Hooking The Big Fish: What It Takes To Serve High Net Worth Clients

Understand your client, and yourself

Don't limit yourself by focusing just on solutions with a risk/return perspective. Financial planning and forecasting are obviously important, but they are by no means everything. High net worth individuals have other needs. They're sensitive to taxes, for example.

Moreover, they define themselves by other parameters and issues, like socially responsible investing, green investing and hedge funds. They are serious about these matters for a variety of reasons; you deliver added value by helping your client figure what fits, what doesn't and why.

Here's where pushing back ultimately becomes a much appreciated service to the high net worth client. Too many advisors and reps are too willing to tell clients only what they want to hear. Do this, and you'll never fully develop this business. Instead, think of yourself as a physician. As much as any doctor would like to tell a patient, "You don't have hypertension," or, "You don't have high cholesterol," they're going to say what's needed to be said.

The need to push back will arise consistently with high net worth individuals, partly because they have constant and complex decisions to make with their finances. These situations call for courageous, sensitive conversations. And you won't be able to have them unless you have a clear understanding of the behavioral and attitudinal sources of your client's goals, needs, values and desires.

One more point about psychology: know thyself. Be aware of how your own attitudes and behaviors might affect your counsel and how you might otherwise advise your client. For example, if you're the type who watches the markets all day long, you may feel the need to react to the never-ending barrage of information you're getting, which could affect the long-term aspects of your planning with your client. Thus, be highly aware of your own biases, and make sure they do not disrupt the strategies appropriate for your clients.

Execute with excellence

The most successful advisors in the high net worth arena do not portray themselves as market gurus. Instead, they focus on delivering an appropriate asset allocation and diversification strategy, as opposed to promising above-market returns. The lesson here is about equating market returns with market risk. Don't take too much risk to produce marginal returns. There aren't any free lunches, and no investment strategy can guarantee a profit or protect against loss.

If all is going well, you'll go through different cycles with your high net worth client as the relationship matures. You'll need to modify your approach over time, as he or she transitions from the accumulation stages to wealth preservation, wealth distribution, etc.

For example, high net worth clients will expect solutions that help preserve and enhance their wealth. When executing strategy, the most successful reps and advisors have spent the time–through detailed risk profiling and financial planning–to understand their clients' economic and emotional needs. In most cases, the ability to minimize taxes is a significant driver in a successful relationship.

Advisors need to understand investment strategies such as tax-loss harvesting and tax-efficient investment vehicles/processes, as well as the legal entity into which those strategies are executed. Here, it can range from qualified plans to an irrevocable life insurance trust to a credit shelter trust.

In another cycle, many high net worth individuals have aspirations to a legacy. This may range from charitable endeavors to inter-generational wealth transfers. Understanding the appropriate investment solution for these complex needs requires keen insight and experience.

A final thought about process and execution: high net worth clients want to know there's a robust check-and-balance system in place to help oversee all that's going on regarding the planning of their future. Though most practitioners cringe at the thought of compliance departments breathing down their necks, the successful ones use this fact to their advantage. Too much stewardship is never a bad thing!