that the top two reasons an affluent investor leaves an advisory relationship is because of poor service and repeated mistakes.

In addition to the most fundamental expectations of regular contact and accuracy of work, today’s wealthy investor hungers for a relationship with a central go-to professional, and seeks holistic advice around more than just investments. The advisor who captures the majority of an affluent investor’s wealth does so by positioning himself as a true guardian of wealth and provider of exquisite client service.

Deliver top-notch service to your elite clients by first discovering what they need and want from you and your advisory team. There are countless definitions of great service, but the only definition that matters to your high-net-worth client is their own. Start with a baseline suite of outstanding service offerings, and then supplement and tailor additional elements based on your client’s unique preferences.

Putting it all together

As the affluent wave continues to gain momentum and the competition intensifies, there will be a select group of advisors who will stand out from the crowd. Those who understand the emotional needs of the wealthy investor, and actively align with their expectations, will enjoy unparalleled growth and long-term success.