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How to Work with High-Net-Worth Clients

28 February 2018
3 min read
How to Work with High-Net-Worth Clients
| Managing Director—AB Advisor Institute

“Did you hear the news? We just got a new client—Jane Smith—$6.8 million, moved from XYZ Advisors.” As financial advisors working in a highly competitive space, these are words we don’t often get to say.

According to recent research from Barron’s, over one million people now have $5 million or more in wealth.1 That sounds like a lot of potential clients. So why is it hard to land a new high-net-worth client?

The answer is partly because, to coin a phrase, “there are plenty of other fish in the sea.” According to FINRA, in 2016 there were close to 636,000 registered representatives. And as you would expect, most high-net-worth individuals already have a financial advisor—even among millennials, 65% of those in the high-net-worth category work with an advisor.2 So, given this highly saturated marketplace, how can you stand out from the crowd?

Client Needs Evolve with Time and Wealth

Many advisors are good at focusing on the “bottom line”—reporting to clients on a regular basis about how their portfolio performed over a given period of time. Some advisors have even mastered the art of checking in regularly. But few have stopped to think about what their clients really require, and how that changes as they get older and wealthier.

Pain Over Pleasure

I like to think about age and wealth in relation to anxiety or distress. Research shows that pain is nearly three times more motivating than pleasure. That means people are significantly more motivated to reduce or avoid pain than they are to achieve pleasure. This insight helps us understand how to give clients what they really need: more than just helping them achieve pleasure, like making more money or increasing the value of their portfolios, the simple answers, we should consider what pain our clients are hoping to avoid.

“Will I Be Okay?” vs. “What Am I Missing?”

Figuring out what clients are trying to protect themselves from depends on where they lie on the wealth/age timeline. Before a client is financially secure, her primary pain or anxiety (Display) is focused on answering the question “Will I be okay?” She hopes that by hiring an advisor she’ll avoid the pain of running out of money during retirement. What she really needs is an advisor who can safeguard and grow her money.

Security vs. Complexity
Security vs. Complexity

A wealthier older client, on the other hand, is less concerned about financial security—he’s reasonably confident he has enough money to last his lifetime. Instead, his anxiety becomes “What am I missing that could hurt me—or take away my security?” What this client really needs is a holistic wealth advisor who can provide asset management, risk management, tax management and wealth-transfer strategies—someone he trusts with his whole financial life, someone he values as a professional resource.

The concepts of trust and value are other key elements to working with high-net-worth clients. For now, let’s simply say, that managing the client’s experience of trust and helping him see the valuable service you provide are also essential for developing and expanding relationships with high-net-worth clients.

The takeaway here is: to help attract and retain high-net-worth clients in a crowded marketplace, first understand your clients’ age- and wealth-related needs, and then focus on building trust and value.

1 Stacy Perman, “Penta Millionaires: The New Rising Class,” Barron’s, September 17, 2016.

2 Sarah O’Brien, “Millennial Millionaires-to-Be Neglected by Advisors: Study,” CNBC.com, January 29, 2015.

The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams.

About the Author

Kenneth Haman is the Managing Director of the AB Advisor Institute (AB AI). AB AI provides insights from the behavioral sciences, including behavioral finance, to client-facing financial advisors to improve their marketing outreach and relationship-building efforts with investors. Haman began his current role at AB in 2005. Prior to this, he managed a psychotherapy practice in the Washington, DC market for 20 years. Haman holds a BA in business administration from Lebanon Valley College; an MDiv from Princeton Theological Seminary; an MAPC from Moravian College; and certifications in clinical hypnosis and neuro-linguistic programing from the American Hypnosis Training Academy. Location: Nashville