What high-net-worth investors <i>really</i> want from advisers

If you think that an impressive track record is going to wow wealthy clients and persuade them to…

If you think that an impressive track record is going to wow wealthy clients and persuade them to make you their primary adviser, think again.
Wealthy clients want something else that only a small segment of advisers actually deliver, says Kenneth Haman, managing director of the Advisor Institute, a value-added training program at AllianceBernstein.
Speaking Tuesday at the Investment Management Consultants Association’s annual Advanced Wealth Management Conference in Chicago, Mr. Haman said that people with more than $20 million in assets assume financial advisers are good at the nuts-and-bolts of investment management.
“They don’t need technical expertise; they want someone who deeply understands the nature of their lives and who understands them as a human being,” Mr. Haman said.
Based on in-depth quantitative and qualitative research of wealthy investors — he cited an analysis of 300 individuals with $20 million to $49.9 million in investible assets; 300 with $50 million to $79.9 million; and 200 with $80 million or more — Mr. Haman paints a picture of the very wealthy that is surprisingly dour.
Only a slim portion of the wealthy feel in control of their financial lives, an even smaller number (fewer than 9%) enjoy thinking about financial matters and only about a quarter feel successful at investing.
Despite all their money, 99% of the wealthiest individuals and almost 90% of the other mega-millionaires feel that their financial situation is somewhat worse or much worse than their peers. And only about a third are happy with their current financial situation.
So how does a financial adviser get in front of the anxious and troubled super-wealthy and fix the problem? By having meaningful conversations with them over the course of many years, so they feel that you truly understand them, says Mr. Haman (who was a psychotherapist and chaplain before he started helping advisers become more productive).
“It will take about five years of constant effort to get them to concentrate their assets with you because it will take you that long to demonstrate that you really understand them,” he said.
The wealthy don’t easily engage with advisers because they’re leery of people who want things from them — and also because they are loath to admit that they are struggling to maintain self-esteem and self-image in the face of nagging insecurity.
The road to quelling your wealthy clients’ fears and winning them over is communication, Mr. Haman says.
“Frequency of contact is important, but they don’t want a barrage of market stuff,” he said. “They want to know that you are thinking of them, and that you are willing to invest time in them and their families. They are hungry for contact, and it can’t be mechanical.”
When the discussion turns to finance, your explanations should be in plain English they understand, not financial jargon. A written financial plan raises confidence considerably, as does a presentation laying out a few scenarios that give the client a sense of what life would be like under varying financial outcomes.
Another crucial factor is having a nearby office. “They want you to be local,” Mr. Haman said.
If you communicate, communicate, communicate and show that you understand and care, wealthy investors are likely to work with you, consolidate their assets with you and refer you to their wealthy friends.
“Advisers tend to reduce clients to their financial life. That doesn’t work,” Mr. Haman said.