Advisors who expect their clients’ wealth will grow over the years, and help them to build their practices along the way, are likely to end up disappointed.

That’s according to a new statistical analysis of data from 7 million clients representing $3.5 trillion in invested assets across a variety of firms, including wirehouses.

“Only 3% of the time did a relationship that is currently HNW begin with less than $500,000 invested,” says Patrick Kennedy, cofounder and vice president of client and product management at PriceMetrix, which conducted the study. “There’s a misconception amongst some advisors that they can grow all of their clients into HNW clients and that’s simply not true. If they want to increase the number of HNW individuals in their practice, they need to go out and get them.”

Based in Toronto, PriceMetrix provides practice management tools to planners.


The study also spotlighted a number of other interesting insights into the country’s wealthiest investors. For example, the vast majority [92%] of HNW investors still have non-discretionary transactional accounts and more than half [51%] have fee-based, according to Kennedy.

“That’s an important finding for a financial advisor who may be trying to persuade their clients to switch from one approach to another,” he said. “I think we are seeing clients wanting different ways to pay their advisors.”

In all likelihood, the wealthiest advisors are keeping a portion of their wealth with one advisor, in a fee-based account, and another portion or portions in transactional accounts, Kennedy says.


“It all points to a little more sophistication,” he adds, indicating that wealthy clients are insisting on retaining more control than many planners might imagine.

Another indication of the same phenomenon is that HNW households are slightly less likely to keep money in retirement accounts, the study found. In all, 69% of households with $2 million or more in assets hold retirement accounts compared to 75% of households with $250,000 to less than $500,000 in assets, according to PriceMetrix’s analysis.

This likely speaks to an increased tendency HNW investors to spread their wealth across providers, according to the study.

Pricing and the client composition of a practice also greatly impact a planner’s ability to serve HNW clients effectively, Kennedy says.


“It is the case that advisors who tilt their books towards HNW investors do a better job of attracting them,” he said, adding that HNW clients aren’t happy working with planners who typically serve smaller clients. “It’s strictly a matter of capacity. If you take on any [and every] client you will have less time to service your less affluent clients.”

The study also uncovered a specific band of pricing that planners need to aim for when serving the wealthiest clients. Advisors who priced their service between 50 and 75 basis points of invested assets had the same amount of production directly from HNW households than those who priced between 75 and 100 basis points, according to Kennedy.


“But when their price went below 50 basis points or when it went above 100 basis points the number of HNW relationships dropped off,” he says. HNW investors “are value sensitive. They are not price sensitive. “They are looking for quality and they are willing to pay for it. But, like when they are looking for a car, they are not just looking for the cheapest car, they are looking for the greatest value. There’s definitely a range you want to be in.”

Experienced advisors also have more HNW clients, Kennedy said, suggesting that planners should highlight their experience when seeking to woo them.

The study also found that the average advisor has about four clients with $2.5 million or more, while only 27% of advisors have attracted 10 or more clients of this size and 15% have none, according to Kennedy.


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