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AN OVERVIEW OF
AFFLUENT CONSUMER BEHAVIOR
AND RELATED STRATEGIC MARKETING NOTES
AUGUST 29, 2008

LESLIE BAKER
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Applied Project: An Overview of Affluent Consumer Behavior

Background

The affluent market is an attractive arena to promote and sell a product because of the
market’s higher spending power. If acquired as customers, this consumer base could
potentially lead to more profit for one’s company or organization. But the introspective
marketer knows that understanding trends affecting these consumers is just as important
as targeting the affluent consumer, High Net Worth Individuals (HNWIs) or mass
affluents. Such trends that are drawn from affluent consumers’ behaviors include their
want for personal attention and personal services, convenience and all-inclusiveness1.

For this discussion, HNWIs are those with net assets of at least $1 million, excluding
their primary residence and consumables; Ultra-HNWIs - who number some 103,000 -are
those with net assets of at least $30 million, excluding their primary residence and
consumables. Mass affluents include those with assets of $250,000 to $1 million
excluding their primary residence.

Because consumer decision making is the result of cognitive processes where consumers
interpret product information, integrate it with their personal experiences, information
from the environment and integrate that knowledge to make choices2. The strengths of
their beliefs focus on the attributes and functional consequences of the item or action
under consideration.

Predicting the attitudes resulting from a consumer’s information integration process

involves behavioral intention - the proposition connecting the individual consumer to a
future action. In devising marketing strategies to shape these attitudes and intentions, it is
important to consider elements from the model of the Theory of Reasoned Action (Peter,
2005):
Attitude » Intention » Behavior

In 2007, the Ultra-HNWI “wealth band” experienced the strongest growth, gaining 8.8%
in population size and 14.5% in accumulated wealth Emerging markets, especially those
in the Middle East and Latin America, scored the greatest regional HNWI population
gains.
 India, China and Brazil had the highest HNWI population growth at the country
level
 HNWI financial wealth is projected to reach US$59.1 trillion by 2012, advancing
at an annual growth rate of 7.7%. (CapGemini, 2008)

While HNWIs still place high value on perceived competence and service quality, as
Lesley E Bains, executive vice president of HSBC Bank USA puts it: “They still want a
trusted adviser who is interested in cultivating relationships, not in pushing products3.”

Yet, today’s consumer of products and services views technical expertise and special
service as givens, so there is less hard differentiation between a greater number of service

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providers and their solutions. Having a relationship is now a key differentiator and
becomes especially important as a platform for strong long term partnerships. “We find
that the marketplace for accounting services has been well served by providers of great
technical quality and commitment. As a result, our clients and our prospects have greater
service expectations,” says Senior Director of Marketing Barbara Casulli of RSM
McGladrey4. “Understanding these expectations helps us determine those strategic
actions that best assist our service professionals in securing an opportunity to build a
relationship built around their expertise at offering accounting solutions to a client
financial challenges.”

The key lies with understanding how clients make decisions and the skills, strategies and
tactics needed to influence that process. The skills of the person facing the potential client
and the ability to show how his/her solution better meets that client’s needs are now
usually the main differentiator between apparently identical providers. As a professional
services marketer, this project will assist me in working towards more effective
marketing programs and I approached the research and interviews with this goal in mind.

As the New York Economic Unit’s Financial Services Practice strategic marketing
manager for the 5th largest US public accounting firm, this is a very important target
audience for us. I am researching this consumer segment as part of developing a 2009
strategic marketing plan. Some of the firm’s practice areas working directly with this
market segment include:
 Wealth Management Individual practice (Tax advisory; family trusts and estates
advisory)
 Small business and entrepreneurial consulting (Business formation, tax
structuring and treatment, etc.)
 Private Equity Groups
 Not for Profit practice (nature and trends of charitable giving)

All of the firms practice areas will benefit from insights into this group who are also
clients, prospects and colleagues. Researching a behavioral profile of HNWIs as well as
identifying the areas for more in depth discussion and examination will impact our
strategic marketing plan and add focus to our practice’s business development efforts.

This in mind, this applied project examines the trends of affluent consumers in a variety
of industries. The wealth management industry has a focus on estate planning and a
discussion on why many affluent people are procrastinating in this area.

The real estate section is centered on the wants and needs of the pending affluent Baby
Boomer retirees—where do they want to live, what types of communities would be ideal,
and what is holding some of them back when it comes to real estate.

In the non-profit sector, there is a sizable untapped section of the affluent market. The
section looks at trends in what attracts the wealthy to donate. Furthermore, the
importance of family-centered events is an important trend to recognize within this
market.

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Retail and travel industries are very much complementary in the area of what the affluent
customer desires. The experience and personal service are very important aspects to the
wealthy individual, as well as quality.

The study and research findings are supplemented by informal interviews with financial
services professionals who work with HNWIs as part of their professional practices. The
focus of these interviews reflects their observations on the behavior of their clientele –
how they make their decisions and the observed behaviors that are part of the decision
making process.

A crucial challenge is to identify what happens in a successful sale which makes it

different from a failed sale and identify what it is that top performers are doing which
differentiates them from their less effective colleagues. The strongest single message to
emerge from this project:

“Don’t think about how you want to sell - think about how the client wants to
buy”.

The most effective advisers understand the client decision making process, know where
the client is within it, and have the skills to influence the decision at each critical phase.

If one is motivated to be continually educated and updated on trends of the potential

client, customer, or donor, in his or her own industry as well as other industries, it would
greatly improve marketing campaigns and sales. The consumer recognizes when
someone understands their desires and actually follows through. Additionally there will
be information on the importance of client-centric advisors.

Making that personal connection is important across all industry sectors.

The HNWI market is important to veritably all businesses and organizations. They often
generate the largest amount of sales in retail, wealth management, real estate, travel, and
are some of the largest donors of non-profit organizations.

What all these industries have in common is the need to understand HNWI behavior in
order to produce effective marketing campaigns and selling methods, which in turn will
generate profit. While this report is broken down into industry sectors, the information
will is meaningful to all markets.

Wealth Management

This hotly contested market has garnered the attention of small and large wealth
management firms, banks, in addition to trust companies and CPA firms like RSM
McGladrey. The high net worth individual needs a comprehensive financial plan and
wealth management strategy. If one focuses on estate planning, in particular, they will see

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a significant untapped market and also an opportunity to improve relationships with

current clients.

Two years ago, Marty Sieberman was downsized out of a job selling pharmaceuticals.
That startling event forced him to finally take account of his finances. After 30 years in
sales, the last 17 years with a division of a pharmaceutical company, Sieberman had
accumulated a nest egg of nearly half a million dollars in his 401(k) account — nearly all
of it in company stock.

At 59, he knew that would not be enough to sustain him and his family through
retirement. He had a brokerage account with PaineWebber but rarely used it. So he turned
to a financial services firm, which urged him to diversify.

At RSM McGladrey, the 5th largest US accounting firm, the Wealth Management practice
works with clients like Sieberman.

“I listened to my adviser, and in two years, I’ve had about a 30 percent gain in my
portfolio, a novice like me really needs somebody independent to look at the state of my
financial affairs.” (McGladrey, 2008)

This is just one story of the mass affluent: High-net-worth households — those with $1
million or more outside of real estate in 2007 to 9.2 million. Despite a collective $6
trillion in estimated assets, this group is often overlooked by the big brokerage houses
and investment firms that prefer high-net-worth individuals with more than $3 million in
their portfolios.

Figure 1 illustrates that there is still a large percentage of affluent individuals without
wills or trusts. The majority of people who lack estate planning cite procrastination as the
culprit.5

Figure 1
The Unplanned Financial Future of
Affluent Individuals

Do Not Have a Will

43%

47% Have Not Created a

Trust
27%
No Comprehensive
Financial, Estate, or
Investment Plan
0% 20% 40% 60%

Source: PNC’s Wealth and Values Survey (2005); based on individuals with over $10 million in investible
assets

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Being educated on and understanding why a potential client is not properly saving for
retirement allows for a more focused sales pitch specifically to each person’s individual
needs. Of the many different surveys that focus on retirement trends; the one thing to take
away is that there is still a segment of the affluent market that has not seriously planned
for retirement, and this understanding of their situation will help you towards building
solid relationships.

Understanding how clients make decisions and the skills, strategies and tactics needed to
influence that process is the key to success. The skills of the person facing the potential
client and the ability to show how his/her solution better meets that client’s needs are
now usually the main differentiator between apparently identical providers.

Many experienced advisers are disadvantaged by their deep expertise. With their client
experience and technical knowledge they can diagnose a problem and present the “right”
solution before the client has recognized that they have that need.

“I had to learn not to make the mistake of blinding a client or prospect with science,” said
Gary Goldstein, a federal taxation expert. “I used to get so excited by the intricacies of a
tax act that, while I thought I was dazzling them with brilliance, I was creating a dense
cloud of confusion which just frightened or stunned my audience.”

When a client sees a sophisticated and/or potentially expensive solution that may involve
considerable change to his/her present approach but in their mind their needs are just
half-formed, the advice is rejected. Subsequently, when the need is fully thought through
in their mind, there may be a competitor with them who will then reap the benefit of the
engagement.

Some wealth advisors lose touch with their clients who have started retirement and estate
planning. This lack of contact can diminish relationships and eventually profits. In a CEG
Worldwide publication titled “Capturing the High- Net-Worth Investor,” the authors
contend, “Today’s affluent investors want more. They want real relationships with their
financial advisors.” They want to be involved in their financial planning; they want the
personal experience, which can also be seen as important to affluent consumers in other
industries7.

“Many of these investors want to feel that their advisers are making time for them,
personalizing it for them,” Ms. J. O’Hare, a Wealth Management Specialist said. “They
don’t consider themselves rich but they don’t want to be treated as if they are small.”
Client-centric advisors are rarer than “investment-centric” advisors, but the former had
around 30 times more assets than the latter (Mogel, 2006). Figure 2 shows that there are
great opportunities to gain through improved contact and communications with clients.

HNWIs are somewhat lagging in the area of retirement planning for a variety of reasons,
and presents opportunities for wealth managers to capitalize on. Additionally advisors
should recognize the profitability of nurturing relationships with their clients. Both of

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these areas can be improved through event campaigns that allow personal time with
clients or potential clients. Beth Allan, of Phoenix Marketing International states, “The
higher you go up on the food chain, the more important one-on-one sessions are.”5 Events
are beneficial means to generate interest in a business among potential clients or in
particular estate planning clients, in a more personal manner.

Why are people procrastinating?

Allstate Corporation’s “Retirement Reality Check” survey segments pre-retirees into five
categories according to his or her personality type.

The “procrastinators” make up three of the five segments. They are as follows:
 Optimists: they aren’t worried about planning for retirement; most have saved less
than $100,000
 Pessimists/Worriers: they have careless spending habits
 Realists: they believe they will have to work later in life and the majority are
nervous and dread retirement

Figure 2

When Last Met with Advisor about

Estate/Retirement Planning

10+Years A go

7-10 Years Ago

24% 9% 5%
4-6 Years A go
9%

1-3 Years Ago

15%
Within last Year
38%
Never M et w/
Financial Adviso r

Source: Phoenix Marketing International’s affluent and high net worth trend data (2007); based on individuals with
over $1 million in investible

HNWIs Retrench to Safer, More Familiar Investments

 HNWIs moved to safer investment categories, with cash/deposits and fixed-

income securities accounting for 44% of HNWI financial assets, up 9 percentage
points from 2006
 Fixed-Income Securities saw a 6 percentage-point increase in asset allocation,
accounting for 27% of holdings, up from 21% in 2006

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 Globally, HNWIs continued to decrease their holdings in North America

 HNWIs showed greater interest in domestic market investments, preferring more
familiar grounds amid heightened levels of economic uncertainty (CapGemini,
2008, 14).

In 2007, HNWIs sought refuge in safer, more traditional investment vehicles, increasing
their overall portfolio allocations to cash/deposits and fixed-income securities by 9
percentage points, to 44% of their holdings. Of this amount, fixed-income securities
accounted for 27%, up from 21% a year earlier, and cash/deposits rose to 17%, from a
14% share in 2006. (CapGemini, 2008 14).

“These individuals want someone to be a filter for them and help them understand change
in the investment marketplace, sort through the product offerings, and act as a coach to
make sure that they follow through on whatever actions they need to take to achieve their
goals. No matter how many extra zeroes and account has, investor’s objectives are the
same,” said Dawn Brede, an independent investment advisor. Formerly with large
brokerage houses like Shearson, she was taught to sell products rather than form
relationships with her clients.

“Those firms are missing a big market,” said Ms. Brede, whose firm manages $300
million for 400 clients. “These investors don’t want packaged products. They want a
tailored suit at a good price. They want value. This segment is so underserved that they
are turning to their accountant or insurance agent for financial assistance and they end up
getting sold whole life insurance instead of a personalized financial plan.”

Real Estate

The Baby Boomers are setting a trend in the real estate industry. As Baby Boomers begin
to retire, they are looking for a comfortable place that suits all their needs. The graph
below illustrates what the mass affluent Baby Boomer is looking for in a retirement
home, whether they keep their present house or purchase a new one8.

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Figure 3

Trends among Retiring Affluent Baby Boomers

Plan to Move Where There is a Low er

Cost of Living
35% Plan to Move to a Better Climate
17%
15% Rather Live in Rural Area

12% Rather Live in the Suburbs

67%
14% Plan to Purchase a Second Home

51% Plan to Upgrade Current Home

46%
Want to Design/Build a New Home to
Meet Their Needs
0% 20% 40% 60% 80% Prefer to Buy a New /Different Home to
Get What They Want
Percentage

Source: Study commissioned by Hanley Wood, 2006; respondents were homeowners between the ages of
50 and 60, with annual household incomes of $250,000 or more

Figure 3 illustrates Baby Boomers’ desire to follow their personal pursuits, and one of the
top desires of this demographic segment is a house in a warm suburban area. This
impacts real estate developers and sales agents. A noticeable shift of retirees moving
away from high-priced housing markets to climate-friendly markets. The U.S. Census
Data pinpointed increased movement away from high-priced areas such as the Northeast
and Midwest, towards lower priced markets in the South and West (mountain area)
(Perkins, 2006). Moving to these markets will allow retirees to put additional savings into
their investment accounts; they do not have the additional assets to invest in real estate9.

Mass affluent individuals are somewhat cautious when it comes to real estate because:
 They already have a little less than half of their total assets in real estate
 They need more readily available cash—real estate is illiquid
 Real estate is becoming more risky
 Emotions weigh more than potential returns10

Cost-efficient, active communities in warmer areas will appeal to the affluent Baby
Boomer demographic segment. However, they are not going to sacrifice luxuries and
amenities to which they are accustomed. The pending retirees who have not properly
saved for retirement will be more cautious when it comes to real estate, but for the
retirees that have saved, they will be looking for somewhere that fits all their needs and
desires.

The 2008 CapGemini Merrill Lynch Study said in 2006, real estate experienced record
returns across various categories. Many HNWIs took profits from these increased values
during 2007, and moved their money into other asset classes. However, HNWIs across

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the globe pulled out of real estate investments earlier and more significantly than
anticipated, finishing 2007 with only 14% of their financial assets allocated to real estate,
a 10 percentage-point drop from 2006 levels.

HNWIs outside the United States moved to diminish their exposure to U.S. markets
which are the primary victims of the subprime and credit market turmoil. For instance,
HNWIs in the Middle East and Latin America, who, among non-U.S. investors,
traditionally have had the highest proportion of their financial assets allocated to North
American markets, decreased their exposure to this part of the world by five and nine
percentage points, respectively. Globally, HNWI allocations to North America accounted
for 42% in 2007, but have been decreasing in recent years (CapGemini, 2008).
McGladrey does a considerable amount of work with HNWI who are heavily invested in
real estate via their business operations. Our firm professionals focus on the estate and
tax consequences of these portfolio reallocations. These behavior trends will continue to
be monitored and discussed as they provide insights into the motivations as well as the
emotional state of these clients.
Understanding a client’s motivations aligns our professionals closer to the individual’s
needs and vision. This helps us strengthen our relationship and retain that business as we
provide the right solution to their financial challenge.

Non-Profit Giving

The affluent philanthropic donor is very important to non-profit institutions because they
make up a large part of total contributions. The additional complications posed by the
current Wall Street downturn and donor fatigue after a series of high profile disasters
(Katrina, Myanmar, China earthquakes, Iowa Floods, etc.) means non-profits are even
more hard pressed to develop new sources of funding.

But there are still many available donors that need a little encouragement to begin their
personal philanthropic endeavors. The number of U.S. taxpayers with adjusted gross
incomes of $100,000 or more rose from 7.2 million in 1997 to 12.4 million in 2003.
Research by the New Tithing Group reported in The Chronicle of Philanthropy says that
donors with adjusted gross incomes of $100,000 and over could have given more to
charity in 2003 – by a total of $107-billion – without affecting their standard of living.

Figure 4 shows that about half of the respondents to this Luxury Institute’s survey are not
currently donating. In the U.S., the 4.9% of families with net worth of $1-million or more
make 42% of the total during-life contributions to charitable organizations.

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Figure 4

Non Profit Giving Trends of the Wealthy

Plan to Give Soon,

6% Currently Donate

Do Not Plan to
Currently Donate, Donate Now & In Their
Donate, 13%
35% Wills

Unsure Whether Will

Unsure Whether Donate
Will Donate, 17%
Do Not Plan to Donate

Plan to Give Soon

Donate Now & In
Their Wills, 29%

Source: The Luxury Institute and Charles Maclean’s (Philanthropy Now) survey Philanthropic Beliefs and Behaviors
of the Wealthy, 2007; the surveyed had an average household income of $330,000 and average net worth of $2.4 mill.

Of this small but wealthy group, those families with $1-million or more in net worth plus
annual incomes exceeding $1 million comprise only 0.2% of the population, yet
contribute 14% of all during-life giving, while 4.7% with income less than $1 million
contributed 28% of all current giving. This presents a great market opportunity for non-
profit organizations to garner support for their causes.

Most charities have poor track records in upgrading donors, especially from the initial,
modest gifts many affluents make to test an organization’s commitment to its donors.
According to a Money magazine study, most affluents are conservative regarding money.
When asked to describe themselves from a list of 25 adjectives, very few respondents
said they consider themselves “impulsive” (17%), “a risk taker” (18%) or even
“entrepreneurial” (24%). Rather, the greatest share of affluent Americans (65%) chose
“independent” as a description. “Well-organized” (55%), “goal-oriented” (54%) and
“confident” (51%) also ranked high on the list11.

The study indicated that to convince affluents to increase their giving to an organization,
the fundraiser will need to provide them with the appropriate information. They want to
feel that partnering with the non-profit is a good investment with quantifiable results.

According to additional measures to attract affluent donors include:

 Challenge the norm with your message
 Do not appear wasteful
 Create diverse and invigorating communications across all avenues
 Generate a dialogue between your values and their values
 Focus on life stages and events11

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These points assist in accumulating returns on marketing campaigns because new and
fresh messages are essential in a market that constantly targets the same people. An
organization needs to stand out and make a connection with the recipient in order to
engender interest in the organization’s focus.

Another way of attracting people to your charitable organization’s cause is through

holding special events, not just for adults, but involving the whole family.

Figure 5

Affluent Parents' Influences on the Philanthropic Activities of

Their Children

Affluent Parents’ Influences on

the Philanthropic Activities of
Their Children Encourage
Children to Take Part in
91% Charitable Activities
Affluent Parents’ Influences on
67% the Philanthropic Activities of
Their Children Children Who
Take Part in Charitable
62% Activities
Affluent Parents’ Influences on
the Philanthropic Activities of
Their Children Children Who
Have Donated Part of Their
0% 50% 100% Money

Source: Third Annual American Express Platinum Luxury Survey, 2006; respondents had an average
household income of $472,000 and an average net worth of $4.3 million

Figure 5 illustrates that affluent families are very interested in getting their children
involved in and educated about philanthropy. Non-profit organizations can capitalize on
this and implement family-oriented events in order to obtain two generations of donors.
Not only do parents influence their children, but children are having more influence over
their parents than in the past. A child’s interest in a cause is a type of consumer-to-
consumer marketing, so family events can be quite effective.

The number of U.S. taxpayers with adjusted gross incomes of $100,000 or more rose
from 7.2 million in 1997 to 12.4 million in 2003. Research by the NewTithing Group
reported in The Chronicle of Philanthropy says that donors with adjusted gross incomes
of $100,000 and over could have given more to charity in 2003 – by a total of $107-
billion – without affecting their standard of living.

A potential donor’s connection with a cause is one of the most important aspects of a
marketing campaign, whether in direct or event marketing, since that usually triggers him
or her to become a donor.

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In the accounting industry, increased donor concern about the integrity of the charitable
institutions financial reporting and internal financial controls is also a marketing
opportunity. Evidence of sound and transparent corporate governance as well as audits of
the internal controls of all operations impacting a non profit’s financial statement is an
area of increasing focus. The Panel on the Nonprofit Sector, an independent coalition of
charities and foundations, has offered a comprehensive series of recommendations
intended to strengthen the ability of the nation’s 1.3 million charities and foundations to
serve as responsible stewards of the public’s generosity.
In addition to the current and increasing required governance in accordance with the
provisions of SOX for organizations receiving federal funding, donors of these and other
organizations are likely to not only inquire about the use of their donations, but also to
the organization’s compliance and governance process. Members of associations often
encourage boards to comply. The boards themselves will decide that for public relations
and other purposes, the best approach is a proactive one: to show compliance with the
spirit of good governance. Finally, many board members of charities are executives and
managers of SOX compliant companies. They may feel that compliance with SOX
affords them a bit of comfort in having the not-for-profit organization operate in such a
transparent manner. Boards are adopting codes of ethics and codes of conduct. Human
resource policies and performance reward systems are reviewed and linked to
organizational objectives as well as risk management or internal control systems.
This in mind, understanding the nature of charitable giving adds insight into the pressures
and challenges faced by development arms of these organizations. From an internal audit
perspective, this may indicate areas of operation needing careful examination to prevent
overstatements or other misrepresentation of contribution levels or other budgetary
allocation.
This area of internal control audits and compliance is a focus of our 2009 strategic
marketing plan.

Retail and Travel

The wealthy consumer has similar desires when it comes to retail and travel. For many
wealthy consumers, fulfillment of their needs and wants is very important in their
purchasing process.

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Figure 6
Consumer Beliefs Comparison

Wealthy Consumers’ Beliefs Affluent Consumers’ Beliefs

about Business Success about Business Success

Inherent Product Quality Inherent Product Quality

Matches Taste and Aesthetics

Price

Brand Trust Brand Trust

Source: Worth-Harrison Taylor study on the Status of Wealth in America, 2005; wealthy denotes
consumers with liquid assets over $5 million and affluent denotes consumers with annual income of
$75,000.

Wealthy and the affluent consumers have some similar and some different ideas about
what they look for in a product or service. The major difference is that price, in itself, is
not an issue for the wealthy. Rather, it is more important if the product or service matches
what they have in mind or their tastes. On the other hand, price matters to the affluent
consumer. According to the Yesawich, Pepperdine, Brown & Russell’s 2006 Portrait of
Affluent Travelers survey, some attributes that are appealing to affluent consumers when
choosing a hotel are:

 Complimentary delayed check-out (89%)

 Express checkout (89%)
 Security staff to ensure safety (87%
 Premium bedding (85%)
 Concierge staff and services (81%)
 Choice of newspaper daily (78%)

Convenience, comfort, and personal services are among the top desires of affluent
travelers. Again, the focus is on the personal needs of the consumer.

Personal experiences that tap into the specific tastes of the wealthy consumer are
important in travel and retail sales. When marketing to the wealthy consumer, those
experienced successful sales persons urge that concentration on the experience, rather
than the product will assure a successful close. When marketing to the affluent consumer,
focus on the price to value ratio; this is more important to them than the experience and
matched tastes, although it is a plus for the affluent consumer if the product or service
does match the aesthetic he or she had in mind12.

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The figure below illustrates the complete decision making process, from an initial
recognition of needs, through the evaluation of options and resolution of concerns
(negotiation), to decision, implementation and subsequent changes over time which may
set the process in train once more.

Figure 7

Source: Peter Belsey, “Selling to High Net Worth Individuals”, High Net Worth, Late Autumn/Winter 2002

Conclusion

The affluent consumer has specific needs and wants in the different markets discussed in
this guide. Although, there are some common threads that run through different
markets—affluent individuals want personal attention and connections with the provider
of potential products or services they may purchase. Convenience and all-inclusiveness
also are important to the time pressed wealthy individual. Although there are common
themes, all individuals act in their own ways. Therefore, the more prospects one acquires,
and the creation of a clean, concise, and convincing marketing campaign increases the
chances of a profitable return for the company or organization.

Our firm provides professional services. At its core, providing a service means helping
and our service professionals enjoy their work because they help others.

“To be successful, advisers need both to understand the process and recognize where
each client’s thinking has reached in his/her decision making. A client may, for example,
already believe he/she knows what the investment strategy ought to be (late in
“evaluation of options”), or may not see the need for any change at all (early in “changes

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over time”), says RSM business development professional Jim Hedges. “Different
starting points therefore require differing approaches on the part of the adviser, yet the
fundamental skills required to help that client recognize his/her real financial needs
before developing and agreeing a suitable investment strategy remain the same.13”

Competence

The provision of wealth management advice itself has become a highly competitive
market, with stockbrokers, high street banks and individual financial professionals
joining private bankers in offering broadly similar services, making it more difficult to
differentiate on traditional criteria.

Sadly, too many experienced advisers are now disadvantaged by their sheer expertise.
With their client experience and technical knowledge they can diagnose a problem and
present the “right” solution before the client has recognized that they have that need.

The client sees potentially a sophisticated and/or expensive solution that may involve
considerable change to his/her present approach and they weigh it against the half-formed
needs they are feeling. Unsurprisingly, the advice is rejected.

From this it should be clear that effective HNWI advisers need consultative influencing
skills which harness their technical expertise with an ability to think in the client’s terms.
They need to talk to clients in a language they can understand and take them from
whichever part of their thinking they are at, either forwards or backwards, to reach a
mutually beneficial and commercially sound conclusion.

Developing Sales Skills

The financial services sector is no exception to the need to improve sales performance
and this applies to banks, insurance companies and individual financial advisors. Private
bankers in particular should be included in any exercise which has the aim of improving
sales performance.

Asking top advisers what makes them successful tends to elicit one of two responses.
Some simply cannot say - in other words their skills are largely intuitive. Others believe
they know precisely, yet observation proves that either they do not work in the way
described, or it is something else which is having a positive impact.

Once one knows what the “best” advisers are doing, this can then be used as a benchmark
against which to give others feedback on the extent to which they exhibit these behaviors.
The initial goal should be for colleagues to understand and recognize what they are doing
right and wrong - moving from unconscious to conscious competencies. Skills can then
be developed to the point where these are put into practice without thinking - reaching a
new level of unconscious competence.

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But, coaching can’t just be left to individual managers based largely on their own
experience of selling. Our firm management is committed to equip coaches with a series
of tools for diagnosing current skills and giving feedback objectively and persuasively,
helping advisers integrate the particular sales model into their own style and make
appropriate changes to their behavior.

Bill Carey is president of the Registered Investment Advisors Group at Fidelity

Investments in Boston, the nation’s largest mutual fund company. Mr. Carey’s group
offers brokerage services for independent financial advisers and he says that Fidelity
research has shown a dearth of financial planning among the mass affluent.

“Our research has shown that the typical working American is on track to replace just 56
percent of his income in retirement and that only one in five Americans retire with any
retirement income plan,” Mr. Carey says. “So we really see an opportunity here for
investment advisers.”

Indeed, his group grew 40 percent in 2005 and he already has 3,000 independent
investment firms on board. “People are waking up to a need for more advice and
guidance,” he said. “There are a lot of new businesses being formed in this space.”

The HNW world today is very different from that of a decade ago. To sell it successfully
requires a structured approach to behavioral and skills development which can help
ensure that technically skilled and historically successful advisers will continue to
enhance their value to the client and contribution to their own organization (Ibid 13).

As we move forward at McGladrey to develop our strategic marketing plan, continuing

research and discussions will take place focusing on the behavior of this key group of
individuals.
Once the behavior is understood the insights can be applied using models similar to the
one below to create a behavior focused, client-centric message for use in marketing
collateral and direct communication.
The model reflects Robert A. Potter’s MVP proposition which measure the prospect’s
Motivation, Vision (why the motivated change is desired), and Path to Resolution
(solution). Potter is the author of Winning the Invisible Market which is the basis for a
quick seminar I am preparing to for a business development workshop later this Fall.
The model diagram is accompanied by three value propositions which are used to extract
solid, unique deliverables or tangible benefits from the service provided, i.e., Value
proposition: industry knowledge and experience = valuable insights into operational
processes = cost segmentation studies of new facility construction resulting in $XX
million in tax savings over Y years.

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Figure8

Source: Created by writer from Winning in the Invisible Market by Robert A. Potter, 2003

Sample Page from accompanying Analysis sheet:

Value Proposition Analysis – Tangibles/Best Practices/Solutions

Hedge PEGs Domestic Banks International Banks

Funds/Broker
Dealers
Industry specialization
and experience -
Technical skill +
specialized knowledge =
incomparable results

We have industry
specialization and
experience
 Partners focused on
FS Industry
o Within that, focus
on hedge funds,
PEGs, domestic and
internal banking
o Partners and senior
professionals bring
XX years of
experience in area of
specialization
o Professionals know
ins and outs of their
sector, both:
 Industry trends,
because we work
with X # of clients
in the space

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 Regulatory
environment (we
sit at the table, we
testify before
Congress, etc.)

References
1. Capgemini/Merrill Lynch Financial Advisor Survey, April 2008
2. Peter, J. Paul, and Jerry C. Olson (2005), Consumer Behavior and Marketing Strategy (8th
edition).
3. Belsey, Peter, “Selling to High Net Worth Individuals”, High Net Worth, Late
Autumn/Winter 2002.
4. RSM McGladrey, Informal interviews with Wealth Management practice professionals, July,
2008.
5. Mogel, Gary S., “Personality drives retirement savings,” Investment News, November 14,
2005, 6.
6. MainStay Investment’s 2006 Across Generations Survey from the article, “Intergenerational
Referrals,” Financial Planning, by Marshall Eckblad, December 1, 2006.
7. Bowen, John J., Jr., Russ Alan Prince and Patricia J. Abram, “Capturing the High-Net-Worth
Investor,” CEG Worldwide, LLC, 2004, 2.
8. Perkins, Broderick, “Baby Boomers Let It Roll On Real Estate,” Reality Times, May 31,
2006.
9. Perkins, Broderick, “Americans Are Moving To Cheaper Housing Markets,” Reality Times,
April 28, 2006.
10. Perkins, Broderick, “Affluent Often Don’t Boast Reality Investments,” Reality Times, April
14, 2006 (includes all bullet points).
11. Spicer, Mike, “Donor Dilemma,” Campaign, October 6, 2006, 7 (includes all bullet points).
12. Paikert, Charles, “Marketing efforts to affluent taking on a personal touch,” Investment News,
May 16, 2005, 44.
13. RSM McGladrey, Informal interviews with Business Development professionals from the
respective Small Business and Financial Services Practices, July, 2008.

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