More than a third of emerging high-net-worth consumers lack financial advisors. For annuity maker Jefferson National, this gives RIA-based and other fee-on-assets FAs a crack at a lucrative client base that straddles all demographic categories — provided they adopt an attitude attuned to the service needs of these would-be clients.
Louisville, Ky.-based Jefferson National, a subsidiary since March of Columbus, Ohio-based insurance giant Nationwide, pegs emerging HNWs as individuals with liquid assets worth between $500,000 and $999,999. HNWs have between $1 million and anything shy of $5 million, and ultra HNWs have $5 million or more to invest, according to the firm.
But emerging HNWs aren’t all millennials or members of Generation X. In fact, these two demographics as the firm defines them — ages 18 to 26 and ages 37 to 52 — account for just 21% of emerging HNWs, split roughly down the middle, Jefferson National says in its third annual Advisor Authority report.
Meanwhile, the biggest cohort for the emerging-wealth bracket is the age 53-71 baby boom generation, which makes up 62% of emerging HNWs. Those age 72 and above -- “matures,” as Jefferson National calls them -- make up 17% of emerging HNWs.
Difficult as emerging HNWs may be to pin down by age and without appealing to some of the service characteristics proverbially associated with different age bands — millennials go wild for tech, boomers dig lifestyle appeals — targeting them remains “essential for advisors to enhance profitability now and position their firms for the future,” says Nationwide executive Craig Hawley. “RIAs and fee-based advisors in our study rate the pursuit of profitability as their single most important practice-management issue” while “the push for new clients like emerging HNWs remains the top driver.”
And it could be trouble worth taking. Emerging HNWs currently represent a growing segment of about 12 million households, or nearly 10% of all U.S. households and 18% of the affluent population, says Jefferson National.
Job one for winning over members of this disparate troop is instilling confidence, according to the Jefferson National study. Emerging HNWs are to begin with more confident than other wealth bands. And roughly two-thirds of them who already have advisors say they employ FAs to make them feel, in one way or another, more confident.
Jefferson National says it makes sense for advisors to play to this characteristic by stressing the importance of confidence-building financial planning.
Emerging HNWs also feel more secure when FAs take pains to show they put their clients’ interests first. “You can’t just say you put the client first,” says Eileen O’Connor, CEO of Tysons, Va.-based Hemington Wealth Management, an RIA with about $600 million under management. “You have to live and breathe it.”
Hawley elaborates. “Putting clients first means making the commitment to transparency in the fees that you charge, the products that you use, and the breadth of choices that you offer,” he tells FA-IQ.
Empathy is another vital trait for winning over emerging HNW clients, according to the Jefferson National report. The big thing on these investors’ minds is wealth preservation. At rock bottom they don’t want to lose what they have. Listening with patience, sympathy and understanding to this fear can strengthen emotional ties between client and advisor.
“The opportunity is huge,” Hawley says in an email to FA-IQ. “In a market where asset management is becoming increasingly commoditized and competition for emerging HNW clients continues to grow, the real key to attracting and retaining these affluent investors comes from leading with holistic planning, customized offerings, and putting the client’s best interest first.”
Beyond these intangibles, emerging HNWs prize experience in their advisors (54%), adherence to “a fee-based fiduciary standard” (31%), and a commitment to “personalized holistic planning” (22%), the report tells us.
Jefferson National urges FAs with less experience to “consider partnering with more experienced advisors within their firm and building multi-generational teams.” It also suggests making “greater transparency and greater choice a top priority” to be “consistent with a fee-based fiduciary standard.” And “to provide more personalized and holistic planning, consider partnerships with specialists” like accountants, trust lawyers and estate planners, the report says.
For Ed Friedman, head of strategic relationships at wealth management infrastructure provider Dynasty Financial Partners, the business of attracting emerging HNWs comes down to “redefining your practice by building on your success and identifying areas of opportunity” with an eye to the “services these clients value or don’t value.”