High-net-worth clients are by definition less common, but are perhaps unsurprisingly the most common core market after the mass affluent.
And although wealth can sometimes conjure stereotypes, this does not necessarily reflect HNW individuals or their expectations of advisers.
“Just because somebody’s got lots of money, it doesn’t mean that they expect some sort of smart talking, public school-educated adviser,” says Alexandra Loydon, director of partner engagement and consultancy at St James’s Place.
“Yes, you have to be intelligent, and you have to have the intellectual capability to advise these clients; but they come in all shapes and sizes.
“A lot of the clients that we work with in the HNW space are successful entrepreneurs who started from nothing and have done very well, and as a result, they come from a wide range of social backgrounds.”
So while they may be subject to stereotypes, what is it like to work with HNW individuals?
What HNW clients expect, says Loydon, is a different level of service. “By the very nature of an increased level of wealth, they get used to an increased status, and therefore being able to command a different experience from product and service providers that mass affluent clients don’t.”
They may be perceived to be more lucrative for business, but Loydon says that HNW clients tend to want to negotiate on fees, or are more prepared to negotiate on fees. “They’re probably a little bit more commercially savvy,” she adds.
Loydon likewise says that HNW individuals are not necessarily more profitable than mass affluent clients, and whether to expand into the higher wealth segment can be more of a professional lifestyle choice.
“If you enjoy meeting clients and you prefer to stick to a particular proposition, or you’ve found your niche in that you’re a mortgage adviser, or you specialise in pensions, then actually you might find staying in the mass affluent space much more profitable than doing that for HNW clients, if you can't branch out and offer a full holistic advice service,” Loydon says.
“Conversely, HNW clients by their very nature are more demanding on the servicing side and so you can't manage as many. Some advisers might prefer the servicing element to a more frequent advisory interaction.
“But I think operating both in the mass affluent space and in the HNW space can be equally profitable.”
HNWIs are naturally more complex to advise, says Loydon, with their level of wealth generally presenting an opportunity for more planning and investment. “It does require a greater level of experience and expertise to advise HNW clients,” she adds.
For example, Lucy Chahil, a financial planner at Charles Stanley, says more knowledge may be needed around higher risk investments such as enterprise investment schemes.
“A HNW client can generally afford to have a portion of their assets non-accessible for longer periods of time. HNW clients may also be more involved in philanthropic giving where their financial planning involves, for example, establishing a donor-advised fund, so knowledge around this can be helpful in advising clients.”
