Many financial advisors dream of catering to the most elite investors seeking advice on how to invest their great fortunes. With thanks to the Spectrem Group, which surveys ultra-high-net-worth investors–those with $5 million to $25 million in assets to invest–on a quarterly basis, here is an inside look into the attitudes and characteristics of the denizens of elite advisors’ mahogany-paneled executive suites.
- The ultra-high-net-worth are young retirees, who amassed their great fortunes as managers, business owners and senior corporate executives. Their average age is 61; only 24% are still working full-time. The fully retired (63%) vastly outnumber the semi-retired (13%).
- Most of the ultra-high-net-worth seek the help of a professional advisor. A third of UHNW investors enjoy regular advisory relationships and another 27% seek an advisor’s help when events impel them to–for example, when they want to plan for retirement or diversify an overly concentrated portfolio after a corporate liquidity event. There is plenty of room for advisors form new relationships or expand existing relationships with UHNW investors. Fully 43% of UHNW assets are untended by advisors. And while UHNW investors express the highest level of satisfaction with their advisors (80% are satisfied), a smaller percentage (70%) were pleased
- How does an advisor impress one of these coveted clients? By being honest and trustworthy. That is the preference of 99% of UHNW investors choosing a new advisor; in comparison, only 83% said fees were a key concern, less than those who identified the advisor’s track record (93%), transparency and communication (93%) or depth of products and services (86%) as key criteria. Evidently, this is where an advisor’s reputation, built over many years, counts the most.
- How does an advisor lose his UHNW clients? Poor communications is the key reason identified by UHNW clients, including not returning phone calls in a timely manner (57%), not proactively contacting the client (49%) and not returning emails in a timely manner (42%). In contrast, not providing the client with good ideas and advice (49%) and long-term portfolio losses (29%) were of lesser significance. Most UHNW clients hear from their advisors on a monthly (49%) or semi-annual (33%) basis, and are satisfied with the frequency of the advisor’s communications tools (account statements, newsletters, face-to-face meetings, etc.). However, UHNW were less than impressed with the quality specifically of newsletters (23% satisfaction) and blogs (11%).
- How loyal are UHNW clients? Most (62%) have just one advisor. In the event an advisor separated from his firm, 60% of clients would follow the advisor whereas the safety and brand name of the firm would keep 40% of clients in their place. Two-thirds of UHNW are comfortable with the fees they pay their advisors, and they prefer fees over commissions by a two-to-one margin.
While little in this report should come as a surprise to those familiar with ultra-wealthy investors, the very low satisfaction with advisor blogs may provide the best clue as to how advisors may prospect among this client segment.
Spectrem suggests that newer forms of online communication may provide an opportunity “not only to communicate with existing clients but to appeal to prospective clients who will become familiar with your investment attitudes.” Such communications may also provide advisors with a venue to build the reputation for honesty and trustworthiness that UHNW investors desire most in an advisor.