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Written by: Jim Stackpool
Is your advice firm striving to crack the ‘High Net Worth’ market – i.e. rich people?
It’s not getting a bit ‘old-fashioned’ for advice firms is it?
I suppose if you use other people’s money to make your money, the high net worth client is a logical focus. Similar to the bank robber ‘ s attraction to banks (i.e. follow the money!)
There are lot of reasons to focus on this market.
Apart from having lots of money, the high net worth client is usually accustomed to delegating.
The people with the big bucks often have the big houses, the big boats, big jobs or big businesses and take big holidays. They generally have greater propensity to use experts to better manage their life and all the ‘big’ things in it. The high net worth market is accustomed to seeking out specific expertise. Thus, hard gained experience in tax, or structures, or underwriting, or property, or risk management, or stock-picking, is usually better rewarded.
Being rich also really helps pay fees!
Particularly if you charge by percentages of product where the maths and ‘percentage game’ is more attractive at this end of the market. Small percentage gain in large assets enjoys larger consequences (and possible success fees?). Plus the on-going percentages of large risk premiums or assets can quickly fill the on-going renewal income nest for potentially years to come.
For some advisers, working with this market is also a status and reputation thing.
For advisers that like to brag about their big overseas holidays, or the number boards they sit on, or the expensive timepiece on their wrist or being a high bidder at the big corporate charity auctions, there’s a certain kudos among some ‘advisers’ being able to brag about their high net worth credentials. It seems to carry more reputation than the hard work with Centrelink pensioner clients.
In fact, the current ‘advice’ industries obsession with the high net worth market has led a lot of Australians to believe that financial planning is only for rich people.
Or is it?
Where’s the value?
Do you send your kids to the school where the primary focus is on their curriculum or their primary focus is on your kids?
Do you prefer the doctor who is the ‘gun’ surgeon or who has the reputation of surgery only as the very last option after all other alternatives are fully considered?
Is the high net worth market still the ultimate proposition for financial advisory firms in 2014? Or is the term a throw-back to pre-GFC era when more consumers believed that the primary job of financial planners was the management of money and associated risks? Has that perception of the function of financial planners past it’s peak just like traditional newpapers and their ability to attract advertising?
Consider school fees.
Why do so many Australian families willingly go into debt to put their kids into expensive schools when cheaper and good alternatives are often available? Obviously they perceive value. How many Australians today knowingly go into similar debt to get great but expensive financial advice? It’s almost unheard of, isn’t it?
Does the whole financial advice industry need a re-invention to deliver advice whose value could parallel expensive school fees? Could it ever be possible that one day ‘middle or low’ net worth clients might see the value in great financial advice and, like expensive school fees, actually begin to better understand that possibly even having to go into debt to pay advice fees might be the best debt they have ever considered?
I don’t believe those firms that specialise in the ‘net worth market’ are going to be early adopters of these new propositions. It’s a bridge too far for their beliefs and experiences that reinforce their current approach to deal mostly with ‘rich’ people. Without experience, or more importantly confidence, in the ‘pure’ advice market without reliance on lots of money (i.e. product), making good consistent profits from people who aren’t high net worth seems too hard and isn’t impossible.
Is it possible that ordinary Australians will come to value advice and the fee associated or will it always only be valued by the ‘high net worth’ and other ‘rich’ people.
Or is it time to start experimenting? Maybe consider removing your ‘expertise in the high net worth’ market off your web site? Maybe replace it with an authentic advice expertise that you really believe in and wish to be known as an expert in? Is that a possibility, to actually get paid for YOUR specific expertise with people rather than your preceived expertise with their money?
What do you reckon?