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Financial Planning > Tax Planning

Capitalizing On The Affluent Opportunity

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How would you like to be branded as the financial professional of choice in your community? Only an elite few currently are functioning in such a capacity, but you could be one of them!

We probably all know advisors who are part of the elite minority. But the affluent research we completed in June 2004 leads us to believe that many more advisors can increase significantly their affluent market share. In fact, these three statistically significant insights surfaced in our research:

o The affluent need a primary financial advisor to provide solutions for the multidimensional aspects of their financial affairs.

o The affluent are aware of this need for a primary financial advisor.

o High levels of dissatisfaction exist with current financial professionals.

These facts present an ideal environment for affluent prospecting, especially for financial professionals with an insurance background. Why? Who better to serve as a primary financial advisor, with regular out-of-the-office meetings as a must?

This face-to-face game requires highly refined sales skills, patience, persistence and a wide knowledge of financial solutions. From my vantage point, this fits the profile of the high level insurance professional.

As you ponder this advantage, it might help to know that 51% of our June 2004 respondents use a primary financial advisor, but they also reported serious gaps between expectations and performance. What contributes to this dissatisfaction? Our research also helped to shed more light on that issue.

When looking for financial guidance, survey respondents lent the highest credibility to the opinions and suggestions of immediate family and trusted friends. However, if the answer they gave is a qualified, “I have a financial advisor, but…,” the opportunity for that advisor is lost.

Marketing of financial services has become a billion-dollar industry, with many dollars targeting the affluent and raising both awareness and expectations. The result, according to our respondents, is sobering. They said: “The gap between my expectations and the performance of my primary financial advisor is wider than ever.” Too many financial professionals are not congruent with the marketing messages.

The Research

In June 2004 The Oechsli Institute commissioned an independent study to determine how the affluent make major purchase decisions. Included were decisions relating to the selection of their financial advisor. Drawing from a sampling across the United States, the survey polled 400 individuals with annual incomes ranging from $100,000 to more than $1 million.

The study followed our 2000 research project that surveyed affluent perceptions of financial professionals; and, despite a slightly different focus, a simple and consistent truth emerged. The affluent desperately need competent financial advisors who can integrate and coordinate multidimensional financial needs.

Our research confirms that these advisors remain in short supply. We also uncovered “7 truths” that advisors must address if they expect to excel at attracting, servicing and retaining affluent clients. They include:

o Dissatisfaction is the breeding ground for opportunity. That’s especially true if you know the source of that dissatisfaction. Since dissatisfaction and skepticism are at record highs, the opportunity is also greater than ever!

o Reputation only can be earned one client at a time. Affluent prospects will select a primary financial advisor only when they are convinced that a particular professional can deliver exactly what they need. This is the essence of branding. Eventually they will refer but only after complete satisfaction.

Ask yourself: “If my key clients were talking to a family member, trusted friend or colleague, how would they articulate my value? How would they describe what I do?”

o The best way to attract affluent prospects is to become one with them. Advisors to the affluent must go where the affluent go and become involved in the activities, events and causes that interest them. Select organizations with activities and events that attract wealthy people and provide opportunities to meet new people (at least monthly), and that also have purposes and goals that capture your interest.

The affluent must know an advisor on a personal level and they must like what they see. Each advisor is his or her product and is always on display.

o If you want to target the affluent, you must either become a primary financial advisor or work with someone who is.Because there are so few competent primary financial advisors, they are initially difficult to distinguish from the slick marketing ofpretenders. As a result, many affluent have given up trying to find one. You must become what the affluent want!

o Your financial advisory process must be proactive. Financial planning is important, as are quarterly and annual review meetings. But they are not enough.

The affluent also want proactive contact regarding tax and other changes that might impact their investments. One characteristic that influences loyalty above all others is an advisor’s ability to resolve problems quickly to the client’s satisfaction.

o Personalized service is the essence of a successful wealth management practice. This is the Holy Grail of affluent relationships. The affluent want a Ritz-Carlton level of service combined with FedEx efficiency.

o The real compensation issue is full disclosure, not simply commissions vs. fees. The affluent want to know the details of your fee structure, what they are paying and what they are getting. They are not shopping for the cheapest advisor.

But they are price-value conscious and do not like the confusion, complexity and variances of financial product and service pricing. Fee structures must be fully disclosed and clearly understood.

An important part of our 2004 research focused on how the affluent select a primary financial advisor. We learned that as they progress through the decision-making process, they use different criteria.

For example, referrals and introductions are the most effective method for getting face to face with an affluent prospect. However, the final decision is made after careful evaluation and a comparative analysis. According to our research, affluent prospects do their homework, so advisors must be as advertised.

Our survey respondents indicated that the following 8 criteria influence their selection process for a “go-to” financial advisor, someone who:

o is proactive about contacting them when upcoming tax and other changes will impact their investment portfolio;

o clearly reveals their fee structure;

o clearly understands the goals and family situation of the affluent when giving investment advice;

o brings in experts to help with other financial areas;

o helps the affluent select the best asset mix for their investment portfolio;

o helps to create a formal financial plan;

o helps coordinate and organize all financial documents of the affluent; and

o coordinates and integrates investment decisions.

We know that the affluent cannot fully protect their assets or optimize their investment portfolio without the expertise of competent primary financial advisors. The opportunity or challenge for insurance professionals is to make the necessary adjustments and work every day to capitalize on this underserved market.

Matt J. Oechsli is president of The Oechsli Institute, Greensboro, N.C. You can e-mail him at [email protected].


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