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(July 2002) According to Keith Sjögren — whose firm, Toronto-based Taddingstone Consulting Group, produces the Canadian Millionaire Report — Canadian millionaires (defined in the Taddingstone report as individuals with at least $1 million in investable assets) demand quality in everything, including their advisors. So how well do you know this market? Do you have what it takes to prospect and serve this market? Complete this Millionaire Market Material Workout and find out:

1. Most millionaires prefer conventional investment strategies.
   True
   False

2. As an advisor to a millionaire, your primary focus and strength should be investment strategies.
   True
   False

3. Millionaires don't mind carrying debt and make great banking customers because they use credit products.
   True
   False

4. Millionaires prefer to consolidate all of their financial needs with one trusted advisor.
   True
   False

5. Many millionaires show a decided lack of interest in their life insurance policies.
   True
   False

6. Millionaires don't have time for a lot of extraneous information, and prefer streamlined research and briefings from one source — their advisor.
   True
   False

7. Less than 25% of Canadian millionaires with a comprehensive financial plan had it developed by a financial planner.
   True
   False

8. When selecting mutual funds, the top criteria for millionaires is historical performance.
   True
   False

9. Full-service brokers already have a powerful hold on most of the millionaire market.
   True
   False

10. Once millionaires have selected a primary advisor, they tend to stick with that person.
    True
    False

• • •

Answers

The following answers are based on information from Taddingstone Consulting Group's 2001 Canadian Millionaire Report.

1. False. According to the 2001 Canadian Millionaire Report, millionaires love alternative investments. Twenty-three per cent of active millionaires have investments in private companies, followed closely by royalty and real estate investment trusts.

2. False. Twenty-six per cent of the over 400 Canadian millionaires surveyed for the 2001 Canadian Millionaire Report are retirees. "This is the largest single occupation category, and an increasingly aging population will add to this statistic," says the report. "Millionaires will logically place increased importance on retirement and estate planning; are financial service providers prepared for that?"

3. True. Twenty per cent of millionaires have yet to pay off their mortgage, 35% have loans and lines of credit and 25% carry a balance on their credit card.

4. False. Only 19% of the respondents to 2001 Canadian Millionaire Report indicated they are likely to consolidate all their financial needs with one advisor. More than 50% are concerned with the risk of "putting all their eggs in one basket," while 40% worry about a lack of objectivity.

5. True. Despite the fact that 77% of millionaires surveyed in the 2001 Canadian Millionaire Report reported having life insurance, 23% admitted to never reviewing their coverage.

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6. False. "There is a strong demand for varied, detailed and objective research for which millionaires are willing to pay," says the 2001 Canadian Millionaire Report. "They also turn to trusted external sources in various media such as CNBC and ROB-TV, periodicals, investor newsletters and many Internet Web sites such as Yahoo!Finance and BigCharts.

7. True. Only 24% of millionaires who currently have comprehensive financial plans had them developed by a financial planner. In addition, the use of financial planning companies dropped 7% to a mere 24% between mid-summer 2000 and mid-summer 2001.

8. True. Historical performance remains the top criteria for selection of funds. Only 40% of millionaires choose mutual funds based on your recommendations.

9. False. The 2001 Canadian Millionaire Report found that the percentage of millionaires dealing with full-service brokers fell to 71% in 2001 from 82% in 2000. Meanwhile, investment counsellors captured a larger portion of the market, moving to 41% in 2001 from 27% in 2000.

10. False. Twenty-seven per cent of millionaires switched their primary advisor over the last three years. One of the biggest reasons for doing so is frequency of contact. "On average, a millionaire wants to meet his primary advisor in a formal way every six months," Taddingstone's Keith Sjögren told Advisor.ca earlier this year. "In fact on average they meet once every eight months." Taddingstone's 2001 Canadian Millionaire Report found that 25% of millionaires claim they don't meet frequently enough with their advisor and that 17% of millionaires have not met their financial advisor within the past 12 months, despite declining markets, the tech bubble burst and the September 11 terrorist attacks.

• • •

Scorecard

Give yourself one point for each correct answer.

8-10 points: Fire up your Mercedes Benz (the car of choice for Canadian millionaires) and get out there to sign up more affluent clients — you are showing a strong grasp of this market.

4-7 points: You need to do a little more homework to fully understand the needs and wants of millionaires. As Keith Sjögren told Advisor.ca previously, "It's key for advisors to understand the mind of the millionaire, not just the balance sheet and the income statement — it's critical to understand how the millionaire behaves."

0-3 points: The only silver lining is that non-millionaires need good financial advice, too, so maybe it's best you stick to this market.

• • •

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(07/02/02)