What to consider when building HNW business

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PHOENIX — There are many reasons advisors want to target high-net-worth clients — more assets, for one. But firms looking to expand their wealthy client base need to come up with custom strategies for them, experts told attendees at a panel at Pershing's Insite conference.

The definition of high-net-worth shifts based on whom you ask, said moderator Marc Butler, chief operating officer at BNY Mellon Albridge. Research places it anywhere between $1 million and $30 million in investable assets, he said.

Because the spread is so wide, "there's not a right answer. There's not a wrong answer," Butler said. "But part of serving the high-net-worth client is differentiation — what is your value proposition in the market and how do we serve the right investors?"

Defining that value might mean doubling down on tenets of holistic financial planning, said Emily Wirgin, managing director of Financial Focus Group. "We assume that most advisors have the same information we do, thanks to the internet," she said. "Building trust and establishing the relationship we have is how we customize the relationship for our clients."

Many advisors may not realize how much more time it takes to establish trust with wealthy clients. Because referrals drive much of HNW business, firms may need to rethink their business models, said Jeff Vivacqua, chief marketing officer with Cambridge Investment Research. "High-net-worth investors are going to ask more of you than your regular clients," he said.

Perhaps the biggest challenge is attracting emerging HNW clients. Expanding communications to clients’ adult children and grandchildren can go a long way, said Katie Swain, Pershing’s director of global strategy and product management. It may require some difficult conversations about the future, particularly regarding estate planning.

"It's a disservice not to have those conversations and ask those questions," Swain said. "It builds trust, it opens the door to allow you to build relationships with other family members. For example, if they share a common passion around giving, that's a great way to help them get educated and started on that path."

Technology can play a vital role in appealing to the next generation, the panelists agreed.

For example, one way to open a dialogue is to simply start onboarding children and grandchildren with some of the same aggregation tools you're using with your clients, Wirgin said. "They may not be high-net-worth now, but they will be later," she said. "You need to maintain that [relationship] to some degree because when the next generation does inherit … they see their parents are getting that care and they'll expect it. Even if they aren't clients yet." Her firm will send some clients' families the same market updates.

Using technology to streamline and modernize their businesses is another way to attract younger, HNW-clients-to-be, However, that doesn't mean planners should expect technology to do all the work for them, Vivacqua said. "Technology should be what it is: tech," he said. It's not going to be the end-all when communicating, he added, but should rather be used as a tool that can help HNW clients see the whole picture.

In particular, advisors should look for platforms that can show most client information in one place, Vivacqua said.

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Some clients may see other experts — such as tax professionals or divorce attorneys — for additional services, or may pursue some investments DIY-style, Butler said. True differentiation means understanding that "there's not a person who has a patent on all the good ideas, so why not have a relationship with me as well?" he said.

No matter how a book of business is defined, it's important to communicate. "Your business model should not be based on products on a shelf. It's so much more than that," Vivacqua said. "What's the voice of the client? If you're not talking to HNW clients and asking what they want, that's a gap. Build your business from a smart perspective not just a product perspective."

Ultimately, differentiation, time spent and customization are keys to success with HNW clients, the panelists agreed. Advisors shouldn't be afraid to get creative, Swain noted. For example, planning events around your clients' philanthropic or purely personal interests can open the door to build greater trust with them — and their families, too.

"Look at the service you're providing, the experience the client is getting. Is it similar to the first class experience they're getting at a five-star hotel or restaurant?" Wirgin asked the audience. "It should be. Because that's what they expect."

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