Consumer trust isn’t something to be taken for granted, but reports from the UK, US and here at home are all pointing towards an uplift in trust levels around financial advice, which can only be a welcome development.
There are significant tailwinds behind the financial advice industry at the moment, but some major obstacles are still preventing advice practices from taking advantage of surging demand according to a new study from CFS.
Eight ways to win more HNW clients
High-net-worth (HNW) investors are the holy grail for any competent financial adviser. These are typically educated, experienced professionals and business owners who are seeking to establish long-term relationships and trust the adviser as an expert. Naturally, attracting these clients to your firm consistently is highly competitive and extremely difficult.
As is typically the case, despite Australia’s rich economy, the US leads the way in building solutions and understanding the needs of this emerging client base. In recent weeks, global consulting firm McKinsey and Company offered an insight into how this cohort is evolving and outlined eight ways advisers should be seeking to grow and deepen their relationships to build a client base in the sector.
According to McKinsey’s research, these types of affluent client are actually getting younger, whether due to the tech boom or perhaps crypto-led profits. The result is that they are now engaging financial advisers at around 35 years of age, when they have just US$500,000 ($676,000) to invest. Interestingly, McKinsey found that 60% still work with the same adviser, which may force the industry to look beyond the short-term, asset-gathering model.
Tailored strategies are a must in this ‘highly heterogeneous’ segment of the market, with alternate approaches required depending on clients’ life stage or source of wealth. In a boon to the private wealth and investment bank sector, as many as half of those with US$5 million ($6.8 million) in assets seek to consolidate their banking and wealth management relationships with a single firm.
Getting in early isn’t any guarantee, nor is seeking out shareholders in a firm that is about to mount an IPO. The research suggests that over 50% of those that accumulate their wealth from a legal settlement, be it a business sale or even divorce, actually change their adviser at the same time.
Personal advice is a clear priority of this group, which is seeking regular and personable advisers; with just 6% reporting they were comfortable with a digital-only model. Given this is the direction of many of the larger wealth and industry fund groups, it offers a unique differentiating point for the IFA sector.
Similarly, the days of having multiple advisers and multiple brokers appears to be gone, with simplicity the focus: McKinsey found 40% of HNW investors seek to consolidate 80% of their assets with their primary financial adviser. And they aren’t afraid to pay higher fees, so long as they feel it is providing a higher level of personal service, faster transactions and access to research.
Finally, communication is key, likely stimulated by the onset of the pandemic. McKinsey’s report showed that client satisfaction with their advisers increases by 25% for those who switch from quarterly to weekly personal communications. This likely marks the end of ‘annual reviews’ for those seeking to specialise in this sector.
