Hitting the HNW jackpot

By Keith Pangretitsch | April 1, 2010 | Last updated on April 1, 2010
6 min read

Every now and then I’ll buy a lottery ticket and dream of winning millions. If I had $10 million, I’d hang out in my house on the Riviera, drive into town in my hot Italian car to pick up some wine and cheese… wait, I’d have a hot Italian butler do that for me.

It’s great to daydream, but we all know the odds of winning millions are slim to none.

Being an optimist, I quickly moved on to thinking about the chances of having a client who just won millions, and suddenly the probabilities increased. I’m sure many advisors hope for that stroke of luck at least once, but in the 17 years of working in this industry with hundreds of different advisors, I have only heard of that happening three times – with the biggest client bringing in a $25 million windfall.

If you want even better odds of winning millions, a more realistic strategy is to attract more high-net-worth clients to your business. The million-dollar question, of course, is: how do you win more HNW clients?

What kinds of clients are you currently attracting?

Some advisors are often quite shocked by their success in the high-net-worth space once they think about their client lists. Here’s a simple test you can do to assess your success in building high-net-worth relationships. Add up the number of clients in your book of business who brought in more than $10,000 in gross revenue to you in 2009. If this is a little unfair, considering the market we went through last year, feel free to go back to 2008 or 2007 figures.

The next step is to add up the number of years you have been in the investment business. Take the number of HNW clients and divide it by the number of years you’ve been in business. You’ll end up with a number that tells you how many HNW clients you have added on an annual basis. If the number is between one and three, consider yourself normal. If the number is between six and 12, you are among the best in your field.

Target a HNW client niche and build in that market

If you’re averaging between one and three new HNW clients a year, how do you get to 10? I propose you start by looking at your existing HNW clients and identify the ones you enjoy working with. Next, determine which of those HNW clients work in an industry with the most potential, and make yourself relevant in that target market—such as manufacturing entrepreneurs, doctors, oil and gas executives, just to name a few.

The most common pushback I get from advisors looking for a target HNW market to infiltrate is: “There are not enough doctors, entrepreneurs, and executives in my city.”

My experience has led me to different conclusions. Whether it’s the small town of Estevan, a mid-sized city such as Calgary or a metropolis such as Montreal, there are ample opportunities to cultivate HNW clients.

For information on business directories in Canada you can go to www.infocanada.ca. A quick search for dentists in Calgary brought 461 listings. Of those 461 dentists, 341 dentists generated revenue of between $500,000 and $1 million.

But hold on to your dental floss. Before you start smiling and dialling, step 1 is to work with your existing HNW dentist clients in order to ready your practice to start delivering the investment services they need. Like most HNW entrepreneurs, dentists have business needs, insurance needs, benefit and pension needs for staff, retirement planning (RCA, IPP), personal and business tax filing and planning, and succession planning needs.

Too often the HNW entrepreneur is wearing too many hats (accountant, marketer, benefits specialist, etc.) to do a good job at any of them. If you can set up your practice to serve these special HNW needs, it will make your clients’ lives easier, and, in turn, raise your competency in the mind of your client.

It isn’t enough when working with high-net-worth clients to just be a nice, honest person. The HNW market demands facts that are accurate and delivered with confidence. The only reason clients would refer your business is if they feel they are doing their peer, family member or friend a favour. Your job is to ensure your business is referable to your target market before you start building your brand in that market.

Package services for HNW prospects

If there’s one thing that is broadly needed by any client, it is an advisor’s ability to help people get organized. Until I sat down and got serious about my financial situation with my advisor, I was totally unprepared for any significant hiccup in my life. I had no will, no financial plan, no tax strategy, no insurance, nothing, with the exception of a decent investment account.

If I am in this business and work with advisors on a daily basis and I am disorganized, how many HNW individuals do you think are the same way? We need to continue to embrace the idea of providing complete wealth management. More and more HNW clients are looking for black and white deliverables from advisors. Things that fall into this category are wealth management deliverables: a will, insurance, income-splitting, tax and financial planning.

Your relationship with your HNW clients will be strengthened if they can clearly see that they are more organized because of working with you. If all you do is manage their money, your relationship will inevitably ebb and flow with the markets.

A great example of this is an advisor who organized a team of financial professionals to help his HNW entrepreneur clients – his target HNW market. He partnered with a business valuation specialist, corporate finance person, private banker, and a pair of lawyers to provide business succession planning.

The business valuation team allows the entrepreneur to value business outside the scrutiny of the marketplace and potentially fix any shortcomings to increase the value of the business before the sale. The corporate finance team assists any potential buyer by providing financing. They know the company and situation well and can move the process along as quickly as possible. The private banker gets the banking assets upon sale. Overseeing the transaction are the lawyers who are familiar with the team and bless the deal. Russell Investments also partnered with this advisor by providing him with the same high-end proposal tools we use to compete for $50 million to $250 million institutional accounts.

Based on the success of these partnerships, entrepreneurs have referred significant business to the advisor’s team. Many of these entrepreneurs also tend to be perpetual dealmakers and some of them like to take part of the money they have made in a transaction and do it all over again – which provides potential future business for the team.

Luck has very little to do with landing HNW clients

In business, the more successful you are the tougher the competition gets. However, the difference between one competitor and the next shrinks significantly at each level of success. I am sure Roger Federer or Sidney Crosby stood out unbelievably as youths playing tennis and hockey, a little less so in their teens, and less again now that they are on the professional stage. I am certain the small gap that separates the top athletes from the pack has nothing to do with luck and everything to do with determination and practice.

Likewise, you can look at a colleague who is producing large revenues and you wonder if luck shone on them at some point. In the majority of cases I’ve seen, the top advisors are more successful because they have put in the extra effort to understand their HNW clients better, and thus served them better.

Think of an advisor – in your branch, firm, or city – who has had success targeting a marketplace with lots of HNW prospects. In my experience, such advisors have very well-organized businesses with professional team members and a clear plan to attract HNW clients. They know where they’re going and they know what they have to get done to build their book. In doing so, they’ve essentially written their own million-dollar ticket, instead of hoping to luck out on a lottery ticket.

That being said, I still may buy a Lotto 649 ticket this week. Even if I don’t win, maybe I’ll be lucky enough to chat up a potential HNW jackpot winner.

  • Keith Pangretitsch is the director of private client services at Russell Investments Canada.
  • Keith Pangretitsch