How being an "additional advisor" can attract HNW clients

When it comes to winning new clients, historically most advisors have thought in terms of persuading prospects of the need to replace their existing advisors.

New research from the United States suggests that in today's environment, an easier course of action might be to persuade those prospects that they should supplement the advisor or advisors they are currently working with.  This is especially the case if you're working at the top of the market, with high net worth investors with millions of dollars.

The trend to multiple advisors

 An August report from Boston based Cerulli Associates indicated that about a quarter of American households who seek financial advice use multiple advisors.  For households with assets of $2 million to $5 million, the percentage with multiple advisors is 33%.  Of investors with assets over $5 million, 58% have multiple advisors.

One Cerulli analyst said:  "Investors are taking the idea of diversification one step further and diversifying across firms and across advisors."

The drive for multiple sources of advice has been driven by the financial crisis of the past three years.  As Cerulli 's analyst put it:  "Today, fear is outweighing convenience."   With that trend to multiple advisors, there is an increased push for quantitative measures of performance as well as a greater interest in understanding an advisor's credentials, qualifications and knowledge level.

As a result of this shift, many advisors overestimate the extent to which they are a client's primary advisor.  When Cerulli surveyed advisors about a cross section of their clients, advisors indicated that they were the primary advisor 73% of the time; when those same clients were asked the question only 34% said that advisor filled this roll

Implications for action

There are some immediate implications from this trend, as well as some down the road.

When it comes to existing top clients, don't assume you're the primary or only advisor.  Consider opening a dialogue about how things are going  and also about whether they may have begun working with another advisor you're not aware of.

With prospective clients, some advisors have historically had an "all or nothing" stance when it came to a client's investments;   a position that you might want to reconsider for the moment at least.  You also need to rethink your conversations with prospects, positioning yourself as a supplement rather than a replacement.  Finally, consider relaxing your account minimums; one advisor tells prospective clients that his normal minimum is $1 million, but that he's willing to drop this to $250,000 for the first twelve months that he works with new clients, so they get to know him before making that big a commitment.

Finally, position yourself for the point in time when the pendulum shifts and convenience becomes more important than fear, leading to reconsolidation of advisors.  Suggest to clients with multiple advisors that you'll provide a monthly or quarterly summary of all their investments;  what you manage as well as what they hold elsewhere.  The opportunity to identify inefficient and overlapping holdings could help position you to be among the winners when that reconsolidation occurs.  Iif you don't make this offer, the risk is that another of your client's advisors will.