This is the 24th installment in a Financial Planning series by Chief Correspondent Tobias Salinger on how to build a successful RIA. See the previous stories here, or find them by following Salinger on LinkedIn.
The wealth management industry’s most coveted base of high net worth and ultrahigh net worth clients will always grab the attention of registered investment advisory firms thanks to their assets.
But the profession’s traditional fixation on multimillionaires and billionaires may distract new RIA founders from the process of building a sustainable business. Early on after a launch, they may not even have the capacity to manage those clients’ complex needs across areas like tax and estate planning, family dynamics and, of course, the fancy perks. Many experts warn that high and ultrahigh net worth clients are out of reach for financial advisors early in their careers, unless they are part of service teams. But some studies have shown the vast business potential among inheritors of the “great wealth transfer.” And many advisors share anecdotes about landing their first wealthy client.
On one hand, if advisors have “one client that’s occupying all of your time or your research,” they could be reaching beyond their resources, noted April Rudin, CEO of wealth management marketing firm The Rudin Group and the co-author of the new book “Wealth Management With a Difference: Your Guide to Achieving Client, Generational and Business Success” (Wiley). And even converting them into clients before they have the necessary capabilities “could really damage your reputation, if it’s not something you know about,” she said. High and ultrahigh net worth clients simply have distinctive assets, portfolio allocations, legacy planning, jurisdictional requirements and even bill pay, compared to other customers.
“It’s a specialization for a reason,” Rudin said. “There are a million things that you could say that makes serving that client different. … Unless you are trained and qualified in all those different aspects, it doesn’t make sense to really onboard one client. That one client might be your undoing.”
READ MORE: What’s wrong with the big RIA model, straight from advisors’ mouths
A saturated market, but not entirely spoken for
On the other hand, she acknowledged that acquiring that first high net worth client remains an aspirational goal for many advisors at the beginning of their careers. And “ultrawealthy” clients represent one of nine specific growth opportunities she and the book’s co-author, Nick Rice, a director at consulting firm The Brunswick Group, pointed out in the text’s chapters. In that vein, even wealth management firms known for catering to the mass affluent engage in frequent pushes to gain high net worth clients. But they face tough competition from wirehouses and other giants, as well as the growing ranks of family offices and RIAs that already have the infrastructure to work with very wealthy people.
And just like the term “family office,” the meaning of “high net worth” and “ultrahigh net worth” may be elastic. The Securities and Exchange Commission defines “high net worth individuals” as “qualified individuals” under the Investment Company Act of 1940 — essentially synonymous with “accredited investors,” who are allowed to invest in more risky alternative assets that have limited customer bases under the law. The SEC’s state-level counterparts with the North American Securities Administrators Association offer a more practical criteria of high net worth individuals as bringing at least $1.1 million in assets under an RIA’s management or an overall household net worth of more than $2.2 million. But the SEC is slated to increase those numbers next year and every five years after 2026. In general, the industry’s lexicon attaches the “high net worth” label at around $1 million to $2 million and “ultrahigh net worth” at anywhere from $5 million to $20 million.
RIAs have certainly penetrated the high net worth market. Those fitting the current high net worth criteria of $1.1 million under the firm’s management or $2.2 million overall comprise 15% of the individual clients of SEC-registered RIAs, or 8.7 million households, according to the Investment Adviser Association and COMPLY. But those households’ combined $15.2 trillion in assets under management represent 66% of all AUM across every RIA.
Nevertheless, the HNW client base is expanding and increasingly up for grabs as wealth management firms navigate generational shifts that may still elude the largest RIAs. The number of high net worth clients in the U.S. rose 8% in 2024 and reeled in 9% gain in wealth last year, according to a survey of thousands of wealthy households for the Capgemini Research Institute’s annual “World Wealth Report.” In North America, the estimated number of high net worth clients (defined by Capgemini as those with at least $1 million in assets) jumped 7% to 8.4 million, and their wealth surged 9% to $29.9 trillion.
But one key takeaway could raise red flags for advisors: At least 81% of next-generation clients in the high net worth category said they plan to change their wealth management firm within a year or two upon inheriting their families’ money.
READ MORE: Should financial advisors be dually registered or RIA-only?
Not built overnight
That potential business explains part of the allure and complicated nature of the high net worth client base. Established players among RIAs and wealth management firms in particular can tap into more resources and expertise, and the successors to veteran advisors who are frequently the children of those longtime industry professionals no doubt have a head start on a transfer of a book of business, a high net worth client lead and a network of potential customers. However, those successors point out that wealthy people will not keep their business at a firm purely out of loyalty to a retired advisor. And many self-made advisors have won the business of high net worth clients without any connections, although that scenario amounts to the exception much more than the rule for many wealthy customers.
“Depending on when you come into the industry, it can be very, very difficult,” said Adam Spiegelman, the founder of Alamo, California-based Spiegelman Wealth Management. “It’s difficult for someone who has money to, kind of, hand some of the keys over or all of them to someone who is in their 20s.”
He advised early-career and aspiring advisors to “start small” with clients whose wealth will grow over time and remember that confidence and self-esteem, combined with “small things,” like showing up on time and asking questions that communicate they care about the customers as people, pay off over time. But getting a high net worth client isn’t beyond the grasp of any advisor who is working hard to serve their customer base, Spiegelman said.
“It’s all about relationship-building, and I think that’s the secret sauce of any good advisor,” he said. “That all builds credibility, and clients will start giving you money and referring their friends. But that takes time.”
Sometimes, advisors may even be speaking to their first high net worth client without knowing it, according to Mitch Hamer, the founder of Northbrook, Illinois-based Intersecting Wealth. He has a “$40-million relationship that started at zero” with a relative of a family friend in his 30s who just asked for some general advice on how to diversify the holdings of a trust, Hamer said. From the start, Hamer asked the prospective client about his overall plans and goals, his family and how to “understand what’s going on” across their entire wealth picture, as opposed to restricting the conversation to that question alone.
“If I had that old school attitude and just passed on it, I wouldn’t have a business,” Hamer said. “That person took a bigger role in family affairs. I feel like I helped that client educate other family members.”
In late 2021, the client brought roughly $1 million in trust assets under Hamer’s management. They had a lot of other assets with “a really premier growth stock manager,” but the GameStop saga happened the following year, he noted. By the beginning of this year, about 90% of the client’s assets were under Hamer’s care.
“I’m not a salesy person,” he said. “It took a long time, and I never, ever pushed it, but I always reported and opined on things that were outside of my purview. None of the other advisors were doing that.”
READ MORE: When should a financial advisor launch an RIA?
Teaming, other strategies to compete for HNW clients
Outside of success stories like that, early-career advisors could forge relationships with high net worth clients by getting into a team where they can find “mentorship to help them gain the expertise that they need to be able to serve that market,” Rudin said. Otherwise, they could find it incredibly tough to compete with firms that have layers of support services with a lot of niche specialties in areas like philanthropic planning. In the meantime, they could develop a better understanding of the client base for the long term.
“The most important thing to know about serving ultrahigh net worth and high net worth clients is that people think that having more money makes your life more simple. It actually makes your life more complex,” Rudin said. “There are definitely opportunities for younger advisors to join those teams.”
Working with very wealthy clients also requires an even sharper lens into their families, where advisors operate “almost like a therapist or a coach” acquiring an understanding into how they grew up and their relationship with money from a young age, said Spiegelman. And those psychological and social backgrounds influence their behavior as a client.
“Our conversations are mostly about their cash flow, their grandkids, their next trip and encouraging them to spend their money. Our clients, they’ve won the game. They’ve got millions, and they’re scared to spend it, oftentimes,” he said. “It’s a balancing act, but a lot of our conversations are encouraging clients to live in a reasonable, safe manner where I can tell them, ‘I’m not going to let you fail.’ It sinks in a little bit but never completely changes them.”
If advisors turn into the successors receiving a handoff of the client from a retiring counterpart, they should prepare for the initial meetings by immersing themselves in everything it’s possible to know about the customer, said Hamer. Once in the meeting, though, advisors need to “bring out that warmth and put the quantitative stuff aside for a bit,” he said. Eventually they can move into the more direct financial topics. But phone calls and messages around the holidays or about their favorite sports team or charitable endeavors can build the relationship further.
“I don’t need to be the expert in the room, I need to be compassionate. I need to really take a genuine interest into who these people are as human beings,” Hamer said. “Those little check-ins and showing an interest, they just make everything else so much easier. It’s a hard thing to do to manage all the financial moving parts in people’s lives. If you can do some things to make it easier, those have always led to the best transitions.”
