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No client should be considered too small or not worthy of attention. Try not to look at the revenue you get from the initial transaction when opening the account. Look at what the account could develop into over time. This is the lifetime revenue aspect of the relationship.
Years ago, I heard this was a study the Cadillac auto brand conducted. They looked at the profit General Motors made when a customer bought a Cadillac for the first time. In a competitive market where car buyers shop around, it might not be that much. But what happens when you look a decade or two into the future? If the buyer was happy driving a Cadillac, they might turn it in and buy another every few years. Their Cadillac will need regular service, which will probably take place at the dealership. The small amount of initial profit is dwarfed by the future revenue if this Cadillac owner becomes a loyal customer!
If you are cultivating a relationship with a HNW individual, it is unlikely they will give you all their money at the time of the first transaction. They will want to “try you out.” Why? Because they wonder if the promise of personalized service will materialize after they become a client. They wonder if their investments will perform as advertised. They will wonder how you interact with them if the stock market goes through a rough patch. They might never admit they want handholding, but they will want to know you are paying attention.
How much does the client have in investible assets? This should be apparent when you do financial planning at the start of the relationship. Do they have established relationships with one or more financial advisors or do they own CDs at different banks that will gradually come due? Are they paid by salary plus an annual bonus? What does that look like? What do they have in retirement assets, both with their employer and elsewhere?
This gives you an idea how the relationship might grow, assuming you both hit it off and develop a professional relationship.
Here are other factors to consider:
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Are they an influencer? The Development Director at the local museum might not be rich, but they are cultivating major donors for the museum. They are good at blending their personal and business lives. They might help you with introductions. The HNW person might ask if they do business with you. You want that answer to be yes.
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Can your friend be a conduit to their wealthy parents? Your college friend might not be rich, but their parents are wealthy. If they act as an intermediary, helping you get their parent’s business, you want them to speak from firsthand experience. The friend is your client. They had a good experience. They think their parents will too.
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Do they direct money that is not their own? They might be on the finance or investment committee for a nonprofit. They might be connected to a foundation or the endowment at their college. They have the potential to get you in front of the decision makers. You want them speaking from personal experience. Saying He’s a good guy” is not enough.
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Is an inheritance on the horizon? There are situations where you might be confident if your friend got a windfall, the funds would flow in your direction. You want to have this client relationship already in place, instead of reminding them when the times comes what they said they would do.
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Is it a startup situation? Your friend has a business in the technology sector. It’s in the early stages, but you think it has promise. Once they scale up, you know the investment bankers will be all over them. This is your friend. Try to get a relationship in place before they appear on the radar of your competitors.
There are many reasons to take on a client based on where you think the relationship will be in the future, not judging solely on what they have now.