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Finding the hidden HNW clients

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The rich. They are everyone’s favorite prospect. Agents call. Advisors email. Cruise lines and jewelers send catalogs. Political parties seek donations. Why? Because they appear on lists. But lists aren’t perfect. Many wealthy people don’t show up. 

Advisors must do research. Seek them out. Make new friends.

Now you are starting to building a HNW clientele.

What does wealthy mean?

On “Gilligan’s Island,” Thurston Howell III was the millionaire. Donald Trump, the celebrity and property developer is considered wealthy. Bill Gates is rich. That is our stereotype.

In most communities, wealth can be organized into four categories starting with High Asset, High Cash Flow prospects. They’ve got it socked away and keep earning more. Senior executives at listed public companies are a good example.

Low Asset, High Cash Flow prospects are your next wealth segment. They are great earners but haven’t put away that big nest egg. Engineers and scientists are good examples. They “work for someone else.” They aren’t good prospects for many wirehouse advisors because they have $250,000+ minimums. Insurance agents, on the other hand, have many ways to help people who can send monthly checks.

Thurston Howell III represents your High Asset, Low Cash Flow prospects. These are the “old money” families. Often money is held in trusts.  Sometimes the wealth isn’t money but property, jewelry or antiques. They can’t easily spend it. They own everything they need and rarely throw anything away. They are described as “cheap.” Their main focus is passing the money to the next generation. Estate planning plays a big role.

Some people don’t neatly fit into boxes. The “under the radar” wealthy are often people who make money legally and quietly but prefer you know as little as possible. They have diverse needs.

What about Low Asset, Low Cash Flow wealth? That’s the final possible combination. This category likely represents once-wealthy people who spent the family fortune, or newer arrivals who flaunt status symbols and finance their lifestyle on credit. Might they make good friends?  Yes. Are they good prospects? No.

Don’t’ start searching until….

There’s plenty of wealth living quietly around you. Determine your geographic market. It’s where you live or where you work. If you live and work close by, chances are your office location is the focal point. If you commute daily from a wealthy suburb, you might choose to build your business close to home. Why? You play golf nearby. Your children attend the local school. 

You may say, “Does this mean I can’t take clients from anywhere? I’m licensed for five states!” If business lands in your lap, take it. Your prospecting strategy is about finding the areas seriously wealthy people are likely to call home, searching out prospects within the wealthiest 2–5 percent of your geographic market, identifying where they live and populating your local market.

Finding high asset, high cash flow prospects: senior executives

Senior executives at listed public companies represent the jewel in the crown. You want firms with their headquarters nearby. If you work in New York, Los Angeles or Dallas you say: “We’ve got those.” What about the agent or advisor in Wisconsin or Idaho? “There aren’t any around here!”

Wrong! Business journals often list the Top 25 local firms. Many smaller ones are located nearby. Several websites enable local searching. The results are surprising. Grand Rapids and Western Michigan have about 43. Orange County, Calif., has about 176. San Antonio has 15. Buffalo and Western New York State, 46. 

Your rationale is simple. People who are high up enough in the firm to be listed in the company’s annual report are doing well. Think salaries, bonuses and stock options. You want names! But how?

Secure a copy of each firm’s annual report and find the page listing directors and officers. The average firm has 30. Smaller companies have less, banks more. How do you get the annual report? Writing and asking works, but its so 20th century! Visit the firm’s website. It’s usually available as a viewable pdf document. 

Researching home addresses

How do we find home addresses? You do the work or you pay someone else. If you undertake this project, start by selecting from one of several websites that replaced the telephone white pages. They often have a “people search” function. Enter the first and last names and the town for the company headquarters. The results should list one or more names. If you have incomplete names, try Googling the phone number. It often backs into the owner and address. 

“Aren’t they on the Do Not Call list?” you may ask. In 2010, the DNC list topped 200 million registrants. But don’t worry, you aren’t planning on calling, you want to meet them socially.

Your conscience tingles. “Aren’t I stalking them?” No. Think of yourself as computer genius Timothy Magee on NCIS, as played by Sean Murray. Everybody likes Tim.

Privately owned businesses

The wealth in the community is largely held by owners of established private businesses. It isn’t difficult to find the big ones.

According to a September 2012 report from the Small Business Administration, small businesses make up 99.7 percent of U.S. employer firms. They counted 27.9 million small businesses and 18,500 firms with 500 employees or more. Owning your own business is a big part of the American Dream.

“The Millionaire Next Door” by Tom Stanley and William Danko introduced the idea that your neighborhood plumber has likely amassed considerable wealth. How? Traits include staying in their original house, staying married and buying midsized American cars. In 1996, America awoke to the fact that some neighbors might be wealthier than we thought.

Certain small businesses can be “Cash Cows.” Tom Stanley used dry cleaners as an example of a business category with many millionaires. Remember “The Jeffersons?” George Jefferson, an African American, owned several dry cleaning establishments. The jewelry business is also known for high profit margins. Auto body repair shops, florists and funeral homes often do well.

High volume businesses can make their owners rich. Think car washes, liquor stores and gas stations. You don’t pay a lot but you stand in line to hand your money over.

Services billed hourly are another source. When an auto mechanic works on your car, the pricing is based on parts and labor. Electricians and plumbers, too. If more than one professional is on site, are they all collecting the hourly rate you are billed?

Think about how you have spent money over the past year. Landscapers, stonemasons and HVAC contractors can turn in high bills. What about business’ others use? Truck stops, convenience stores and self-service laundromats often do high volume.

Earlier, you used an electronic white pages website. It’s likely the site has a yellow pages function, too. Search out local businesses in these fields. You will be amazed at the number of convenience stores, gas stations, jewelers and auto body shops nearby.

You want a bigger firm. Consider highway construction. Companies painting lines, setting up orange cones and squeezing traffic can do quite well. The federal or state government usually awards the contracts. The firms often employ union labor.

Identify concrete contractors and excavation contractors. Expand your hunt to include contractors in asphalt paving, grading, pipeline and sewers. Add in heavy construction and ready-mix concrete. Think about specialties involving heavy equipment: dealers, rental, repair and moving. Your search might yield a couple of hundred local firms.

Tracking down the owners of private firms

When thinking about chambers of commerce, one local organization comes to mind I’m sure. But think bigger. The website allows you to search chambers by state. Your state probably has hundreds. Some Google searching should reveal your own city has several for different segments of town. Add in cultural chambers. The member directory on the public access side of the site is usually searchable by business category.

Many businesses don’t join the chamber. Most need to register with the Office of the Secretary of State. The website usually links to a division of corporations with a searchable database. This should reveal the owner, officers or agent of record with contact information.

Researching wealth in your market is part art and part science. It takes patience. It yields results.

Disclaimer: Always read and respect the legal and privacy notices on websites, only use websites for the purpose originally intended by the site, secure approval from your branch or compliance manager before initiating research and prospecting.