No Company Dominates Mindshare In The HNW Segment

When it comes to supporting advisors serving the lucrative high-net-worth market segment, no single company has captured advisor “mindshare.” Nor has any single company developed a “go-to” reputation for advisors in search of help with that market, according to recent research.

The upshot means there’s plenty of opportunity for insurers, broker/dealers, custodians, estate planners, specialty lawyers or accountants to develop themselves as the place to go for advisors looking for help, said consultant Howard Schneider.

Asset manager BlackRock stood out as the destination for advisors searching for help and guidance on how to make the most of clients' Social Security withdrawals, according to a previous study Schneider conducted on Social Security.

But in the high-net-worth segment, there’s “not that similar organization identified as leaders in the space,” he told InsuranceNewsNet. This could provide companies who put their mind to it with an opportunity to help advisors in the high-net-worth market, he added.

Other than in the wirehouse channel, companies have less of an exclusive commitment to the high-net-worth segment, he said.

One reason companies hold back from going “all in” to develop high-net-worth expertise for advisors is that insurers or broker/dealers want the widest possible footprint without focusing too much on one segment, Schneider said.

The report,  “Advisors Working with High Net Worth Clients,” was published this month.  The findings are based on online responses from more than 725 advisors in June.

Insurers Lag as Advice Source

Advisors also report that identifying and attracting new high-net-worth client relationships is by far the most significant challenge in working with the segment. This challenge is followed by managing client transitions across generations and managing complex needs, the report found.

Broker/dealers provide a key source of support to advisors, while registered investment advisors (RIAs) tend to rely more on other sources such as accountants or attorneys, Schneider said.

RIAs, who shy away from commission-based products, usually don't rely on insurance companies for advice about how to approach the high-net-worth market.

Even with universal life and variable annuities, products that might appeal to wealthy investors, the insurance companies aren’t getting much traction with advisors, the survey found.

The report found that 24 percent of respondents relied heavily on brokers/dealers and custodians for support with high-net-worth clients. In addition, 16 percent relied on other service providers or third-party sources (such as CPAs), 14 percent relied on mutual fund companies, 12 percent relied on investment managers and only 5 percent relied on insurance companies.

Dealing with high-net-worth clients is a resource-intensive proposition at a time when insurers are “resource constrained,” Schneider said.

The top five services advisors provide to high-net-worth clients are investment management, estate planning, comprehensive financial planning, insurance management and charitable giving, the report found.

HNW’s Broad Range

Schneider said that one of the surprising findings in the report was the range of wealth that advisors use to define a high-net-worth client.

It’s not uncommon to see surveys using the $1 million or $5 million mark as the cutoff for high-net-worth investors. But many advisors define high-net-worth clients as those holding assets of $250,000 to $500,000, he said.

RIAs and full service advisors are most likely to define high-net-worth relationships as those having at least $1 million in assets under management.

By contrast, advisors in the independent channel are more likely to define a high-net-worth relationship as one having $750,000 or less, Schneider said.

From the advisor perspective, there’s a big difference in dealing with a client who has $500,000 in assets compared with a client with assets in the multimillion-dollar range.

“The lesson in all of this is that you have to be aware there’s a lot of difference across the advisor spectrum for what they do, and who they work for,” Schneider said.

Cerulli Research, in a 2013 report, estimated that by its definition, there were 771,120 high-net-worth households in the U.S., holding between $5 million and $25 million in investable assets.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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