The Optimal Methods For Sourcing Ultra-Affluent Clients
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In our work we find it essential to discriminate among different classifications of wealth. According to our definition, the ultra-affluent are families who possess a net worth of $25 million or more. Worldwide, the ultra-affluent command nearly $12 trillion in private wealth. Their great affluence alone makes them exceptional clients for advanced planners.
For their part, advanced planners bring enormous value to these families. Because they adopt a consultative approach, advanced planners move from challenges and needs to solutions and resolution of critical issues. For so doing, advanced planners are well rewarded for their expertise and efforts. These rewards are not only financial; they are personal as well.
For advanced planners, a critical issue is sourcing. Specifically, what are the optimal methodologies for sourcing qualified ultra-affluent clients? It is important to be very clear what we mean by “qualified.” It is not enough to get an introduction and a meeting. It is essential to get the meeting on a most favored basis.
The best means of sourcing new ultra-affluent clients is through other advisors.
This is a different approach to sourcing compared to working with less wealthy clients. Among affluent clients ($5 million to $25 million in net worth), referrals from current clients dominate the sourcing process for advisors. Among the ultra-affluent, this approach rarely works very well. Among the ultra-affluent, advisor referrals dominate. Therefore, the answer to sourcing ultra-affluent clients is building bridges to advisors who have such wealthy clients.
The best means of sourcing new ultra-affluent clients from other advisors is through a formal process of knowledge transfer. While the sharing of fees and commissions will usually accompany referrals, knowledge transfer drives referrals.
Knowledge Transfer
The importance of knowledge transfer cannot be overemphasized in sourcing ultra-affluent clients. We already know knowledge transfer is important in sourcing affluent clients, so it is not surprising that knowledge transfer is also crucial in sourcing the ultra-affluent.
Most successful producers already obtain wealthy (though not necessarily ultra-affluent) clients from other advisors. In fact, recent research studies among accountants and attorneys show that they readily refer clients to producers who are valuable business resources to them. Of course, the best way to become a business resource is through knowledge transfer.
These results correlating value as an information resource with client referrals have been replicated in more than a dozen studies conducted over the last five years. We have found that this information resource approach to sourcing new business is effective across all professional servicesinvestment management, investment banking, and even strategy consulting.
We consistently find that knowledge transfer is the best way for advisorsincluding advanced plannersto be “top of the mind” with other advisors when referral opportunities arise.
The process of knowledge transfer can take a number of different forms, each of which is associated with a set of benefits and costs. A common approach is when a producer calls on other advisors to introduce new ideas, strategies, tactics and products. This can be something of a hit-or-miss approach; it is most effective if the other advisor is just then facing a client situation in which the new approach is relevant. However, considerable energy has to be expended for that one opportunity.
Another problem with this approach is that it defaults to the “strategy of the day.” Bringing the next latest-and-greatest strategy creates a transactional mentality, not a relationship.