From the June 2006 issue of Investment Advisor • Subscribe!

Listening to Margaret Mead

What anthropology can teach you about affluent

No matter what stage of development your business may be in or how many clients you have, advisors depend on their individual clients for ongoing and referral business. While some advisors struggle to get or retain clients, there are others who have long-term relationships with their clients. How do certain advisors acquire and retain such close relationships with clients? Are these advisors just lucky? Or are they performing a trick from which other advisors can learn? In fact, their only "trick," is that their clients feel a close, personal relationship with their advisors. They feel their advisors know and understand them so well that this understanding and closeness leads to trust and an exceptionally high comfort level. When your clients have trust and comfort in what you are doing for them, they are more likely to stay focused on their long-term goals and stick to their plan. As we saw in last month's article, this is imperative to both you and your clients' success.

These relationships develop because, more than likely, advisors are listening to and understanding their clients' "passion points" and using that knowledge to speak with them about what matters most in a language that makes them feel understood. Recent research conducted by JPMorgan can help you to tap into your clients' and prospects' passions to enhance your success.

Each month we share with you the findings of proprietary research and offer our insights to help you gain greater knowledge of the affluent and so provide wealth management services in the most effective manner. This month you will learn about the passion points of your clients and how to turn that information into growth for your business. In next month's column, we will discuss the best way to apply this information, including the concepts of language, touch points, and service level, to further your efforts with existing clients as well as prospects.

The Lessons of Anthropology

Can Margaret Mead, famous cultural anthropologist in the early- and mid-1900s, help you to improve client acquisition and retention? Can this author of the seminal Coming of Age in Samoa (1928) help you grow your business?

Although Margaret Mead may not be available to personally assist you, her teachings can. Instead of poking around tribal villages in Papua New Guinea, or Amazonian rain forests, cultural anthropologists are invading suburbs and cities to find out about a group that is most valuable to financial advisors--the affluent "tribes." How does anthropology, which deals with the origins, physical and cultural development, characteristics, social customs, and beliefs of mankind relate to the study of the affluent? In the past, you could rely on mass demographic trends (age, earnings, or family wealth), but that approach no longer is as targeted or predictive because the marketplace has become too diversified.

According to the U.S. Census Bureau, there are currently 8.9 million millionaire households in the U.S. This is up nearly 50% from two years ago. Even if millionaires have now become a more "common" species, they are hardly homogeneous. In fact, studies have shown that they are much more fragmented, "tribal," and passion-based. With that in mind, how can advisors benefit from anthropology?

At JPMorgan, we believe that by understanding your client, including his or her individual tastes and motivations, you and your clients will have a greater probability of developing the kind of personal relationship that leads to your mutual success. In this article we will examine the social, cultural, and behavioral patterns of the affluent market and how these patterns can be applied to furthering your business.

In today's culture, knowing each of your clients individually has become increasingly more important. Numerous studies have confirmed that relationship and quality of service continue to be top motivators for affluent client acquisition and retention.

While there has been an explosion of service providers competing for affluent clients, it has become increasingly difficult to differentiate one's service to match the client's need, especially when talking about product or price. To set yourself apart from the competition, you've got to move the discussion to a new level and get the attention of the affluent investor.

So if your competitors are selling to the perceived need (i.e., talking product and price), you need to shift the discussion to that individual client and his or her passion points.

Passion and Your Business

More than at any other time in history, there is an unprecedented need to raise the bar for client delivery by offering truly unique, meaningful, and personalized service. Consequently, the products, services, and communications you employ need to leverage each affluent individual's core values and passions.

When it comes to an individual's needs, we generally assume that "something" must be done. But when we take into account a person's wants or passions, it's a different story. Although we may assume that there is little passion attached to one's needs, passion is the underlying basis for a person's pursuit of money, objects, and experiences. Passion is the primary lens through which a person views life. It is that individual's principal modus operandi.

By seeing the world through the eyes of your clients and prospects, and by understanding their core values and passions, imagine how much easier it would be to identify--and serve--not just their needs but their wants. Because passion drives behavior, you need to align yourself to be an agent of your clients' passions.

To learn more about the passions of affluent investors, JPMorgan recently commissioned Culture Planning LLC to explore and document the cultural dynamics of American millionaires. We wanted to learn more about this exclusive tribe, specifically to determine their wealth culture, and their passions.

The study took an approach based on ethnography. Ethnography, which is a part of anthropological research, involves observing--technically called field work--individuals in action within their own cultural environment. JPMorgan's goal was to become fully immersed in affluent investors' actual behavior.

Distinguishing affluent behaviors

The result of this observation confirmed that the affluent were not a homogeneuos group. In fact, it identified five distinct archetypes of affluent people. Distinctions among the five groups were determined by their core values and passions (i.e., behaviors). Passion-based research is steeped in emotion, which drives decision-making more than logic or rational thinking (see chart below).

These five archetypes are called Goodlife, Artisan, Unplugged, Wellville, and Legacy. As you read the descriptions for each of these archetypes, think about your top clients. Can you identify which type they are? Do you customize your service approach to their specific passion points?

Client Archetypes

The Goodlife person, also known as a "thrillionaire," has core values and passions driven by pleasure, exclusivity and experiences. The Goodlife client is steeped in the belief that "money exists to use and enjoy." Goodlife people will have artifacts that are symbols of their status and success.

The Artisan, warmly known as a "coolionaire," is motivated by beauty, aesthetics, and taste. Artisans use their wealth as an opportunity to express their status as people of refinement and sophistication. Artisans are not just interested in consuming beauty but ideally in creating it as well. Production is more rewarding than mere consumption.

The Unplugged segment represents the "millionaire next door" and is best described as a "realionaire." This group's emotive values are practicality, value, and intelligence. They take pride in being well-informed and self-reliant. Wealth is considered a means to be oneself. Among their personal objects, you notice that there is a willingness to spend money on things that matter to them, but they have a firm resolve to save on things that don't.

The Wellville person, or wellionaire, is centered on the pursuit of 360-degree wellness. Wellvilles use their wealth to convey that they are living life in balance. What motivates them to take action is wellness, naturalness, and balance.

Lastly, there is the Legacy group, or "willionaire," known by this term because the Legacy's core values and passions are motivated by tradition, family, and giving back. These individuals are very concerned about how they will be remembered. They want to make an impact on future generations. This archetype is just as interested in passing down ethics, values, and life lessons as material wealth.

Determining Clients' Passions

Most people are a mix of these different characteristics. Usually by asking questions of and listening to your clients, you can determine what each of their predominant passion points are or where they fall among the five groups.

If you have a three-year-old or can remember what you were like at that age, you will be able to determine your clients' archetype I say this because of one word: "Why." Most three-year-olds are famous for asking questions: trying to understand something by using the word "why." Now it's time to turn to your inner three-year-old to determine your clients' passions.

How do you do that? Let's assume your client owns a BMW. By uncovering the "why" of that purchase--the driving force behind the client's buying decision--you can gain greater insight into who the client is and her motivation. Was it status? Design? Best brand for value retention? Fuel efficiency? Or perhaps it was family tradition? What emotion caused your client's buying behavior?

Profiling Is Crucial

Although profiling can take on many different definitions, we like to say it is nothing more than asking a question to be able to ask another question. The more we know about our clients, the more significant we become in their lives. The more significant we become, the more satisfied they will be with our service.

A Harvard Business Review study found that at the mid-point of satisfaction, where clients are neither dissatisfied nor highly satisfied, the average client retention rate was only 20%. Because it takes five times the effort to get a new client than to retain an existing one, wouldn't it make sense to take the time to get to know your clients' passions to ensure they do not fall into that dwindling group of "not highly satisfied" retained clients?

Uncovering the "why" behind your clients' decision-making can give you the edge over your competitors that you may be looking for. By putting passion points to work, you will better understand the social, cultural, and behavioral patterns of your client base as they relate to the five distinct segments of the affluent market.

In next month's article we will share how to apply passion points to market more effectively, build better relationships, and obtain more qualified referrals.

The future belongs to those offering not just the best products or the best technical analysis, but the closest and longest-lasting emotional connections.

Susan L. Hirshman, CFP, CPA, CFA, CLU, is a managing director for JPMorgan Asset Management in New York. In that position, she develops strategies to provide wealth solutions to the affluent market. She can be reached at susan.l.hirshman@jpmorgan.com.

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