Consultant offers tips for servicing wealthy clients

By Kate McCaffery | June 30, 2005 | Last updated on June 30, 2005
3 min read

No matter how badly they want to grow their high net worth client base, many advisors are simply not equipped to properly serve millionaire clients, says one expert in the field.

Many have no clue how to effectively communicate in ways that are appealing to wealthy clients and chronic tunnel vision leads many to consider only investable assets has rather than the client’s entire balance sheet.

On top of this, it’s a competitive environment, says Keith Sjögren of Taddingstone Consulting Group. The population of brokers armed with wrap accounts calling themselves wealth advisors is booming, and growing much faster than the number of millionaires in Canada.

“It’s tough to take, I know,” jokes Sjögren. “But the competition is only going to get tougher.” The strategy consulting firm conducts a survey of millionaire clients every 18 months for institutional financial services firms in Canada. Sjögren says the latest survey will be available to the firm’s institutional clients in July.

The number of millionaires in Canada has grown about 10%, Sjögren told delegates at the Investment Dealers Association annual conference in Banff, Alberta. That number is dwarfed by growth in the retail and affluent parts of the market.

There is some opportunity, however, for those who get the millionaire business right. The rich are restless, they have choice, and wealthy investors are more willing to move than ever before. About 25,000 wealthy individuals change their primary advisors every year. Currently, Sjögren says there are roughly 46,000 new or newly-mobile millionaires in Canada and many mass millionaires feel underserved. The opportunity is likely greatest for advisors who are willing to learn from the experiences of their wealthy clients.

Simply taking a tax planning course or effectively segmenting your client base likely won’t cut it. In his presentation, Top Ten Complaints from Millionaire Clients, Sjögren discusses where advisors go wrong with millionaire clients, and the top reasons millionaire clients give for being dissatisfied with an advisor’s service.

Advisors who do well with millionaire clients are specialists, they measure their own performance, communicate well, give bad news well, educate rather than simply inform, keep an eye on the big picture, cultivate more “worldly” experiences and understanding, and provide a higher level of service to their clients. Customer service and the quality of an advisor’s support staff are also critical to maintaining the relationships.

As for clients, Sjögren says attitudes are changing. The number of millionaires who want partnerships with their financial advisors is on the rise. The number of soloists and delegators are also expected to rise in the future, but at a far slower rate than those seeking education. “Moving forward we’ll see a change in the types of relationships people want,” says Sjögren. “They want to sit down with advisors, get educated and participate.”

Interest rates and taxation are primary areas of concern from many millionaires. Nearly 60% believe investment performance is important, but giving adequate explanation for poor performance is even more important. Clients who receive good explanations for poor performance say they are generally very satisfied overall. Similarly, clients who measure advisor performance against a benchmark usually express higher levels of satisfaction.

Along with interest rates and taxation, clients are becoming increasingly touchy about fees and their affect on income. It’s not surprising given that the average Canadian millionaire is in their 60s.

What is interesting however are the growing number of complaints about fees related to managed accounts and wrap products. More than 70% of those surveyed say fees should be linked to performance. Many are also questioning the value advisors add to these relationships.

For those trying to target wealthy clients, Sjögren says it pays target the right groups. Doctors for example are quite comfortable dealing with groups like MD Management because they are confident the firm understands how they make money. Older millionaires generally don’t want to take investment advice from someone half their age.

Finally, Sjögren says it also pays to patiently “stay alongside the whales,” persistently and consistently showing interest, since large accounts can sometimes take years to land.

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Kate McCaffery