KY(A)C: Know your (affluent) client

The high-net-worth market is driven by macro trends such as demographics, changing retirement patterns, and clients’ desire for relationships with their advisors, reveals a report by Investment Planning Counsel (IPC).

Capitalizing on these trends might be a sure path to your success.

That’s because the number of mid-tier affluent investors (those with $500,000 to $1 million in investable assets) is expected to grow from $536 billion in 2014 to about one trillion by 2024 — an increase of about 78%. (The report cites Investor Economics research.)

Demographics

Of note is the longer lifespan of women, as well as their expanding share of wealth, from $1.2 trillion in 2014 to $2.7 trillion by 2024. Longer lifespans mean more years on the job, requiring different financial planning models. Also be aware of nuanced differences in financial planning for women versus men. Further, don’t ignore your client’s spouse — man or woman — in the relationship-management life cycle, urges the report.

Read: How long will your client live?

A potentially underserved market is boomers, who are set to control an increasing amount of wealth by 2024. As they sell businesses and liquidate assets, they’ll want safety and a good income stream from their portfolios.

But don’t expect a demographic group to be homogeneous. Client success depends on developing a personalized investment strategy; that means knowing your client.

To that end, here’s a quick test. Name your client’s:

• sources of wealth;
• wealth management preferences and knowledge (for example, validator versus delegator tendencies);
• professional and personal concerns;
• interests; and
• brand affiliations.

That last one makes you look like an ace when you know not only whether to offer your client coffee or tea but also his preferred brand. The report calls that kind of relationship detail “the difference maker.” More on that in a moment.

Changing retirement patterns

As clients shift from wealth accumulation to income generation, asset management must shift to capital preservation and risk management. A key risk for advisors to consider is the depth, duration and frequency of market declines on client’s returns.

Read: Rethink risk tolerance questionnaires

Clients may also look to advisors to act as the family CFO when transferring wealth to the next generation. Consider hosting a family meeting, perhaps with other professionals, to develop an inter-generational plan.

Read: Ailing parents need their children’s help

Relationships

Your affluent clients want both a business and social relationship with you, says the report, citing Oeschsli Institute research. That means face-to-face meetings, including non-business lunches or dinners hosted at your home with your respective spouses. Like any relationship, it’s about genuine care and quality time.