Advisors have long hunted the $13 trillion in total investable assets held in high-net-worth households. In fact, 13% of advisory firms now focus on the wealthiest clients that account for less than 1% of the U.S. population, according to new research from Cerulli Associates.
As the competition for HNW investors tightens, advisors may want to focus on up-and-coming clients — young doctors, entrepreneurs and mid-level corporate executives — who are likely to become the next generation of wealthy investors, the study suggests.
“High-net-worth households with at least $5 million in investable assets represent only 0.9% of the U.S. population,” Cerulli analyst Marina Shtyrkov said in the report. “As competition for this wealthiest subset intensifies, advisors will be challenged to expand their focus to new networks of emerging leaders poised to become the next group of affluent clients.”
Referrals are the most effective tool for finding new clientele, according to the data. Almost 70% of mass-affluent relationships begin from mutual connections. Personal relationships (38%) and referrals from CPAs and other professionals (16%) are the next best avenues to attract new business.
Prospecting and marketing efforts drew in only 7% of all mass-affluent clients.
When it comes to social media, LinkedIn is key, said Gordon Abel, Dynasty Financial Partners’ director of marketing. After search, social media drives about 25% of traffic coming to the websites of firms belonging to Dynasty’s network, primarily driven by LinkedIn, Abel said in the June 7 webinar focused on attracting HNW clientele.
Although the payoffs could be plentiful, recognize that HNW clients can demand more than some firms are able to offer, the study suggests. Wealthier clients often require high-touch services, the study says, and a robust financial toolbox that many firms simply don’t have.
The ultrawealthy are taking more conservative positions this year, but younger investors are still bullish, according to a recent industry study.
Even so, as a disproportionate number of advisors head upmarket, paying close attention to the mass-affluent investor could prove prescient, according to the research.
