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For the Very Rich, It's All About the Relationship


While high-net-worth individuals with $1 million or more in investable assets are highly prized, cultivating relationships with these trophy investors presents formidable challenges to marketers.

That's the finding of a study by Standard & Poor's of what it takes to land high-net-worth accounts.

An intriguing finding by the researchers was the distinction between traditional and newcomers in the market.

"Established wealth-management firms tend to rely on the collective experience of their organizations to determine their overall marketing communications strategies," observed S&P Senior Editor Mike Zargaj. "Firms that are new to the wealth-management arena rely more on traditional research methodology - things like quantitative studies, surveys and focus groups" than they do a cohesive approach.

After conducting roundtable discussions with some leading HNW marketers, S&P identified five keys to fat cats: robust relationships, quality communication, outside-the-box sensitivity, brand moderation and hefty resource allocation.

If the key to real estate is "location, location, location," then the mantra for HNW marketers should be "relationships, relationships, relationships."

Exquisitely Important'

"The concept of trust developing from a personal relationship is exquisitely important in the high-net-worth marketplace," said Dennis J. Ceru, director of retail brokerage and investing for the TowerGroup in Needham, Mass.

"A solid, personalized relationship with a customer is important at all levels of wealth management," Ceru added, "but it is even more important at the higher-net-worth levels where you're asking people to trust you with significantly more amounts of money, with decisions that are much more critical and in situations that are much more complex."

Zargaj explained that traditional wealth management firms are relationship-management focused. "The marketing efforts of newer players are focused on establishing brand credibility first and relationship management second," he added.

Quality communication delivered on a regular basis is also very important. That includes newsletters, magazines, personalized reports, market analyses, seminars, personalized client Web pages (see related story, page 16) and online access to account information.

What some newcomers to the HNW market don't understand is the "hypersensitive" degree of personalized care required by affluent investors, the study noted. The researchers added that a typical mistake made by novice marketers is putting the brand first. Established firms let the client experience the firm's brand.

Newcomers, on the other hand, sometimes push their brands as if they were dealing with mass-market investors.

"Executive management and shareholders who are not accustomed to the long-term nature of the typical wealth management business model may seek an immediate return of investment," the study explained.

Patience, Patience

A daunting challenge to all marketers in financial services is obtaining the resources they need to do their jobs in the face of fiscal constraints. That problem can be doubly acute for HNW marketers because not only do they require hefty resource allocations, but they need them over a long period of time.

According to the researchers, one way to relieve the resource crunch is through focused outsourcing.

Robert H. Hallowell III, president of Hallowell Associates in Burlington, Vt., runs a database and direct marketing firm targeted at affluent investors and outsources his work to large banks, and mutual fund companies. Some marketing departments choose to buy his database and create their own marketing materials, he said. That may be a mistake on their part if they're not as familiar with the market as his firm is, he asserted.

"Of all the different forms of writing and communications, one thinks that writing a business letter must be the easiest because one does it all the time," he said. "But to send a letter to a stranger and convince them to put their money in a wheelbarrow and bring it down to your office and talk about managing it is really quite a tall order."

While many financial services companies feverishly pursue affluent investors, during the current days of the bear, traditionalists appear to have a paw up on newer market entrants, according to Zargaj.

"They do better during volatile times because they have an established client base that is long-term in nature," he said. "The newer firms appeal to new wealth because they're less staid. But a lot of the new wealth just isn't around anymore."

What's more, the tendency of affluent investors right now is to stay on the horse they rode into the bear market, according to David Thompson, director of affluent market research at NFO WorldGroup in Greenwich, Conn. "It is clear that there are very few hidden opportunities for marketers to exploit to get high-net-worth households to move their assets," he said.

Nevertheless, the S&P researchers discovered that both old and new wealth managers wanted to learn from each other. "They definitely felt they could follow some of the cultural traits from their counterparts," Zargaj said. "Traditional firms felt they could become more dynamic to appeal to new wealth, and newer firms felt they could learn a few lessons about relationship management from the traditional firms."

Copyright 2003 Thomson Media Inc. All Rights Reserved.

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