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Financial Success Not Related to Size

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CHICAGO ( new survey gives hope to small and midsize investment firms looking to serve high-net-worth individuals.

Wealthy individuals are more interested in a firm’s reputation and skill than in its size when selecting a financial firm, according to a survey conducted by Click Communications Inc., a marketing company. But once a financial firm snares a client, the quality of customer service becomes important, overshadowing matters such as low fees or performance. “To get the business, you need an impeccable reputation; to keep it you need good customer service,” said Julie Simard, director of research services for Click.

And forget the concept of one-stop shopping. “People do not want to do banking with their insurance company,” Ms. Simard said. That means niche players, such as hedge fund firms, can still make headway with investors when competing with large financial firms. The important thing is to be good. “Do what you do best,” she said.

She noted that large financial firms can offer products in different arenas, but they’d be better off creating separate brands that stand on their own, because individuals want to buy from a company focused on a single product.

A single question in the survey of 610 people indicated that hedge funds are in a small number of portfolios. The question asked if they invested in hedge funds as part of a list of different investments, and only about 10% said, yes.

Click executives said that wealthy individuals have embraced the concept of diversification and often have multiple service providers within the banking and insurance categories, such as banks and insurance companies, but 46% use only one brokerage firm.

The survey respondents were broken into the categories of the mass affluent and the high-net-worth individuals. Mass affluent was defined as having US$100,000 to US$500,000 in investable assets, or as having an income of more than US$500,000 but with a household income of less than US$100,000. The 312 high-net-worth respondents had investable assets of US$500,000 to US$1 million and at least US$100,000 in household income, or had US$1 million in investable assets. The results were weighted to accurately represent 2000 U.S. census data.