Industry News

Growth of the affluent market presents a significant opportunity for financial planners

By Megan Harman |

The number of affluent investors in Canada is set to surge in the next seven years, which will spark a growing appetite for advice, according to Grant Shorten, director of strategic insights with Renaissance Investments.

At the Canadian Institute of Financial Planners’ 2011 conference in Ottawa on Tuesday, Shorten presented research from Investor Economics showing that the number of millionaires in Canada is set to double by 2018. These households, which represent just 5.5% of the Canadian population, will control $2.8 trillion, or two-thirds of all financial wealth assets in Canada.

“The wealthy are coming in droves,” he said. “This is an invasion of the affluent.”

Also set to grow dramatically is the ‘upscale’ market, comprised of individuals with $500,000 to $1 million in investible assets. This group will grow by 91% by 2018, and will hold assets worth a total of $545 billion.

The ‘mid-market,’ comprised of those with $100,000 to $500,000, will expand by 68% in the same period, and will hold assets worth $567 billion.

The ‘mass market,’ meanwhile, which includes those with investible assets of less than $100,000, will grow by a much slower pace of 9%. This group represents 78% of households in Canada, but by 2018, it will control just 8% of the country’s wealth, at $326 billion.

The growth of the affluent market presents a significant opportunity for financial planners, according to Shorten.

“The competition for the business of the high net worth household is intense,” he said. “Given the outlook, it’s set to become a battleground in which there will be clear winners and losers.”

In order to appeal to high net worth clients, Shorten said advisors must become familiar with the fears, priorities and expectations of this segment of the market.

He pointed to survey results showing that the top three financial priorities of high net worth individuals are:

1) Achieving protection from taxes
2) Maintaining their desired lifestyle in retirement
3) Simplifying their financial affairs

Advisors should cater their services to these key priorities, according to Shorten. For instance, help clients simplify their affairs by giving them a binder to use as a financial organizer, in which they can compile all of their account statements, insurance information, estate information and financial planning documents.

“That can start the process in a very powerful way,” Shorten said.

Advisors should also ensure they’re meeting affluent investors’ expectations. These include:

1) Complete objectivity: High net worth clients want conflict-free and unbiased advice, according to Shorten. “They want to know that all of the recommendations you are making on behalf of their hard-earned wealth are based solely on their best interest, and not on your own,” he said.

2) Full transparency: Fully disclose how you get compensated, how products work, and what they can expect from you, Shorten recommends.

3) Competitive advantage: Show clients what differentiates your services from other advisors, and your competitive edge in the marketplace.

4) Defined process: Clearly outline the financial planning process that you follow. “The affluent are drawn to stuff of structure and discipline,” Shorten said.

5) Brilliant customer service: “Affluent people talk to each other, and they love to brag about how ‘my advisor goes above and beyond,’” he said.