Lisa Gray

ContactLisa Gray has been a wealth writer since 2001. She has been involved in the wealth management industry since 1988. She is the author of two bestselling books—The New Family Office and Generational Wealth Management.
read more ...

graymatter Strategies LLC

Contrasting The 1% With The 5%; Why Some Advisors Serving The 5% Might Try Moving Up-Market To The 1% edit
Friday, March 09, 2012 09:37

Tags: client loyalty | client satisfaction | communication | differentiation | investor behavior

There’s another side to the 1%: the 5%, Middle Class Millionaires, and they are your clients. You might even serve some of the 1%. Many advisors have one, two, or three ultra-high net worth individuals as clients. This post will help you see what the 1% and mass affluent have in common and how they're different. And it highlights how advisors focusing on the mass affluent could without great difficulty move upscale to serve more ultra-HNWIs.

This Website Is For Financial Professionals Only


 

While there has been a lot of focus in the press in recent months on the  widening disparity between America's rich and poor, few comparisons are made between the 1% and the mass affluent.

 

Middle Class Millionaires and the 1% have more in common than you might realize. Because of the 2008 crisis, the concerns they share have increased, such as:
·         Attitudes about wealth
·         Experiences in the marketplace
·         Angst over how much to leave to heirs
·         Succession worries
·         Family squabbles over an estate
·         Global investment focus
·         Greater interest in alternative investments
·         Children graduating from Ivy League schools
·         Well-educated children who can’t find work
·         Aging parents
·         Damage from the 2008 crisis
·         Difficulty talking about their wealth issues
 
Both the 1% and the 5% are concerned that wealth will spoil their children. Both seek investments that will offer more stable returns in a volatile market environment. They want to know what’s going on in the global markets and to understand the global impact on their portfolios. Both are less willing to trust; both are reluctant to spend money.
 
They have aging parents to deal with and adult children living at home. They are both facing their own retirement years and health issues as they age. And by and large, the wealthy at all levels are philanthropic.
 
And there are some things they may not have in common:
·         Yachts, planes, and Ferraris
·         A few zeroes
·         Children graduating from Ivy League schools
·         Damage from the 2008 crisis
·         Two houses
·         More than two houses
·         Damage from the 2008 crisis
·         Retirement concerns
 
The 5% are less competitive about having the biggest boat in the marina. The volatility of the markets impacts the lifestyle of someone with $5 million much more severely than someone with $500 million. The 5% are much more concerned about their quality of life during retirement.
 
A recent Boston College study asked 165 ultra wealthy about their wealth concerns. The average respondent had $78 million. Of those, 120 had over $25 million; one or two were billionaires. With society-at-large’s resentment of the 1%, it’s not exactly comfortable for the wealthy to talk about their problems. Society-at-large thinks the ultra wealthy have no problems.
 
Even those who had $5 million before 2008 are not exactly bursting with the news that they lost their vacation home and are now in debt as a result. And advisors of all ilk—including psychologists and therapists—may have their own biases against the wealthy. It’s becoming clear that offering the best investment management strategies may not be all wealthy clients need from their advisors.  
 
Some advisors are teaming up with wealth relationship experts and psychologists. The emotional side of wealth has always been the greatest influence on wealth management decisions. Only now is it being taken seriously as an integral aspect of client service.  
 
The point is that, from a service needs standpoint, it may not be as far a stretch from $5 million to $25 million plus as you might think. How many clients do you have with $10 million, $25 million, even $50 million or above? A few, most likely.
 
With over 40% of the 5% doing due diligence on their own, over 20% of both the 1% and 5% direct investing on their own, and only 40% or so depending on a trusted advisor, opportunity is the operative word!
 
How would it change your business to think about the similarities and differences between the needs of those clients? It may refine your service delivery in ways you never anticipated.
 

 

Comments (0)

Write comment

You must be logged in to post a comment. Please register if you do not have an account yet.

busy
 

Login

Banner

Hot Topics

    Banner
    Banner

    Comments

    Banner
    Banner
    Banner
    Banner
    Banner