High Net Worth Individual (HNI) is one segment which every financial advisor is looking forward to work with, because of their huge portfolios.
With net assets of US $ 5.2 trillion, India now ranks 7th in the world HNI wealth index. India is home to 2.36 lakh high net worth individuals (HNIs) and their population is expected to grow by 135% to reach 5.54 lakh by 2025. (Source: Cafemutual)
The opportunity is lucrative and you must be tempted to manage the assets of HNIs. However, managing HNIs is entirely different from managing a retail customer. An HNI is not looking to invest for building a house, or buying a car, or for his children's education. He has already fulfilled these goals from his existing means. He's looking for something extra, and your advisory strategies should be customized to meet his specific requirements.
There are certain pointers which are specific to HNIs, their behavior towards investments, their goals, strategies, manner of dealing with people, etc. An advisor shall keep these things in mind while conducting business with an HNI client.
HNIs have built wealth through their businesses or jobs, they possess substantial market knowledge and skills and they try to apply the same to investment management. An HNI believes that his success in his professional life can be carried forward to his investments as well. It becomes difficult for the advisor to explain to an HNI that his investments are different from his business, and that the advisor is an expert in the field, so let him apply his expertise to the client's portfolio and multiply his wealth.
The first question that you should ask an HNI is "Do you have a Will?" If the answer is not in the affirmative, you must advise him and take him through the Will writing process. Even the big shots of India Inc. who did not leave a Will behind, their families have faced turbulence later. Take the example of Dhirubai Ambani's family after his death, there was unrest with respect to property distribution and finally Ambani's wife had to step in to sort things out.
HNIs are usually influenced a lot by their bank relationship managers. They trust their banks and buy some investment products which are a complete misfit for their portfolios.
HNIs generally have an inclination towards real estate. A lot is already blocked in real estate and they want to park more money in illiquid assets. Irrespective of the fact that their portfolio needs to be diversified and other investments have to be included and irrespective of the market conditions, they tend to religiously follow the real estate path only.
HNIs are business minded and want the best deal out of everything. They always try to extract a lower than the standard expense ratio in every transaction. And the advisor considering a huge investment, tends to fall into the bargaining trap of his client and ends up committing to terms which are not beneficial for him. As an advisor you should refrain from falling for it and focus on value addition you bring to the table. if you spend more time bargaining, you will lose the deal the moment any other advisor offers extra 5 paise as passback. Focus on offering solutions to the problems of the investor. doing an objective analysis of clients existing investments and giving right advice on it will help you strengthen your relationship in the long term.
Since an HNI has built a decent wealth base, so ideally he should work towards preservation of this wealth. He should secure his wealth with investment options which can protect his money and offer returns higher than the inflation rate. But to the contrary he aims towards generating more wealth and is ready to risk his principal as well.
HNIs rely heavily on their advisors. There is lack of due diligence on their part, they seldom have the time to go through financial blogs or magazines and discuss their viewpoints with the advisor. And if anything goes wrong, the responsibility falls on the advisor's shoulder.
HNIs are generally too busy with their careers and often are not able to devote enough time to their investment planning. The advisor needs client's views on devising a plan, and for periodic amendments in his portfolio. But the client is not able to give time to his advisor, which leads to wrong or delayed investment decisions.
According to a report published by Spectrum Group "more than one-quarter of millionaire and one-third of UHNW (Utra High Net Worth) respondents say that they want a response to a phone call in two hours or less." They want their advisors to respond to their emails or phone calls quickly. They expect you to at least acknowledge to their query if the solution is expected to take time. So, the advisors are expected to maintain an efficient and quick communication system while dealing HNI clients.
Senior citizens among HNIs is another interesting category; they are probably in their late 60s or early 70s and have enough wealth to sustain their lifestyle for the rest of their lives. Their goal is to leave a huge estate behind for their children and for their grandchildren. So the approach to investing would be completely different from a normal retail investor. Investing in equities in order to generate significant returns over a 15-25 years time horizon would be an ideal investment plan. So, there is significant business opportunity here, you have to identify their specific goals and devise an offbeat investment plan for them.
These specific attributes relating to HNIs would help you transact better with HNIs. You should further keep upgrading your knowledge and be technically sound while catering to HNIs. Focus on your branding. Little things like logo, good quality stationary, websites, etc. matter. Try to have a fixed frequency of reviews, so both of you are on the same page always. Also communicate the crucial points effectively, like a contract for advise with fees charged.
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