Advising the rich and famous
Thomas Linklater a CFP® at Momentum Consult.
In a country of such diversity in terms of people, opportunities and household status, a different approach is required by advisors when dealing each individual client. A specialist approach is required for high net worth individuals, such as our country’s wealth managers, bankers, accountants, the legal fraternity, and even celebrities. As part of the process, specific traits of this target audience need to be considered, for example high net worth (HNW) individuals generally do not respond positively to conventional marketing and sales techniques, and, they have less time available - making it very difficult to reach this affluent segment.
Labelled as being HNW or Ultra HNW, these individuals are often targeted by a myriad of financial institutions and sales people. After being constantly bombarded by sales techniques over the years, it is understandable that this demographic feels numb and unresponsive to these advances.
Most financial planners rely on numerical proposals, performance statistics and a plethora of product information in an attempt to establish a relationship with a potential HNW client, but this is often not the right approach. Being successful with this target market often relies on creating an emotional connection with the client, rather than using data, logic and facts in a business proposal. According to the Ipsos Mendelsohn affluent Survey conducted in 2013, 84 % of affluent people feel more comfortable when dealing with people who they have an emotional connection with.
The fact that these clients are busy goes without saying; but the utmost respect of their time is massively underestimated. Advisors should take great care when setting calling patterns and requesting a meeting for mundane annual reviews.
When it comes to financial products, there is no such thing as one size fits all anymore, especially in this market. More and more HNW clients are seeking holistic advice, taking into consideration total market exposure, together with an overall exercise in risk management. Recommendations need to be solution-based, taking into effect estate and succession planning.
Taxation is another vitally important aspect of any recommendation. Advice must be individual and bespoke, often involving the other professionals in the investor’s financial life - bankers, lawyers and accountants - who should be partnered with to form a multi-disciplinary team to ensure a comprehensive and complimentary financial plan for the investor.
HNW individuals should be specifically catered for as a segment given the highly specialised, diverse skills needed to advise in this segment, and a decision needs to be made by any financial services provider as to whether they want to operate in this environment. The segment is highly competitive, with a number of well-established local and international independent advisors, such as the team from Momentum Consult, who offer a client centric business model that offers integrity based wealth and advice solutions based on solid, sustainable house views. Client centric investment goals are determined with clients, incorporating their return objectives, risk appetite and investment horizon whilst bespoke investment portfolios are constructed to have a high likelihood of achieving a defined real return outcome, enhancing client’s financial wellness.
This outcome based investment philosophy operates on four cornerstones of wealth management.
• Philosophy founded on time – based risk management
• Asset /liability modelling ensures cash flows are appropriately matched
• Diversified asset allocation, real returns and careful risk management
• Fund solutions ensure highest probability of achieving best results
Interestingly, very few banks and assurance companies have been successful with this demographic. This may be due to an aversion to one-size solutions, automated investment processes and house-view driven investment philosophies. The long awaited Retail Distribution Review will hamper this advice process further making independent, bespoke and autonomous advice more risky for FSP licence holders.
