It’s common for advisors operating on the fee-based model to have large assets under management (AUM) requirements for clients. Say $500,000 and up. After all, the math is compelling.
A client that comes in the door with $1 million in investable assets paying 1% annually in fees becomes lucrative over the long-term so it’s understandable that advisors target affluent prospects, also known as high-net-worth investors. There’s also a stratosphere beyond high-net-worth conveniently known as ultra-high-net-worth.
That’s when the big(ger) bucks start rolling in because there’s fluidity in the definition of ultra-high-net-worth, many experts agree the floor is $30 million, confirming the desire of many advisors to land such clients. Statistically speaking, it’s difficult to land such clients simply because there aren’t many of them. The percentage of Americans worth $25 million or more is just 0.12%.
Obviously, 0.12% isn’t 0% so yes, there’s a chance an advisor can successfully court an ultra-high-net-worth prospect or family. However, successful courtship of the 0.12% relies on another “C”: capabilities.
Better Have the Goods to Woo the UHNW Crowd
With highly affluent people having added to their wealth in significant fashion in recent years and with the great wealth transfer accelerating, it’s incumbent upon advisors to understand these clients’ unique circumstances. For example, ultra-high-net-worth clients are more likely than others to own multiple properties and more likely to have above-average holdings in illiquid assets such as art, vintage automobiles and wine. Advisors also need to know how to leverage technology to attract and retain highly affluent clients.
“While it’s not a new trend, advances in technology have accelerated the democratization of products and services that have historically been reserved for institutions and the ultra-wealthy, including expanded access to alternative investments and customized separately managed accounts,” observes Fidelity. “This dynamic contributes to rising expectations down-market. But it has a similar effect at the top, where firms of ten pioneer new wealth management capabilities.”
There’s another “C” word advisors need to be aware of: “competition.” “Everyone” wants to work with ultra-high-net-worth investors, including advisors, family offices, private banks and beyond.
“For example, national brokerage firms are moving down-market, while digital-direct firms and registered investment advisors are growing $10M+ relationships faster than any other type of firm,” adds Fidelity. “As wealth managers expand into new markets, they generally bring their capabilities, practices, and client expectations with them.”
Understanding Matters
Ultra-high-net-worth clients share at least one thing common with “regular” folks: they’re not cut of the same cloth on a personal level. Said differently, an advisor working a highly affluent New York law firm partner should take a different approach than would be deployed with a Texas energy executive even if both clients have comparable net worth.
When it comes to the top 0.10%, remember the value of deliberate, targeted approaches, the latter of which should be implicit, but cannot be forgotten.
“Firms also need to structure their UHNW business in ways that allow them to profitably curate, market, and deliver those offerings,” concludes Fidelity. “And that business may look very different from the firm’s core wealth practice and require distinct resources, strategies, and operational models.”