By Walter H. Zultowski
Will Rogers once commented that its not what we dont know that hurts us, its what we know that isnt true. With all the attention thats been focused on the high-net-worth market in recent years, the same observation can be made today in regard to marketing to the high net worth.
By conducting an annual survey and working closely with advisors who serve the wealthy, my company has been keeping its finger on the pulse of this market for several years now. In this tough economy we have seen several myths developed regarding the high net worth that need to be addressed.
Myth #1: The last three years have decimated the ranks of the high net worth.
The three-year bear market has affected the net worth of nearly all Americans, and the high net worth have not been immune to this impact. Nevertheless, two important points need to be made regarding this. First, this fallout has not been equal across the spectrum of high-net-worth households. There has been proportionately greater decline at the lower end than at the middle and upper ends.
Moreover, it should be noted that households falling below the $1 million net-worth mark havent disappeared. Now, theyre “merely affluent.” Its likely to assume that they have the interest and motivation to return to their former millionaire status.
Most importantly, however, it needs to be pointed out that the economy and the stock market are not the primary drivers of wealth in this country. Rather, the primary driver is demographics embodied in such trends as the aging of the baby boom and the expected inheritance boom, projected to be $41 trillion over 50 years. And unlike the cyclical economy and stock market, these are permanent trends backed by already accumulated wealth, which will be driving the growth of wealth in this country for the next several decades.
Myth #2: The high-net-worth market is undifferentiated.
“Seen one millionaire, youve seen them all.” Nothing could be further from the truth. The high-net-worth market is a highly differentiated market that requires segmentation and special approaches to succeed in penetrating the various segments comprising it. Through annually surveys of the high net worth, we have found it useful to divide the market into segments comprised of business owners, senior corporate executives and high-net-worth families–many of whom are already retired.
The segments are as different as night is from day in terms of demographics, financial needs and concerns, and buying behavior. Not surprising, they also differ in terms of the advisory approaches to which they respond.
Another useful view of this market is to segment it in terms of amount of net worth, with a significant inflection point being $5 million or the so-called penta-millionaire level. It is at this point that our survey tells us about significant changes in financial issues, products owned and financial behavior.