What you need to know about working with high-net-worth business owners

February 16, 2018 by Moriah Diedrich

What you need to know about working with high-net-worth business owners by Advicent

About the author

Moriah Diedrich

Demand generation specialist

Moriah Diedrich is a demand generation specialist at NaviPlan, the financial planning technology provider of choice for more than 140,000 financial professionals.

It is no secret that working with high-net-worth (HNW) clients presents an immense business growth opportunity for advisors and financial services firms.

According to The World Ultra Wealth Report 2017, the ultra-high-net-worth (UHNW) population “revealed global growth of 3.5 percent to 226,450 individuals and a 1.5 percent increase of their total combined wealth to $27 trillion.” Additionally, the report suggests that the UHNW population will continue to rise to 299,000 people by 2021.

Within this population of HNW and UHNW people, there are multiple buyer personas advisors can target. One group of HNW individuals that presents a particularly valuable opportunity are business owners.

How can advisors proceed to target this group? What do advisors need to know before taking on this type of client? Let us dig deeper into what HNW business owners need and expect from financial advisors in order to truly understand the opportunity present.

The current financial state of HNW business owners

HNW business owners often have quite complex financial situations due to the fact that a majority of their assets are often illiquid and tied up in this business. This can present challenges for this group when trying to separate their business and personal finances as well as determining how to transfer their wealth in the future.

In 2017, RBC Wealth Management uncovered many compelling statistics about the current financial state for HNW business owners:

  • 51 percent have a will
  • 22 percent said they have done nothing at all to prepare for transferring their wealth
  • 48 percent currently manage their own assets
  • 45 percent plan to give their children more guidance on inheritance than they received

Adam Fridman, seasoned entrepreneur and founder of Mabbly, says that he often sees business executives and owners alike struggling with their personal finances. These struggles include having large salaries with disposable income, lack of separation between personal and business finances, undervaluing good personal credit ratings, and more.

While HNW business owners seem to be more prepared financially than employed individuals according to the RBC Wealth Management study, there is still clearly a lot of room for improvement. This is where a financial advisor can step in and provide value.

What do HNW business owners really need from a financial advisor?

HNW business owners need comprehensive financial planning at varying stages of life (e.g., young business owners, established business owners, someone looking to sell their business). They are often very driven and self-directed individuals, meaning that they prefer to learn and conduct research on their own. Additionally, they are accustomed to “calling the shots” in their business, so they often have the same expectations of their financial relationships.

Advisors and firms must remember these aspects of the individual in order to properly serve them and provide the value that is expected from the client. This may mean that advisors do not need to necessarily worry about any type of formal education program for these clients but rather advisors should proactively provide resources the client can review on their own and initiate conversations to discuss any findings.

With their unique financial struggles and pools of assets, advisors must discuss business transition needs (e.g., installment sales, tax implications of selling a business); budgeting and cash flow management for personal finances; and retirement planning. Within retirement planning, advisors should also explore non-traditional retirement savings vehicles for self-employed clients (e.g., SEP-IRAs) to ensure the client is prepared to transition their wealth from the business into stable personal retirement income.

With client expectations evolving, advisors must learn how to connect with their clients and continue delivering engaging advice. Click here to learn how to connect with clients remotely.