Have you ever found yourself scratching your head once a client leaves your office, thinking, "I'm pretty sure they didn't understand a word of what I was saying"? Most of us have had one or more clients where the communications are always difficult, where when you say "blue," they see "red."
In such cases, you were undoubtedly trying to communicate with a client whose high-net-worth personality ("HNWP") conflicted with your own. Every client has a dominant HNWP, and there are nine distinct types.
The most common HNWP is the Family Steward, and they are easy to identify. When you ask them about what's most important, they'll inevitably say something like "taking care of the kids" or "leaving a legacy for my family." Family Stewards tend to be conservative in their personal and professional lives, and are typically not highly knowledgeable about investment matters, since they prefer to spend time and energy on other things.
When working with Family Stewards, emphasize how your services are helping them reach the all-important goal of taking care of their families. When Family Stewards come into your office, make sure you and your staff members address them by name and ask questions like, "How is Sophie doing in ballet?"
Next are the Independents. They see investing as a means to an end, which is to have enough money to do whatever they dream of doing. Independents seek the personal freedom that money makes possible. They may want to sail around the world, retire and do pro bono work or have the best garden in town.
You can be sure Independents are not interested in working a 9-5 job any longer than they have to. Since it's simply a means to an end, they're not highly interested in the details or process of investing. Keep your conversations with Independents very focused on their goals, and keep technical jargon and information to a minimum.
Then there are the Investment Phobics. Burdened by the responsibility of wealth, they dislike detailed conversations about finances, and technical information irritates and confuses them. When you do meet to discuss their finances, they'll want to talk about anything and everything else, so you'll need to keep them on track. Investment Phobics are challenging to work with, but they tend to be both highly loyal and enjoyable clients.
The Anonymous have not just confidentiality -- a huge concern for many -- but anonymity as their primary concern. Your employee handbook (which you should show these clients) should explicitly state to staffers that talking about clients outside the office is grounds for immediate termination.
For the Mogul, the primary concern is control, and investing is just another way to extend personal power. With a Mogul you're not the co-pilot or navigator, you're just someone who enables them to move forward while they stay in control. The good news is that such individuals are very decisive and take responsibility for whatever happens. The bad news is their egos and personalities can be quite difficult.
VIPs have status and prestige as their dominant concern. They like to affiliate with brand name high-visibility institutions and advisors, and look at investing as a way to purchase superior social status. They are very likely to spend above their means. In their pursuit of status they tend to be highly leveraged, and have fewer investable assets than one might think by looking at their status.
Accumulators, focused on making portfolios bigger, are very performance-oriented. They're often quite frugal (so they have more to invest), and they'll want to talk in dollars, not percentages (since you can't spend percentages). Where I live in Palm Beach County, Fla., one of the oldest banks sends out drivers in its two Rolls Royces to pick up these clients, and when they get to the bank their money is in a room where they can actually view it, hold it and count it.
Gamblers enjoy investing for the excitement of it. They tend to be very knowledgeable, do a lot of their own research and prefer to be directly involved in the investment process. Importantly, don't confuse the Gamblers' need for excitement with their emotional and financial ability to absorb losses.
Gamblers are very difficult clients to deal with. One strategy is to recommend that they divide their portfolio into two portions, one with the "serious money" that you control, and another portion that they can do whatever they want with. But don't monitor or report on their "fun money" or "personal investments," because if you are overseeing assets, then under SEC guidelines you are responsible for what happens to them. So have them set up an account with a discount brokerage, and then they can bring in a report when you meet, but make sure you don't electronically gather that information or have any ability to oversee it. And be prepared for Gamblers to come to you to withdraw substantial assets from their "serious money" once they sustain heavy losses elsewhere.
Last but not least are the Innovators, who are focused on leading-edge -- if not bleeding-edge -- products and services. Innovators are quite sophisticated, closely follow the market and often subscribe to multiple newsletters including technical journals. They may call you and ask about investments you haven't even heard of yet. Highly self-educated and technically savvy, they're frequently engineers or computer consultants, and they'll desire in-depth reports and analyses.
Match or Mismatch?
While none of us have just one HNWP, it's important to understand that every affluent client has a dominant HNWP. While it's not unusual to see a strong secondary HNWP -- for example, our research shows that the Anonymous is gaining as a secondary personality given the prevalence of identity theft -- you should still use your clients' dominant personalities as a guide to communicating and working with them.
You'll be most compatible with clients who have the same HNWP that you do. Conversely, just reading through the chart, you can probably tell which kind of HNWPs you'll be in conflict with because your stomach will be churning.
"Enjoyability" is a critical client profile characteristic. Life is short, and if you're going to be successful, you want to fill your practice with people to whom you can offer extraordinary value and with whom you'll enjoy working. Once you determine it's a bad match, just be very up-front and say, "We're not meant to work with everyone, and we don't feel that our services would be a good match for your needs."
- Dominant focus is to take care of
- their families.
- Conservative in personal and
- professional life.
- Not very knowledgeable about investing.
- Seek the personal freedom money makes possible.
- Feel investing is a necessary means
- to an end.
- Not interested in the process of investing or wealth management.
- Are confused and frustrated by the responsibility of wealth.
- Dislike managing finances and avoid technical discussion of it.
- Choose advisors based on level of personal trust they feel.
- Confidentiality is their prominent concern.
- Prize privacy for their financial affairs.
- Likely to concentrate assets with an advisor who protects them.
- Control is a primary concern.
- Investing is another way of extending personal power.
- Decisive in decisions; rarely look back.
- Investing results in ability to purchase status possessions.
- Prestige is important.
- Like to affiliate with institutions and advisors with leading reputations.
- Focused on making their portfolios bigger.
- Investments are performance-oriented.
- Tend to live below their means and spend frugally.
- Enjoy investing for the excitement of it.
- Tend to be very knowledgeable and involved.
- Exhibit a high risk tolerance.
- Focused on leading-edge products and services.
- Sophisticated investors who like complex products.
- Tend to be technically savvy and highly educated.
Source: Russ Alan Prince and Brett Van Bortel, The Millionaire's Advisor, 2003.