Y-phone Kids Children Baby Toy Phone Education Learning Machine Smart Touch LED
May 6, 2018
Pendulum of Change In the New Economy
May 6, 2018

How Financial Advisors Can Attract Wealthy Clients by How They Get Paid

The U.S. demographics are changing. There are many more wealthy clients today than in decades past due to dual income families, investment in education, and wealth passing to younger generations. High net worth investors are making more intelligent decisions regarding who will manage their investments. They are aware of the differences between fees versus commissions.

This article will help you to define your marketing and pricing strategies to help attract wealthy clients to your financial advisory practice.
Savvier prospects
Moving away from commissions towards advisory fees is just the smart thing to do in the current business environment. Clients are savvier today than ever before, especially high net worth clients, and many would prefer to pay for their financial advice through fees rather than commissions. Wealthy clients know that advisors who are paid with commissions are paid based on transactions. They know that a commission-based advisor is less interested in long term financial strategies that help the wealthy achieve their goals.
Let’s go shopping
As time goes by, it will become increasingly more important to position your practice as one that is client-centered rather than transaction-centered.  You will encounter prospects that are educated about how advisors get paid. Because of the 2008/2009 financial melt-down, high net worth prospects are shopping for new advisors that charge based on assets under management – this is an opportunity for you to bring in new clients.
Why the internet is important
High net worth clients do much of their research on the internet because it’s anonymous and they can check out your credentials and experience first before they contact you. They expect to find a professional website. If you have a template website, a website that is poorly designed, or a site that is not indexed by the search engines, you must invest in a new site.
Charge for your time
High net worth clients don’t beat around the bush. They want to know how much you charge. That doesn’t mean that they want the lowest fees or that they are not willing to pay “extra” for additional services.  You must have a fee schedule that lays out what clients will pay to have you manage their investments. Do not make the fatal mistake of implying that your only income is from assets under management. You are a highly trained professional and your time is precious. You must charge clients for all the time you spend on their accounts outside of investment management. 
Show me the money
Common fees I have seen throughout the industry are hourly fees from $ 150 to $ 300 per hour depending upon years of experience and expertise. I am a firm believer in charging what you are worth. Wealthy clients are willing to pay you to manage their investments, so having a very low fee for assets under management could be a detriment to the profitability of your practice.
AUM fees I have seen:

Advisor B

First $ 100,000 1.6%
Next $ 150,000 1.4%
Next $ 250,000 1.2%
Next $ 500,000 1.0%

On amounts over $ 1 million .75%

Advisor B

$ 200,000 1.75%
$ 500,000 1.5%
$ 750,000 1.0%
$ 1Million .90%

Minimum fee for account management is $ 2500 annually. Hourly fee is $ 200.00.
Advisor A would be better off simplifying his fee structure.  By having so many fee layers he is not attracting wealthy clients.  Advisor B is smart to charge a minimum annual fee as this helps to cover operating costs.
There has never been a better time to attract wealthy clients due to current economic conditions. Before you attempt to do this however, you must get your practice ready. You may need to invest in a firm foundation and implement marketing strategies that look five to ten years in the future. You can start by avoiding these mistakes: being transaction-centered rather than client-centered; not listing your fee schedule; having a poorly designed “brand” or website; and not charging for all the services you provide.

Copyright© 2009 |Suzanne Muusers

About the Author:
Suzanne Muusers has been coaching financial advisors on their marketing plans since 2004. She is the creator of the Financial Advisor Marketing E-Course for financial advisors who Want More Ideal Clients. She helps advisors to build assets under management, get more high net worth clients, get organized and productive, and increase their profit and time off. Visit her at http://www.prosperitycoaching.biz

Leave a Reply