You might see wealthy individuals as the “holy grail” of financial advisory clients. But as profitable as high net-worth (HNW) clients may appear, serving some of these clients can be a challenge.
“There’s no doubt that wealthy clients can make a substantial contribution to your top-line revenue and AUM [assets under management],” says Yvonne Jodhan, marketing consultant with Alternative Asset Research Inc. in Toronto. “But some can be a drain on you as well as your resources. They may expect too much because they know their value to your practice.”
Jodhan divides wealthy clients in two broad categories: those who recognize that you are there to help and appreciate what you are doing for them; and those who treat you like hired help and have unrealistic expectations.
You should, therefore, take steps to ensure that any clients are a good fit before taking them on, regardless of their assets.
But, Jodhan says, for many advisors the lure of a wealthy client often overshadows personal compatibility.
Here are some challenges you should consider if you decide to work with wealthy clients — bearing in mind that they are not all the same:
> They may expect a lot, for little
Wealthy clients have tremendous bargaining power given the size of their assets. Some “nickel and dime” on fees, Jodhan says, and often end up paying a fraction of the average fees of an advisor’s other clients.
Yet these clients may expect a lot from you in the form of services. When you subtract the cost of additional services from the lower-than-average fees you may be charging them, you may find that some wealthy clients are not as valuable to your practice in real terms.
> Some show little respect
Some wealthy clients demand instant attention and often do not take your advice or respect your time. Yet when things go wrong, they place the blame on your shoulders.
“Some clients can be downright relentless and threatening when dealing with you,” Jodhan says.
> They often lack loyalty
Wealthy clients can be fickle, and often believe they are invincible. HNW clients can have you in a state of anxiety over whether they will take there business elsewhere the instant you fall short of their expectations.
> You may have to deal with many intermediaries
Wealthy clients often have several professionals such as lawyers, accountants and trustees. If you are not driving these relationships, you will have to deal with a variety personalities who are directed by the client to deal with you.
This type of arrangement can be time consuming and often challenging because you will be dealing with professionals with whom you do not have a previous relationship, and this can result in conflicts and differences of opinion.