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It is not all about price. When businesses by supplies or raw materials, the purchasing department might put out criteria and see who can provide what they need at the lowest possible price. When mass market investors talk with advisors, they might want to play hardball over fees. Surprisingly, getting the cheapest price is not top of mind for HNW individuals. What do they want?
It is not only HNW individuals who are willing to take price out of the equation if they perceive value. This holds for most people in certain other situations. A heart transplant might cost a million dollars before taking insurance pricing into account. Few people would shop around. They would want the best surgeon performing the operation in the best hospital. Medical tourism would likely not be an option. Heart transplant operations might start at about $38,000 overseas, but most people would feel the risks outweigh the rewards. (1)
What do HNW individuals look for in an advisory relationship? While researching my book Captivating the Wealthy Investor I came across three primary criteria.
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Ideally you are a known quantity. I’ve heard this expressed as “you made someone they know money.” Making money comes under the heading of “adding value.” I like this advisor because she loses me less money than other advisors isn’t a strong recommendation. They could eliminate the risk of losing money in the market by simply not investing. If they were looking for an accountant, they would want someone whose clients are not subject to frequent audits. The HNW individual will seek out an individual or a firm that has a positive reputation that precedes it.
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Possess the right knowledge. If you are a C-suite executive, you want an advisor who has worked with other C-suite executives. If you own a medical practice, you want an advisor who understands how medical practices and features like their retirement plans work. You do not want someone who is going to be practicing on you.
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Make life simple. HNW individuals have other things to do with their time. They are running businesses or enjoying retirement. Unless investing is their hobby, they want someone to handle the day to day details and keep them updated on the big picture. They might have assets in different accounts all over the place. If you can take the lead in bringing these assets under one roof or interacting with the providers, you are taking a burden off their shoulders. This adds value.
When you are competing for business in the HNW space, you hopefully have a good firm behind you and a good team ready to deliver a high-quality experience. You will be available when they need you but otherwise keeping them updated and asking for decisions when necessary.