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Big Opportunities To Advise High-Net-Worth Business Owners

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In the first two columns of this three-part series, it was pointed out that high-net-worth business owners have significant unmet financial needs from both a business and personal financial planning perspective. The next questions to be addressed are:

==Who is, in fact, serving their needs?

==Are there opportunities to break into this market as an advisor?

Traditional thinking has it that this market is already saturated with advisors, who are commonly accountants. In this year’s Phoenix Wealth Survey, we explored these commonly held beliefs and examined this issue from a different angle of interest to life insurance practitioners.

HNW Business Owners Largely Depend on Advisors

Much of the research on business owners has explored the advisor issue using the terminology “primary financial advisor.” In keeping with this approach, our research confirmed the traditional viewpoints regarding this market. We determined 71% of high-net-worth business owners have a “primary financial advisor,” indicating HNW business owners are more likely to be working with a primary advisor than other members of the wealthy population. That being said, it could be argued the 29% without a primary advisor also represent a sizable market waiting to be served.

As shown in Table 1, we also confirmed that accountants play a significant advisory role in this market.

Add to this data the fact that only 1% of HNW business owners say their insurance advisor is their “primary financial advisor” and this picture might seem bleak for life insurance practitioners. On closer inspection, however, it should be noted that while better than 7 out of 10 HNW business owners have a primary financial advisor, it doesn’t mean that all of these advisory relationships are on solid ground. Specifically, 17% express some level of dissatisfaction with their primary advisor. Additionally, 9% say they are looking for a new advisor, and 15% are not sure if they’ll be seeking a new primary advisor in the next 12 months. Add these two percentages with the percent that currently don’t have a primary advisor, and suddenly more than half of high-net-worth business owners are not characterized by a stable advisory relationship.

Finally, we tested the theory that the term “primary financial advisor”–which is utilized in many such research studies–may understate the presence of life insurance practitioners as advisors in high-net-worth businesses. Specifically, we tested by asking those with and without primary advisors whether they have an advisor for life insurance. The results are shown in Table 2.

Interestingly, of those without a primary advisor, nearly 20% have a life insurance advisory relationship. The challenge for these life insurance practitioners is to graduate in their clients’ eyes to being their primary advisor. In nearly one quarter (22%) of these advisory relationships this may already have taken place, for these business owners report their primary advisor and their advisor for life insurance is one and the same. And, in 38% of those with a primary financial advisor, advice regarding life insurance is being received but from a different advisor.

We can draw two main conclusions from Phoenix’s research on high-net-worth business owners: Life insurance advisors are playing a major advisory role in this market with more opportunities waiting to be served; and, when reviewing the results of any survey, always pay close attention to how various concepts are worded.

Walter H. Zultowski, Ph.D., is senior vice president, market and business development, with The Phoenix Companies, Inc. He can be reached via e-mail at [email protected].


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