SM

Cultivating
the Affluent Client
Business-Building Insights into the Personalities of the Wealthy

EXECUTIVE SUMMARY
BY PATRICIA J. ABRAM, JOH N J. BOWEN JR . AN D RUSS ALAN PRI NCE

An Industry
Intelligence
Report from

CULTIVATING THE AFFLUENT CLIENT

The HighNet-Worth
Personalities

The financial needs of the wealthy range

far beyond the traditional investment management that is the primary offering of most
financial advisors. From estate planning,
insurance and asset protection services to
charitable gifting, credit services and cash
flow management, each affluent client has a
diverseand uniqueset of requirements.

In order to successfully address these

needs, its plain that advisors must first fully
comprehend them. High-net-worth psychology provides advisors with a clear
framework for understanding what the wealthy want from their finances, as
well as what they want from their financial advisors.
At the center of this framework are nine personality types:

Family Stewards
Dominant focus on taking care of their families
Conservative in personal and professional life
Not very knowledgeable about investing

Independents
Seek the personal freedom money makes possible
Feel investing is a necessary means to an end
Not interested in the processes of investing or wealth management

Phobics
Are confused and frustrated by the responsibility of wealth
Dislike managing finances and avoid technical discussion of it
Choose advisors based on level of personal trust they feel

Cultivating the Affluent Client:

Business-Building Insights into the Personalities of the Wealthy
By Patricia J. Abram, John J. Bowen Jr. and Russ Alan Prince
Copyright 2006 CEG Worldwide, LLC. All rights reserved.
No part of this publication may be reproduced or retransmitted in any form or by any means, including, but not
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well as liabilities for substantial monetary damages up to $100,000 per infringement, costs and attorneys fees.
The information contained herein is accurate to the best of the publishers knowledge; however, the publisher
can accept no responsibility for the accuracy or completeness of such information or for loss or damage caused
by any use thereof.

CEG Worldwide, LLC 1954 Hayes Lane San Martin, CA 95046

(888) 551-3824 www.cegworldwide.com info@cegworldwide.com

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BUSINESS-BUILDING INSIGHTS INTO THE PERSONALITIES OF THE WEALTHY

Anonymous
Confidentiality a prominent concern
Prize privacy in their financial affairs
Likely to concentrate assets with an advisor who protects them

Moguls
Control a primary concern
Investments another way of extending personal power
Decisive in decisions; rarely look back

VIPs
Invest to be able to purchase status possessions
Prestige important
Like to affiliate with institutions and advisors with top-notch reputations

Accumulators
Focused on making their portfolios bigger
Investments are performance-oriented
Tend to live below their means and spend frugally

Gamblers
Enjoy investing for the excitement of it
Tend to be very knowledgeable and involved
Exhibit a high risk tolerance

Innovators
Focused on leading-edge products and services
Sophisticated investors who like complex products
Tend to be technically savvy and highly educated
Source: Russ Alan Prince and Brett Van Bortel, The Millionaires Advisor, 2003.

An industry study of 1,417 individuals, each with between $500,000 and $5

million of liquid assets, found that Family Stewards make up the largest group
of the affluent, at 34.1 percent of those surveyed. The second-largest group is
the Independents, at 16.8 percent of those surveyed, while Phobics rank third,
at 11.4 percent. All the remaining personalities account for less than 10 percent. (See Exhibit 1.)

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CULTIVATING THE AFFLUENT CLIENT

EXHIBIT 1
DISTRIBUTION OF THE HIGH-NET-WORTH PERSONALITIES
Innovators
4.1%

Gamblers
5.0%
Accumulators
6.1%

Family
Stewards
34.1%

VIPs
6.6%
Moguls
7.6%

Independents
16.8%

Anonymous
8.3%
Phobics
11.4%

N = 1,417 affluent clients.

Source: Russ Alan Prince and David A. Geracioti, Cultivating the Middle-Class Millionaire, 2005.

Key Concerns
of the HighNet-Worth
Personalities

To serve their affluent clients well, advisors

should know their wealthy clients high-networth personalities. But this is only a starting point. They should also understand the
key financial concerns that each personality
is likely to have.

The study of the high-net-worth personalities pinpointed each personalitys level of

concern on a range of personal matters. As
Exhibit 2 shows, issues that are of great
concern to some personalities barely register with others. A look at just three
of these issues highlights the disparities:
Taking care of heirs. The Family Stewardsas would be expectedare

overwhelmingly concerned about ensuring that their heirs are taken care of.
In sharp contrast, just one out of seven Accumulators (14.0 percent) shares
this concern. The concern of the remaining personalities on this issues
ranges between these two extremes.
Paying for education. The Family Stewardsagain as would be expected

are generally concerned about paying for their childrens or grandchildrens

education, with 75.8 percent naming this as an important interest. But

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BUSINESS-BUILDING INSIGHTS INTO THE PERSONALITIES OF THE WEALTHY

EXHIBIT 2
PERSONAL CONCERNS AND INTERESTS OF
THE HIGH-NET-WORTH PERSONALITIES
Weighted
Average

Innovators

Gamblers

Accumulators

VIPs

Moguls

Anonymous

Phobics

Independents

Family
Stewards
Interest or
Responsibility
Ensuring that
heirs are taken
care of

97.3% 89.5% 83.2% 66.7% 63.6% 78.7% 14.0% 54.9% 55.9% 79.2%

Having
adequate
medical
insurance

74.6% 95.4% 77.0% 80.3% 73.8% 86.2% 24.4% 81.7% 86.4% 77.3%

Having enough
money in
retirement

71.5% 96.2% 73.9% 71.8% 43.9% 55.3% 59.3% 62.0% 69.5% 71.5%

Paying for
childrens or
grandchildrens
education

75.8% 16.4% 52.2% 60.7% 22.4% 64.9% 14.0% 22.5% 18.6% 48.3%

Being sued

34.9% 24.8% 19.3% 80.3% 83.2% 87.2% 89.5% 53.5% 52.5% 47.3%

Losing job or
business

52.9% 65.5% 13.7%

Having
high-quality
personal
security

21.1%

Taking care
of parents

47.5% 28.2%

Making
meaningful
gifts to charity

12.0% 29.8% 21.1% 41.9% 76.6% 75.5%

6.7%

17.1%

13.1%

19.1% 76.7% 11.3%

1.9% 88.0% 78.5% 75.5% 20.9% 2.8%

8.1%

16.2% 13.1%

N = 1,417 affluent individuals.

Source: Russ Alan Prince, 2006.

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11.9% 40.0%

1.7%

28.2%

17.0% 19.8% 18.3% 15.3% 28.1%

2.3%

21.1% 20.3% 27.8%

CULTIVATING THE AFFLUENT CLIENT

relatively few Gamblers (22.5 percent), Moguls (22.4 percent), Innovators

(18.6 percent), Independents (16.4 percent) and Accumulators (14.0 percent) consider this to be an issue of major concern.
Possibility of being sued. This is a chief concern for several personalities,

including the Accumulators (89.5 percent), the VIPs (87.2 percent) and the
Moguls (83.2 percent). In contrast, its a fairly minor concern for the
Phobics and the Independents.
The study also asked survey participants about the most fundamental of financial issues: fear of losing ones wealth. All but one of the high-net-worth personalities ranked this as a very important concern. The notable exception is
the Accumulators, who see their fervent focus on amassing wealth as an effective buffer against losing significant amounts of money. (See Exhibit 3.)

EXHIBIT 3
CONCERN ABOUT LOSING WEALTH AMONG
THE HIGH-NET-WORTH PERSONALITIES
Weighted
Average

Innovators

Gamblers

Accumulators

VIPs

Moguls

Anonymous

Phobics

Independents

Family
Stewards
Clients who are
very concerned
about losing
their wealth

91.5% 93.7% 93.8% 86.3% 85.0% 91.5% 45.3% 91.5% 94.9% 88.6%

N = 1,417 affluent individuals.

Source: Russ Alan Prince, 2006.

While the wealthy are clear about their issues of greatest concern, additional
research shows that most advisors fail to fully grasp what these issues are. A parallel
study of 512 advisors asked these advisors about their wealthy clients attitudes
toward the same set of key issues. (As with the client study, affluence was
defined as having between $500,000 and $5 million in liquid assets.)

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BUSINESS-BUILDING INSIGHTS INTO THE PERSONALITIES OF THE WEALTHY

The data reveals significant disparities on most concerns. For instance, while
ensuring that heirs are taken care of ranks very high with wealthy clients overall (79.2 percent of those surveyed), just 40.8 percent of advisors reported that
this was of critical importance to their affluent clients. (See Exhibit 4.)

EXHIBIT 4
THE GAP: CLIENTS INTERESTS AND ADVISORS PERCEPTIONS
Interest or
Responsibility

Affluent Individuals
(All High-Net-Worth Personalities)

Advisors to
Affluent Clients

Ensuring that heirs

are taken care of

79.2%

40.8%

Having adequate
medical insurance

77.3%

79.3%

Having enough money

in retirement

71.5%

52.1%

Paying for childrens or

grandchildrens education

48.3%

28.5%

Being sued

47.3%

9.4%

Losing job or business

40.0%

8.4%

Having high-quality
personal security

28.2%

2.5%

Taking care of parents

28.1%

2.5%

Making meaningful
gifts to charity

27.8%

1.8%

N = 1,417 affluent individuals and 512 financial advisors.

Source: Russ Alan Prince and David A. Geracioti, Cultivating the Middle-Class Millionaire, 2005.

Advisors underestimated their clients level of concern on nearly every other

issue, as well. Major differences are found on the issue of being sued (of concern to nearly half of surveyed affluent clients, but cited as a concern by just
9.4 percent of advisors) and losing a job or business (40.0 percent versus 8.4
percent). Only on the issue of medical insurance did advisors perceptions
match their clients concerns.

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CULTIVATING THE AFFLUENT CLIENT

Perhaps the biggest gap of all can be seen on the issue that trumps all others for
the affluent: concern about losing their wealth. Overall, they rated this as their
top concern, cited by nearly nine out of ten (88.6 percent) of those surveyed.
While affluent clients clearly are anxious about this issue, their advisors
gravely misjudge their unease. As Exhibit 5 demonstrates, just 15.4 percent of
surveyed advisors reported that 20 percent of their wealthy clients are worried
about losing their wealth.

EXHIBIT 5
THE GAP: CLIENTS CONCERN ABOUT LOSING THEIR WEALTH
AND ADVISORS PERCEPTIONS

Affluent Individuals Who Are Very Concerned

About Losing Their Wealth

88.6%

Advisors Who Believe 20 Percent of Their Affluent

Clients Are Very Concerned About Losing Their Wealth

15.4%

N = 1,417 affluent individuals and 512 financial advisors.

Source: Russ Alan Prince and David A. Geracioti, Cultivating the Middle-Class Millionaire, 2005.

The failure of so many advisors to understand their affluent clients well carries
serious consequences. By assuming that they know what is important to their
clientsbut not verifying their assumptionsserving their clients becomes a
hit-and-miss affair. They may offer their clients products and services that
address their key concernsor they may not. In the best case, they meet their
clients needssome of the time. In the worst case, they alienate their wealthy
clients by consistently missing the mark.

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BUSINESS-BUILDING INSIGHTS INTO THE PERSONALITIES OF THE WEALTHY

Cultivating the
Affluent Client
with Wealth
Management

To ensure that advisors serve their

clients well, they need a framework for
building the advisor-client relationship
and for systematically meeting a range
of disparate client needs over time.
There is a single business model
wealth managementthat provides
precisely this framework.
For context, consider that financial
advisors generally fall into one of three
groups, depending on their use of business model:

Investment generalists offer a broad range of investment products (without

specializing in a single type of product) but do not generally do so within a

consultative framework.
Product specialists focus exclusively on an investment-oriented product

niche, such as stocks, managed accounts or fixed-income alternatives.

These advisors are product driven and typically do not make consulting a
large part of their businesses.
Wealth managers use a consultative process to establish close relationships

with affluent clients in order to gain a detailed understanding of their goals

and highest financial needs. They then offer customized choices and solutions designed to fit each individuals needs. Over time, they continue to foster the client relationship to uncover and address new financial challenges as
they arise.
Of the three business models, wealth management is clearly the most useful for
ensuring that advisors fully comprehend their clients most important concerns
and needs. In addition, because they move beyond simply providing investment
advice and products, wealth managers are also prepared to address the entire
range of diverse financial challenges that affluent clients face.

Client Contact: The Cornerstone of Wealth Management

Client relationships are built through client contact, and successful wealth
management hinges on contact thats appropriate for each affluent client. Just
as each high-net-worth personality has unique concerns, so does each prefer a
particular frequency and type of contact.
The research finds that most of the other personalities cluster near the average
for all28 contacts per yearthough the frequency ranges from a low of 12 for
the Anonymous up to 48 for Gamblers.

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CULTIVATING THE AFFLUENT CLIENT

The study defined contact as any personalized communication between advisor and client. This could mean a phone call, an email, a letter or a face-to-face
meetingany encounter in which the advisor personalizes his or her message
to suit the client. This contact excludes any type of mass communication
even if its customizedsuch as brokerage statements or form letters.
An average of 28 personalized contacts per client per yearmore than two
each monthmay seem like a daunting level of communication for any advisor
to take on. Its useful to keep in mind that these contacts need not be long conversations or exhaustive account reviews.
Instead, these contacts canand most ought to bebrief phone calls or quick
emails to clients on issues of importance or interest to them. These issues
need notand should notbe restricted to financial matters. Its wise if they
extend to personal topicsa clients upcoming vacation, for exampleor areas
of mutual interest to advisor and client, such as current events or hobbies.

The Success of Wealth Management

That wealth management is the most effective business model for meeting the
needs of the affluent is borne out by evidence of the success of todays wealth
managers.
One industry study compared wealth managers to advisors using the other two
business models and found substantial differences between each model.
Wealth managers took a commanding lead not only in gross production, but
also in assets under managementall while working with fewer clients. (See
Exhibit 6.)

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BUSINESS-BUILDING INSIGHTS INTO THE PERSONALITIES OF THE WEALTHY

EXHIBIT 6
THE THREE BUSINESS MODELS COMPARED
BUSINESS MODEL
Investment
Generalist

Product
Specialist

Wealth
Manager

Average gross
production

$670,000

$510,000

$1,360,000

Average assets
under management

$31 million

$83 million

$301 million

Average fee-based
assets

$16 million

$6 million

$184 million

220

380

70

Average number
of clients

N = 1,281 financial advisors.

Source: Prince & Associates, 2006.

The shift to wealth management can be challenging. Successful wealth management demands broad financial skills and deep insight into client needs
insight that can be provided in large part by high-net-worth psychology. It also
requires relationship-building skills, including the ability to provide ongoing,
customized client contact. For those advisors who successfully make this shift,
serving the affluent with wealth management can be exceptionally rewarding,
both personally and financially.

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CALL YOUR DOW JONES NEWSWIRES ACCOUNT

RESPRESENTATIVE FOR THE FULL VERSION OF THIS STUDY

CEG Worldwide, LLC

1954 Hayes Lane
San Martin, CA 95046
(888) 551-3824
www.cegworldwide.com
info@cegworldwide.com

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