Within the high-net-worth market, who’s a good prospect? And how do you find that prospect in the first place? Three top producers share their techniques.
This is part three of a three-part Producer Roundtable. For more see:
Part one: The road to the high-net-worth market
Q. What defines your ideal prospect in the high-net-worth market, or is there such a thing for you? In other words, do you look for a certain minimum net worth or a minimum total of investable assets? And in addition — outside of referrals — how do you prospect for new clients?
Marvin H. Feldman, CLU, ChFC, RFC, president of Feldman Financial Group and president and CEO of the LIFE Foundation: Referrals through an introduction are the best source of new clients. And while I do not actively prospect today, I looked for people and companies who were in similar financial positions as my clients to best apply my experience — small closely held companies with net worths of $5 million to $100 million, where there were estate planning and business succession issues that needed to be resolved through sophisticated planning funding with life insurance solutions.
Peter R. Magni, LUTCF, financial representative with the Wellesley Financial Group in Wellesley Hills, Mass.: An ideal prospect in my market is a physician who understands that he or she must make financial decisions regularly and is not afraid or reluctant to address each issue as it comes along. I have been referred to physicians who simply want to gather advice and do their own planning without getting real professional assistance with their decision-making. I call this do-it-yourself surgery. Also, an ideal prospect is interested in developing a trusting relationship with an advisor. If that relationship does not develop in the first couple of meetings, it becomes very difficult to continue working with this kind of prospect. I do not set a minimum net worth or minimum investment portfolio for new prospects that I meet with. I feel I can help them develop their net worth and investment portfolio over time.
My primary method of prospecting for new clients is through seminar selling within various medical departments at hospitals. I conduct general financial seminars to help physicians understand and address the key issues they will face.
Keith Eck, CLU, ChFC, founder of Keith Eck Financial & Insurance Services: I developed a niche in the Imperial Valley, which is a farming community between San Diego and Arizona. My ideal prospect is either a farming family, a business supporting farmers or a low-tech business. I have found that I connect well with those types of business owners and enjoy working with them much more than working with other occupations and industries. While my ideal clients are companies in the $5 million to $50 million range, I also like meeting younger business owners because it enables me to provide financial guidance both for their business and personally, during a time the business owner knows there is not much money for me to make. If the business does not make it, I typically did not allocate much time, and if they are successful, then I should have the inside track as the trusted advisor for the advice we provided in the early years of their company.
Most of our clients are from referral, but we are also trying to generate clients through writing a monthly article for the local newspaper, our informational blog regarding business succession issues and by hosting complimentary workshops in the Imperial Valley.
Q. With your business model serving the high-net-worth market, is any part of the model fee-based? If so, can you describe how that works for you, and how clients feel about it?
Magni: I have resisted using a fee-based model with my practice because I need to spend a great deal of time with each prospect as I develop the relationship, and I don’t want a fee to become cost-prohibitive in their minds. Since all the products I sell are commissionable products, I receive my compensation in this manner, and my clients are generally happy with this system. They understand that I sell many high-quality products to address their needs, and my compensation is derived from these products.
Eck: I have been trying to move as much of my business into the fee-based model as possible because I believe that is where our industry is heading. Most of my assets under management are on a platform that I receive a percentage of what the managers earn versus an upfront commission. I also charge fees for business succession planning, financial planning, and what we call our Financial Snapshot, which is our initial analysis of a prospective client’s financial situation relative to his or her goals and objectives.
Feldman: I charge both fees and commissions, but I offset my fees by any commissions received. Like any other professional, I need to be paid for my time. Clients are used to paying fees, so this is typically not an issue.
Q. Any closing words of advice?
Eck: For those who want to work in the high-net-worth market, the best advice I could give a younger agent is to decide what part of the high-net-worth market you want to specialize in and then either find a seasoned agent to partner with or develop a strategy on how you are going to approach your specialty alone.
Feldman: This is not an easy market to break into, so don’t stop what is currently working for you today. Work into the high-net-worth market one case at a time. As you develop more high-net-worth cases, you can eliminate some of the traditional market you have been working in. While I specialize in the high-net-worth market, I still have many clients in the middle market, and I thoroughly enjoy working with them. These cases have smaller problems with smaller solutions, but I experience the same personal satisfaction in knowing their families are protected.
Magni: The high-net-worth market offers many challenges to advisors and is constantly changing. Any advisor seeking to enter this market must be prepared to constantly educate themselves in these ever-changing issues and must keep current with jurisdictional regulations. One cannot enter this market with a simple approach to problem solving and single-needs planning. An advisor must be prepared to stay in the market by constantly performing the hard work required of it.
For more on the high-net-worth market, see: