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Successful
Prospecting to the Wealthy
by Larry Klein, CPA
Successful prospecting
to the person with a million dollar portfolio, or the one that buys
million-dollar, or multi million-dollar, life policies can require
different tactics than prospecting the “mass affluent” market (i.e. those
with less than $1 million of investment assets).
I say “can” require
different tactics because there are two equal-size wealth
markets—the half who
have accumulated significant assets but do not think of themselves as
rich, and those that have similar financial circumstances yet do think of
themselves as wealthy.
According to a study by
the Spectrem Group, there are 107,023,917 households in the United States.
Of that number 3,737,000 have investable assets in excess of $1 million.
On a national basis, that means that 3.49% of the households have a
million dollars in liquid funds, although you
would find the
percentage of million dollar households can exceed 6% in more affluent
communities like Nassau County, San Jose or West Palm Beach.
Strategies for
prospecting the down-home wealthy
The first half of the
affluent market is the “millionaire next door” as described by Dr. Tom
Stanley in his book “The Millionaire Next Door.” “The real American
millionaire is John Doe, age 57, who has been married for 32 years to the
same woman, owns a highly productive small or medium-sized
business, has two
children, and works 10-14 hours a day, six days a week.” You can picture
this guy—a real “Sam Walton type,” driving his older pick up truck and
sill living in the same 3 bedroom 2 bath home even though his net worth is
$5 million. These people have created their wealth by starting businesses
or investing in real estate and still behave like “salt of the earth”
people.
This type of individual
responds to the same marketing methods as the middle-income buyer: general
seminars, direct mail and advertising. There is little different you need
to do to reach these folks if you are already prospecting the middle
market. In fact, there is little you can do to
isolate these folks as
they live in middle-income neighborhoods and they are inconspicuous as
they don’t buy luxury cars or rent the presidential suite when taking a
cruise. Because multi-millionaires are fewer in number, a seminar that
attracts 50 people will typically only have 3-5 attendees that are
multi-millionaires.
Real estate owners and
small business owners heavily populate a large percentage of this group.
Therefore, one way to
isolate these folks is to obtain a list of residential rental property
owners or commercial property owners and of business owners with fewer
than 50 employees. (Any list broker can help you). Not only can you
contact them individually, but also there may be property-owner
associations or business owner associations that can become a prospecting
platform (for talks or getting published in their magazine).
Strategies for
prospecting the “showy” wealthy
Mass marketing
techniques, however, will not work on the other affluent group, the
Armani-suit wearing crowd. These people do not respond to mass marketing
and need to be met through introduction, social or professional circles.
They live in exclusive neighborhoods, drive late model
luxury cars, belong to
”the club” and may be immersed in their self-importance.
So how do you meet these millionaires? You meet them on their turf. Dick
Heckman joined the best country club in Palm Springs, played golf 3 times
a week at 2 pm, and met wealthy business owners, retired executives, and
large shareholders of major companies. Never having more than
62 clients, he became
one of the wealthiest financial producers in the US.
Here’s another approach.
Each year, when the opera in your city has the annual gala, you buy a
table for $2500 and bring your best clients (a nice treat for them). You
will get noticed. The following week, if you are not called to volunteer
on one of the opera committees, make the call
and volunteer yourself.
The committee will usually be populated with wealthy older patrons of the
arts. You make friends, get invited to their parties and leverage each
contact to the next.
You dominate an industry. One planner I know has realized that franchise
owners are wealthy folks. So he found out that they had a local
association at which he could give a talk. He called each franchise owner
individually and set a time to meet. He did not call them to get immediate
business, but rather
called them with a soft sell approach, “I understand you are a successful
franchise owner. I am building a financial planning firm that assists
franchise owners. Could I interview you about the greatest challenges that
franchise owners face?” He has written an article
on pension plans, for
their newsletter, specifically addressing the franchise owner situation.
Focus on money in
motion. Money is in motion during the following events:
• Death—do you prospect
estate attorneys?
• Employment
termination—one successful advisor contacted an outplacement firm. He
offered his 2-hour class, “How to manage your money between jobs” to the
outplacement firm’s clients—executives that had been laid off. These
executives need to rollover some hefty 401k
balances—who do you
think gets hired?
• Sale of a business—do
you prospect business brokers?
• Sale of Real Estate—do
you prospect commercial real estate brokers?
The key is to develop a
specialty that wealthy people seek. In order to fill a room with wealthy
real estate owners, I secured a list of people that owned at least $1
million of real estate. I sent a seminar invitation entitled “Estate
Planning for Owners of Residential Income Property.” I had 58 millionaires
in the room.
In addition, you
cultivate relationships with people that can introduce you to their
wealthy clients.
These are called
host-beneficiary relationships. You find a host that has relationships you
want and you become the beneficiary of those relationships. Think beyond
CPAs and attorneys. Let me offer more creative examples of a host.
What about the owner of
the Mercedes dealership? Might he be interested in inviting his best
clients to lunch and a talk (by you) on “Maximizing the Tax Benefits from
Business Use of Luxury Cars, Boats and Vacation Properties?” Would the
commercial real estate broker like to have you
write a booklet or give
a talk to his prospects on, “How to Use a Capital Gains Elimination Trust
to Avoid Capital Gains Taxes?” (I always start a discussion of charitable
remainder trusts calling them “capital gains eliminations trusts” so that
people listen before they prejudge). What other hosts can you think of
that have wealthy clients where you can be the beneficiary?
What do the wealthy
want?
Seventy percent of
affluent Americans feel that preserving wealth is their most important
goal, according to a survey released by the Lincoln Financial Group of
Philadelphia. Right behind preserving wealth was avoiding excessive taxes,
listed by 59% of the affluent group as a “very
important” goal. In
fact, avoiding excessive taxes was ranked higher than accumulating
additional wealth. Yet, surprisingly, less than a third of the affluent
said that they feel that they have adequately protected their assets from
excessive taxes, according to the survey. This represents
an enormous opportunity
for you to step in and offer them solutions.
As you can see,
prospecting to the wealthy is not that different than any other niche you
choose to market to. You must understand how they think, design your
marketing program to address their key concerns, and leverage the right
host-beneficiary relationships to acquire more clientele within
that niche.
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