Recently, on one of our coaching sessions, one of my clients shared with me his goal of bringing in $50mm of new assets this year. When I actually used our sales manual (page 28) to show him how much he needed to bring in monthly to reach that annual goal, it became mathematically obvious to him that he can not possibly reach that goal at $1mm minimums. Sometimes it requires math to get my point across! That would mean he would need 50 $1mm clients, which would mean he’d need at least 150 prospective clients on his pipeline to reach his goal. 150 people he’d needs to be actively speaking with to reach his goal.
There are only two ways to resolve that equation and get to his sales goal of $50mm in new assets: 1) Modernize your approach so you can be a credible fit for and visible to more people and/or 2) Increase that minimum from $1mm to $5mm, at least. First, the $1mm have more than enough other options for their wealth management, especially with the advent of so much technological ways of managing wealth. Second, it can take just as much time bringing in and sourcing a $1mm client as it could a $5mm client, if you are taking all the right steps.
His jaw dropped. Increase my minimum? Are there even that many millionaires that I can be in front of? The answer is unequivocally YES, and more now than ever before!
As opportunity develops for Americans of high net worth, opportunities continue to evolve for wealth managers and others who serve them.
While the pandemic has significantly shifted the world and how we conduct things, prospects for growing a wealth management firm have never been greater, especially with the growth of so many multi millionaires that can use a wealth manager’s comprehensive services and financial planning strategies.
With America adding 56 new billionaires in 2020 for a total of 659, the business of wealth management continues to surge with chances to grow.
Newly Minted Ultra High Net Worth Individuals
With so much wealth created in the United States, it stands to reason to wonder where it’s coming from.
Airbnb’s Brian Chesky
Many of America’s newest billionaires come from a crop of 2020’s most impressive IPOs. Count DoorDash’s Tony Xu, Airbnb’s Brian Chesky and Snowflake’s Frank Slootman among them. These individuals benefited from an evolutionary approach to innovation, but there are other factors at play.
MacKenzie Scott
The market aided individuals a great deal. MacKenzie Scott, former wife of Amazon’s Jeff Bezos, is now the richest woman in the world. Scott’s fortune amounts to a net worth of over $66 billion, built in large part from a four percent share in Amazon received as part of the divorce settlement.
Thanks to the pandemic, shares in Amazon jumped from $2,000 to $3,500 over the course of 2020.
During the pandemic, the stock market rose thanks to low rates and open-ended liquidity from the Federal Reserve. This opened the door to substantial gains, while a push to work-from-home policies drove wealth. Those with business interests in technological services saw sizable growth, as innovation shifted from conventional office settings.
How this impacts the wealth management sector remains to be seen, but it’s wise to assume trends toward the technology sector and stock market growth will continue. As people adjust to new realities, prospects for innovation emerge.
Where Wealth is Created
The picture of where wealth is created varies.
According to the Federal Reserve, average net worth increases with age. Those aged 55 to 64 have an average net worth of $1,167,400, while those over the age of 75 have an average net worth of $1,067,000. The slight dip is likely because of increasing health costs and changes to retirement income opportunities.
The average age of the American millionaire is 62. Just under 40 percent of U.S. millionaires are over the age of 65 and only one percent are below the age of 35.
Breaking the numbers down paints a more complete picture.
There are roughly 1.3 million households in the U.S. with a net worth of over $10.3 million, while there are roughly 7.6 million households with a net worth of over $2 million.
According to data from 2019, New Jersey is the state with the most millionaires per capita. California and New York account for over 40 percent of America’s billionaires, but most of those individuals don’t actually live in those states. Amazon’s Jeff Bezos, for instance, lives in Washington.
Finding Wealth in America
The United States adds hundreds of thousands of new millionaires each year. The highest concentration is found in urban centers like New York and the trends are becoming more sophisticated.
Millennial millionaires, for example, are likely to own an average of three properties. Real estate provides plenty of growth opportunities, which may be why an estimated 80 percent of new millionaires are self-made. The notion of inherited wealth is becoming a thing of the past as a new generation finds opportunities in flourishing markets.
The finance and investment industry house 15 percent of the most wealthy Americans. Fashion and retail account for 12 percent of the world’s billionaires, while real estate is the third largest source of wealth. The tech industry is fourth, accounting for a lot of growth.
Those seeking to tap into this wealth for their wealth management practice need to accept and come to terms with the fact that others who are successfully tapping the ultra high net worth are relentless about their approach. Whether the approach is a systematic digital strategy or the development of a strong referral network, the advisors we work with and observe who are successful in this market eat, breath and sleep ultra high net worth marketing. And you can too, if you are prepared for the challenge!
The pandemic has created tremendous challenges, but opportunities can be found with the right approach. Positioning matters and leveraging resources like social media leads to more exposure.
Using the data can go a long way to forging new relationships with clientele, so evolving a modern approach is essential. And the numbers help by establishing client needs and creating opportunities to grow, a benefit for wealth managers and financial advisors across the United States.
Is your practice ripe for attracting such high net worth individuals, when your competitors are evolving rapidly to meet their needs? If you answered no, or not fully, set up a call to help you utilize our resources to modernize and optimize your practice. Because the opportunities have never been greater!