May 8, 2011


CALU 2011 (20th anniversary)The wealthy were treated as a single group. Now they are divided into segments. For instance, needs vary for entrepreneurs (making their own money), professional athletes (high income for a few years) and inheritors (receiving money they didn't earn).

This week at CALU 2011 in Ottawa, Keith Sjögren (LinkedIn profile) of research firm Investor Economics spoke about those with High Net Worth (HNW). Technically, they have $1 million of investable assets. Here we'll call them "wealthy" and review findings.

Key Issues

The wealthy identified two key financial concerns
  1. how to minimize tax
  2. how to transfer their wealth
They turn to advisors for help. Even then, the wealthy do little planning. Only 1/3 are willing to undergo comprehensive financial planning (see why financial planning is ignored). However, they are interested in estate planning which deals with what happens after their deaths.

Because of the recent poor economic environment, the wealthy have become more conservative. They're focusing more on capital preservation than returns. That's predictable.


Overall, the wealthy are now more demanding. They want advisors with expertise and significant technical skills.

The older wealthy prefer older advisors. They don't feel a young'un can understand what they've gone through. The young wealthy aren't keen on older advisors who are prone to think like their parents. They prefer younger advisors who are technically-savvy and share contemporary views. Finding a "modern" advisor is a big challenge since
  1. many advisors are close to retirement
  2. there are fewer newer advisors
  3. there's little training for new advisors

Changing Advisors

To simplify their lives, the wealthy have cut advisors and now use about 2.5.  Here are reasons they have switched (more most important to least important)
  • inadequate level of expertise
  • disagreement regarding strategy
  • high fees
  • lack of objectivity
The wealthy are open to ideas ... but they aren't contacted regularly. As wealth increases, there's more reluctance to give referrals. The wealthy aren't keen to be part of an advisor's business development strategy.


Do the wealthy have confidence in their current advisors?
  • Yes: 67%
  • No: 5%
  • Unsure: 28%
The last element is interesting. Imagine not knowing if you've got the right advisor. Comparing is difficult. You may not know what to expect or how your advisor compares. There are no standardized public scores to help you measure trust. Buyer beware.

Switching advisors is a hassle and less than 10% do in a year. When the wealthy leave an advisor, they tend to go to a bank. Private banks are growing but there is the perennial problem of biased advice and cross-selling. That's part of the cost of getting advice from your banker.

The Luxury Market

The session ended with some insights about consumers in the luxury market
  • expect privileged service (e.g., private bankers)
  • expect increasing levels of service
  • less brand loyalty
  • crave innovation
  • reward performance over reputation
  • demand technical expertise since they are becoming increasingly inquisitive
You probably distort your spending to spend part of your life in the luxury market.


Podcast 116 (5:01)

direct download | Internet Archive page | iTunes (new)

PS I spoke at CALU too. Here's the background and a video of my session on YouTube.


Augusto said...

That was really useful, Promod. Content from unique sources summarized makes good blog reading. More of these and I may even subscribe!

Promod said...

If you want better content, you'll need to subscribe first :)

Thanks for your comments Augusto.

estate planning said...

Financial planning is an integral part of maintaining your wealth. You need to be sure that your investment is in the right place.