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ELITE ADVISOR REPORT

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To Attract the Affluent, You Must Understand the Affluent – Episode 23


KEY TAKEAWAYS:

  • Above all else, the affluent are concerned about losing their wealth.
  • Wealth enhancement, transfer and protection are three other key concerns.
  • Impactful charitable giving is a big issue for many affluent clients.

One of the smartest moves you can make as a financial advisor is one you’re well aware of: Attract and serve more affluent clients.

Indeed, we have found that the decision to focus on affluent clients is a major driver of advisors’ success—one that empowers them to ascend the hierarchy of advisor success, from the technical level all the way to elite advisor status.

But actually taking that step successfully can be a major challenge, as it takes more than simply wanting to serve the affluent to make it happen.

Here’s how to build the foundation for serving affluent clients.

THE FIVE KEY FINANCIAL CONCERNS OF THE AFFLUENT

To garner affluent clients’ attention, bring them on board and successfully retain them over time, you need to know their hot-button issues—the key financial concerns that keep them up at night and the major financial challenges that could potentially derail their future.

Affluent clients want to work with true authorities: financial advisors who can help them make informed decisions to solve their most pressing financial challenges. When you know what those challenges are and can articulate them succinctly, you are ready to position yourself as the optimal financial advisor for your prospective affluent clients.

CEG Worldwide initially identified the five major concerns of the affluent during a foundational study by Russ Alan Prince. The findings of that research have been reconfirmed many times since the initial study. And as we have coached thousands of financial advisors who serve affluent clients, we have heard these major concerns repeated over and over again.

1. Wealth preservation. Above all else, the affluent are concerned about losing their wealth. Despite their affluence, they are not immune to financial setbacks. But wealth preservation is not only about not losing money—it’s about having enough money to fund their lifestyle, be it simple or extravagant.

The goal of wealth preservation is to produce the best possible investment returns consistent with a client’s time frame and tolerance for risk. This is the primary area of focus for most financial advisors. Investment management will be only the foundation of the value you, as a wealth manager, provide to affluent clients. As you will see, you will also help them address their other four key financial concerns.

2. Wealth enhancement. Wealth enhancement is about tax mitigation: minimizing the impact of taxes on clients’ investment returns while ensuring the cash flow they need.

We have seen that mitigating income taxes is one of the major financial concerns of the great majority of affluent individuals and families. Mitigating estate taxes and capital gains taxes also ranks high on their list of concerns.

It’s no surprise that so many of the affluent share these tax-related concerns. Taxes can—and do—eat up a great deal of wealth. As a wealth manager, you need to help affluent clients enhance their wealth by minimizing this impact. Certainly they’re expecting you to do so!

3. Wealth transfer. Effective wealth transfer is all about helping the affluent take care of their heirs: finding and facilitating the most tax-efficient way to pass assets to loved ones, in ways that meet affluent clients’ wishes with minimal difficulty and cost.

Given the fluid nature of today’s tax environment, affluent families need to be proactive in their wealth transfer planning efforts if they truly want their wealth to benefit their heirs to the fullest extent possible. They will look to you to help them do so.

4. Wealth protection. This includes all concerns about protecting affluent clients’ wealth against catastrophic loss, potential creditors, litigants, children’s spouses and potential ex-spouses, and identity thieves—in short, ensuring that their assets are not unjustly taken.

Many affluent individuals are worried about being sued—not surprising, given how litigious our culture has become. This means that as a wealth manager, you will need to address controlling risks using various tools. Those tools might include business processes, employment agreements and buy-sell agreements, and might involve such tasks as restructuring various assets and considering legal forms of ownership—such as trusts and limited liability entities—that will help put your clients’ wealth beyond the reach of creditors and other parties who may seek to take it.

5. Charitable giving. Many affluent individuals are looking outward beyond their own families, to their communities and to the world at large. For these people, making meaningful gifts to charity in the most impactful way possible is a key issue.

Charitable giving comes with its own unique set of challenges—from selecting the appropriate means of giving (such as direct gifts, donor-advised funds or private family foundations) to identifying causes and specific organizations that will have the biggest impact. As a wealth manager, you will help your charitably minded affluent clients to navigate the charitable planning process.

Most affluent clients we survey say their current advisors don’t address all five of these challenges—or at least, they’re not sure if their advisors do. This means you can truly differentiate yourself by showing the affluent that you can tackle all five.

These five concerns will become extremely familiar to you as build and position your business to serve the affluent—and particularly as you focus on a specific niche of affluent clients.

In fact, your ability to effectively address each of these key financial concerns will become the bedrock of your value promise to your affluent clients and prospective clients—one that will help drive your future success.


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