Cerulli Suggests What Not to Do with HNW Clients

Cerulli Associates has published a report detailing what can cause high-net worth (HNW) investors to leave their financial adviser.  

In its report, “Investors in the High-Net-Worth and Ultra-High-Net-Worth Marketplace,” Cerulli identified the most common mistakes that providers can make that would cause their highly coveted clients to go elsewhere.

“The number one reason HNW investors leave their current provider is product choice. HNW investors change providers when they perceive they can access better products elsewhere. And, in this current environment, concern over product selection is often tied closely to interest rates,” Cerulli asserts.   

The report suggests that HNW providers must have strong interest rate-focused product messages, particularly providers with skill in managing fixed-income investments, or with a compelling product offering promising higher yields.

Other ways Cerulli says providers can lose their HNW clients include:

  • Less-than-superior service: HNW clients require a specified level and method of contact, use a variety of complex investment products, often have unrealistic performance expectations, and demand personalized portfolios, Cerulli says. Meeting, or even surpassing, the needs of the HNW is a must for firms in this space.
  • Poor investment performance: If performance is substandard, call your clients. The majority of HNW clients prefer more provider initiated contact, and this is particularly important when the news isn’t great.
  • Referrals: HNW clients tend to pick providers based on reputation and referrals. Therefore, Cerulli says, maintain healthy client relationships, otherwise your business is at risk of being referred away.
  • Fees are too high: Competition is fierce for the HNW. Learn what your closest competitors are charging, and if your fees are justified, explain why, the report notes.  Compare your fee structures to those that your clients prefer. Cerulli identifies a disconnect between the fee structures being offered to the HNW versus HNW preferences.
  • Poor advisory tools: The report says HNW clients should be able to make interactive queries about their current financial position and future trajectory. This requires sophisticated aggregation and performance engines. Firms without this technology should begin to think about how they can properly implement this type of system in order to satisfy clients’ ever-growing need for more information about their investments. In the near future, it will not be sufficient for firms to only provide their client with static monthly or quarterly performance reports.

Cerulli’s data was collected from investors with more than $10 million in investable assets.