Advisors are always aiming for more business from high-net-worth clients and their contemporaries in the ultra-high-net-worth camp, underscoring the importance of bespoke services and strategies tailored explicitly for affluent clients.
Wealth managers have myriad levers at their disposal to pull in terms of boosting the quality of service aimed at well-heeled clients. It’s a good thing, too, because simple math highlights the importance of these clients. Just a decade ago, high-net-worth and ultra-high-net-worth individuals and families controlled 27% of domestic assets, but that figure doubled over those 10 years.
Obviously, some people have gotten wealthier, but knowing that is only half the battle for advisors. Equally as important to rising wealth levels is clients, regardless of asset and income levels, are increasingly sophisticated and knowledgeable in some matters of finance, be it investing or other topics. Clients also wanted to feel valued and believe that they’re not getting the “everyone else treatment” – a proposition that’s ratcheted up with high-net-worth patrons.
When it comes to enhancing the process of improving service to wealthy clients, the good news is that these clients’ priorities are already points of emphasis for many practices.
Model Portfolios to the Rescue
BlackRock’s inaugural Advisor Trends Survey, which queried more than 1,000 U.S. financial advisors – 92% of which work with clients at least $5 million in investable assets – is instructive for advisors regarding upping their value propositions presented to affluent clients. The survey indicates model portfolios are solid starting points.
“Advisors say model portfolios are freeing up time for higher-value client work. Nearly 80% report using model portfolios helps them spend more time with complex or HNW clients, rising to 87% among Millennial advisors,” according to BlackRock.
Importantly, it’s young advisors that are driving model portfolio adoption so if you’ve been in the industry for decades, it may be worth following suit from a competitive perspective because wealthy clients clearly aren’t put off by model portfolios.
“Compared with previous generations, Millennial advisors reported they are more likely to prioritize growth, operational efficiency, and the use of sophisticated investment and tax strategies such as concentrated stock solutions,” adds BlackRock. “Roughly nine in ten advisors surveyed report using model portfolios, and anticipate AUM in model portfolios to increase to 50% in the coming year.”
Private Market Access, Taxes Matter, Too
While high-net-worth clients are on board with model portfolios for basic asset classes, such as stocks and bonds, they still prioritize what they view as “exclusive” access to other segments. Hence the need for advisors to have robust menus of private market assets. Put simply, wealthy clients want to be involved in private markets and advisors need to meet that demand.
“More than half of all advisors and three in four wirehouse advisors now invest client assets in private markets, though average portfolio allocations remain relatively small at about 7%,” observes BlackRock. “Advisors cite liquidity concerns and a lack of confidence as key barriers, with 68% of respondents expressing a need for additional education on portfolio construction involving private assets.”
Another priority for high-net-worth clients is a service holistic practices are already serving up: Tax strategies. In other words, for as bland as taxes are, related mitigation strategies are top-of-mind for the most coveted clients.
“While tax considerations are most relevant among HNW investors and 92% of advisors who serve HNW clients report being asked for tax guidance, only 17% of advisors consider after-tax returns a primary driver of portfolio decisions,” concludes BlackRock.
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