You may have heard about the millionaire next door. Now, with a worldwide increase in personal wealth, many of us may be surrounded by those millionaires -- and more are moving into the neighborhood every day.
According to research from Merrill Lynch and Capgemini, there are nearly 2.9 million households in the United States with a net worth of at least $1 million, excluding the value of their primary residence. That figure represents an increase from approximately 2.7 million households in 2005.
Even more impressive, the number of Americans with truly significant wealth -- $5 million or more of liquid net worth -- is growing faster than the overall population. Spectrem Group, a financial services consulting firm, reports that the number of "ultra-high-net-worth" (UHNW) households in the U.S. has nearly doubled in the past three years to 930,000.
The growth of individuals and families with significant wealth presents an enormous opportunity for financial professionals who have what it takes to serve this market. UHNW individuals have a plethora of financial needs and typically rely on a team of specialists to meet those needs.
Many of those needs include life insurance. UHNW clients often rely on life insurance to help them with estate and wealth transfer, charitable giving, executive benefits, and business succession planning.
But breaking into this market and staying there can be a challenge. Many UHNW individuals expect nothing less than specialized, high-touch financial services and demand a high degree of financial knowledge and expertise from those who serve them. If you want to become a member of this club, you must know the rules and stick to them.
To start, you must be ready to become a member of a team, most likely in a supporting role. Affluent families often rely on teams of specialized professionals for financial planning, insurance, legal, accounting, and bank and trust services. Increasingly, UHNW clients work with multi-family home offices (MFOs) that provide personal services for everything from paying bills and making travel arrangements to managing money and planning for wealth transfer. MFOs managed more than $160 billion in assets for approximately 6,000 well-heeled families in 2004 (the latest year for which figures are available), according to Bloomberg Wealth Manager.
To enter the UHNW market, take a look at this checklist of the necessary skills needed to tap into this demographic.
- Focus on needs, not products. Any discussion of products should come only at the execution stage of the development of a comprehensive financial plan. The discussion should focus on a comprehensive review of the client's financial goals and objectives. Clients in this market have especially sophisticated financial needs that demand in-depth planning knowledge. If you're in this market, you need to stay up to speed on current advanced planning techniques.
- Develop relationships. Relationships are the currency of the UHNW market. Make sure you spend that currency wisely by creating value for your clients. There may be instances where you don't execute a strategy and therefore don't earn a commission. But if you continue to nurture your relationships, those opportunities will come -- and they will be big.
- Play a role. UHNW clients typically work with teams of financial and legal professionals, particularly if they are being served by a multi-family office. Many of their advisors are highly specialized because the advisors are required to have a deep knowledge of their specialty. That means you will most likely be assigned a role on the team and will be expected to work well with other professionals.
- Prove your mettle the first time, every time. This is a small market where those who play in it often know each other well. If you make a misstep, it will likely be the last time you are allowed to set foot in the UHNW market. Focus on being a team player, and carry through on whatever you're asked to do.
- Remember that not everyone can play quarterback. There is room for only one quarterback on the field at any time, so the chances are high that you may be asked to assume another role. Accept your position on the team and, if you're not asked to call the plays, leave the control of the planning process to others.
- Do your research. You must do pre-work, research, and planning before entering the UHNW market. Remember, you have been included on the planning team because of your
expertise in a particular area. Your expertise and skill can ultimately be responsible for tens of millions of dollars passing to multiple generations of a single family.
- Be prepared. The Boy Scout motto is a sound lesson for life as it is for the UHNW market. That means that research and planning are necessities. You are a member of a special team of financial and legal professionals because of your knowledge and expertise. You are being asked to apply it to help a family pass tens of millions of dollars worth of assets to multiple generations.
- Touch often. Personalized service is the mantra for this market. This is particularly true for MFOs, many of which provide concierge services. Be flexible and adaptable.
The UHNW market is not for everyone. Many financial professionals can be just as successful or even more so serving the needs of the merely affluent or even the mass affluent. But if the demands of the UHNW market match your style and skill set, the potential rewards can be outstanding.
There are nearly 1 million families in the U.S. with a net worth of $5 million or more, and the number keeps growing. No market is more lucrative, and no market has a greater need for advisors with sophisticated life insurance planning skills.
Brett Berg is the director of specially tailored Private Wealth Management life insurance service within the individual life division of Hartford Life Inc., a subsidiary of The Hartford Financial Services Group Inc. He can be reached at 860-843-8776 or brett.berg@hartfordlife.com. For more information, visit www.thehartford.com.
