Attracting the Affluent: Evolution and revolution marketing high-end advice to high-need prospects by John H. Melchinger The Case for New Ideas Darwin was right--at least about the evolution of species; that as environments change the fittest survive. Forget speculating backwards in history about the origin of species; this serves no good purpose. Rather, let's simply agree from what we can actually observe that; "fittest" does not necessarily mean strongest; the most adaptable species (and individuals) survive changes in the environment. When tax qualified minimum deposit life insurance died with a mid-Eighties tax reform act, brokers who sold it did not also wither and die because their best marketing technique was taken away; they adapted and continued to prosper. My mantra: Improvise, Adapt, Overcome. Stay fit to survive. there is more than one way to be successful; in nature, there are lessons and proofs for this. For example, a single species may have more than one type of male with equally successful strategies for survival and propagation. In the oho species among the salmon fishes, for example, there are two distinct types of male that fertilize the eggs of that species' one type of female. The hooknose is large and brutish, and fights other hooknoses for the right to fertilize the female's eggs, winner take all. The jack is little and fast, and while the hooknoses are out battling each other, darts in and out of the nest fertilizing the female's eggs. These two strategies are distinct yet equally successful for generating offspring for each of these two types of males. The rough and tumble big guys focus on fighting their competition; the light, quick little guys focus on exploiting their best opportunities. Hmmm...that has a familiar ring to it. change does not always mean progress, but progress always means change. For procedures to produce better results next time, something must change; the timing, sequence, speed, quality, or even the procedures themselves. My functional definition of insanity is doing the same thing repeatedly but expecting a better result. No change, no gain. To obtain better estate planning and financial planning prospects (marketing to the affluent), then your present marketing efforts must change, at least to some degree, as the new realities of the marketplace become apparent. we improve best when we add to the next applications of our present skills what we've learned from our previous experiences. We must think through the situations we've been in, examine and correlate our activities and results, then refine those activities for better results next time. All coaching, whether we are coaching someone else or ourselves, is in the context of next time. Let's see what happens when we apply these principles. What I am talking about here are innovations in marketing estate and financial planning services for the affluent and selling financial products to the affluent. My topic, in a nutshell, is the High-End Prospect and Client Attraction Tool--HEPCAT ( I am continuing to develop. It starts with defining the high-end markets by segments more finite than you may have targeted before. Although you will see how I chart the "affluent" into nine major segments, two of the underlying factors require definition to make good sense of it. High net worth (HNW) means people whose overall financial status make them liable to pay, at death, the estate tax in the U.S. or the capital gains tax in Canada. In either case, they need what I call terminal liquidity to pass through the tax collector's toll booth between the here and now and the hereafter. And when we die, we all know what the tax collector is here after. High income (HI) means individuals with annual incomes in excess of $100,000. This figure is arbitrary and, like the criterion for high net worth, subject to change. This is just how I see it for now. Some of my clients quantify higher standards; some, lower. I believe that as the U.S. and Canadian governments face the increasing burden of servicing their national debts, and continue to prattle on about income tax cuts for whatever popular reasons today's politicos conjure up, the tremendous opportunity to tap wealth transfers through probate will be so tantalizing that new terminal taxation laws will cause havoc for high net worth affluents and glee for both estate and financial planners. These and other changes in the environment in which planners operate will make their ability to prepare themselves for the evolution a critical business skill. When you begin to plot business ownership, employment without ownership and event-based sources of wealth against net worth and income measures, you can begin to see the value of segmenting the affluent into these various types of means. Evolution The marketplace is changing. Some of the facts are already apparent. There are now more millionaires by far than ever before, and their ranks are growing exponentially in North America and the other continents entering the international trade evolution. Of all the people in the history of mankind who have ever lived beyond age 65, more than half are alive today, and their ranks are growing as the current age wave hits the shallows of old age. By 2015, an estimated $10 trillion will pass through probate in the U.S. alone. In Canada, the majority of the present wealth is concentrated in the value of farm land, and the average age of farmers is over 60. Although people age 65 and over are living longer, they will eventually die and leave some of their wealth behind them. Their attitudes about retirement, money and the legacy they will leave are changing. Baby Boomers, also aging, feel the pinch of new problems few before us have ever experienced. They are now Adult Children of Aging Parents, wanting to care for their mothers and fathers in an increasingly costly environment of medical, emotional, nutritional and general care. What was caretaking is becoming caregiving. As parents themselves, they also feel obligations to their children, as well as to themselves. Most have not planned for their new roles either financially or psychologically. Teenagers are the fastest growing age segment of the U.S. population today. Their influence over how money is spent in their households is enormous. Just watch advertising expenditures made by retailers and you'll see how much influence these teenagers really have. They are often paradoxically both a siphon for spending household dollars and the very reason many parents try to save their dollars. Overall, people's values and attitudes about money, wealth, debt, styles of living, legacies and inheritances are changing. We must keep up with these changes if we are to attract certain people of means to become our estate and financial planning clients. If evolution is the natural change that takes place as species adapt to changes in their environment, then altering our marketing strategies based on changes we see in the marketplace becomes the way we will evolve, and it has its problems. 1. The changes never stop, and it is not easy to keep up with them; not that we need to change just as quickly as the marketplace does, but we do need to adjust from time to time. 2. The impact of the changes is not always easy to read, and our judgment sometimes proves itself wrong in the long run even though it looked great at the outset and for the short term. Remember our assumptions as Americans about our home values continuing to rise to support the American Dream; our absolute knowledge that as stock prices rise, bond prices fall and vice versa; that our currencies are stable; that inflation was here to stay; etcetera? That's all out the window. These are all myths now, and dangerous to believe. It isn't what we don't know that hurts usÖIt's what we know for sure, that just ain't so. 3. The marketplace may not read itself the same way we read it, and although our marketing ideas may turn out to be very good ideas eventually, they may be premature for the market when we launch them. Remember the advent of ìfinancial planningî and the birthing pains suffered trying to define this practice and bring it to market? Now, finally, it is a marketing idea whose time has come, and in a big way. It won't be long before fee-only advice is sold more than anything else, and commissions are leveled so products can do more for the customers. All these evolutionary adjustments were bound to happen and can be traced easily by looking back a few years. It seems to be more evolution than revolution. But who knows where or when changes will occur? Revolution I'd like to push evolution a little faster and offer a revolutionary idea. It's based on the marketing tripod marketñ>messagesñ>media, and begins by segmenting affluents into nine primary divisions (market segments), and then into as many more finitely defined subsets you'd care to add. The following chart shows the basic matrix divvied up by net worth and income and then correlated to their sources of wealth and income. This format begins with people with (A) high net worth but not high income; (B) people with both high net worth and high income; and (C) people with high income but not high net worth. In each of these first three categories you can further isolate the basis for their wealth and/or income by (1) incidence of business ownership; (2) not being a business owner; and (3) having otherwise derived their wealth and/or income from an event or generally short-lived experience. The chart shows these divisions with enough detail to make the basic points about the segments. Please take a few minutes to consider it.   A High Net Worth B High Net Worth & High Income C High Income 1 Business Owner 1A probably older, retired may have or want to retain control of the business may be lid-sitting for new, unproved management until they have the skills and knowledge to take charge savoring the accomplishments of a lifetime primary motivation control 1B has been at it for a while; not yet retiring may be waiting to see if children develop abilities and desire to come into the business may not yet be thinking seriously about selling the business to others primary motivation; control 1C relatively new to the business or has not accumulated assets may think more in terms of income and cash flow than capital and growth probably younger; more tactical than strategic enjoying the excitement of making things happen higher risk tolerance primary motivation; control 2 Employed/Employee 2A retired executive or professional may have given up professional interests to pursue other personal interests in retirement tends to think of personal assets as money or dollars, not as wealth per se primary motivation; quality of life 2B probably older, still employed children may be grown thinking about retirement, perhaps as opportunity for a ìnew lifeî after work primary motivation; quality of life 2C young professional; MBA, engineer, attorney, doctor, accountant, super sales maker on commission/bonus financial focus is on income tax as impediment to living better, purchasing goods, accumulating wealth thinks more in terms of cash flow than accumulating pools of money or other assets primary motivation; style of living 3 Event-Based Acquisition of Wealth or Income 3A inherited wealthñmay be tangible vs liquid assets; lottery winner with long-term payout; trust fund beneficiary may have limited or no control over assets may have limited skill to manage assets they did not create (a business, stock portfolio, farm, etc.) primary motivation; unknown; perhaps more income from assets 3B trust fund beneficiary with substantial income; professional sports player with savings or large signing bonus; patent owner receiving income from it; large lottery winner with significant annual payout primary motivation preserving wealth during own lifetime may also seek personal recognition in addition to financial success 3C professional sports player; author or artist with royalty income from book, record, etc.; high income earner with bad spending habits; high commission sales person in big ticket sales probably younger or early middle age primary motivation; having enough to spend; maybe starting to squirrel away some money If you wish to further refine these segments, try adding other criteria. I suggest: age, of all the participants in the clientsí typical situation. Example: HNW/HI professional employees over the age of 55. family status; not just whether married or single, but whether children are in the business, planning to take it over, struggling with family relationships, etcetera decision making history and style, usually seen by studying occupations and specialties or simply by examining your typical clients' decision making histories. Example: among physicians, the internists, oncologists and others of the "scientist" style of physician, decision making seems to be predominantly linear analytical: the typical modus operandi is to stabilize the patient to buy enough time to do enough tests to devise a diagnosis and decide a regimen of medicine to see if the patient will respond well and get better. Surgeons cannot--and do not--think this way. Thus, among the same occupation physician there are at least two distinct decision making styles, observable by examining each specialty's M.O. You may also wish to use other additional criteria, but take care to use ones for which data or information is available to you. You will be disappointed trying to catalog prospects by criteria for which the information is not readily available or is too costly to obtain. Of course, segmenting and prospecting for high-end estate and financial planning prospects using these criteria assumes that you know or will develop the expertise needed to perform professionally for these prospects. Your competency to serve these clients is as much a part of the marketing equation as the formula for attracting new prospects. Messages The messages you convey to each market segment depend on the needs and wants of each segment, as well as what you are able and interested in providing. For example, when attracting the HNW retired but still Business owner prospect, the messages you use would be quite different from those you would employ to attract the young HI only Business owner because their values and perceived needs are different. They may overlap to some degree, but they are different enough to merit devising different sets of messages uniquely tailored to each segment. Some messages convey or imply that you have specialties related to your prospects' situations and needs. What I am talking about here is not to say that "I do only these (three) things," but that "I do these (three) things especially well." Example: If you want to address the needs of the 1AñHNW Business owner, who may still be active as an owner but not as an employee because s/he has children trying to develop enough skills to run the business, the expertise you offer may be described in terms of client situations you deal particularly well with: parent-->child transfers of business ownership parity planning for the children who should not inherit the business practicing Due Care when purchasing life insurance The messages you may want to deliver regarding these three situational topics may include something like Some children coming into a business aren't ready to take it over when the parent or business is...and vice versa. Other children should not inherit your business--or even part of it--otherwise you risk family disasters of a magnitude you may not even be able to imagine. There are games insurers play with undisclosed assumptions about the future of certain contracts they offer...all making pricing look better than reality may later prove out. Are you ready to risk it without a thorough examination that gets to the bottom of these issues? This last message was posed as a question, which is often a very good way to deliver your messages. In dealing with older people, for example, a written checklist of carefully worded questions often gets prospects stimulated enough to want to sit down and talk with you. For instance: I have/have not thought through the process and consequences of aging, competency and healthcare costs and their potential impact on me and my family. Sometimes, direct impact messages work well, as in the "Form 706 Letter" that goes out with a Form 706 (death tax return) on which you fill in the prospect's name as the deceased. The letter begins, Here is the most important tax return that will ever be filed with your name on it, and you don't even have the privilege of signing it yourself. The letter goes on to discuss that through estate planning you can control how the form will be filled out and arrange your assets according to your wishes, but you have to act now before it's too late. It is a high impact message that gets more conversations started with HNW prospects. Media Selecting the best media to employ for delivering your messages depends on the segment you are trying to attract, the messages you want to deliver, and your available resources for delivering those messages. If you are going to ask your best clients for personal introductions to others who, like themselves, meet the basic characteristics of your Ideal Client Profile, then you need a written profile of your ideal client and a meeting with each client who can and will make introductions. The medium is the meeting (which should not be the same meeting as the planned periodic review you conduct with your client), plus the Ideal Client Profile you use. Asking for and making personal introductions should be done personallyñface to face. If you want to develop non-insurance professionals as centers of influence, then you will first need to consider which ones to speak with according to which market segments you want to develop. You will want to work with trusts and estates attorneys to develop 1A segment prospects, and probably accountants and/or contract lawyers to develop 1C segment prospects. There are other variables to consider, as well, but too many to cover effectively here. Direct approaches to develop specific market segments at the high ends can also work. Relationship development of this sort takes time, however, so make sure you go into this effort with that understanding. A mere decade ago, the average adult American would grant name recognition after an average of six unique exposures in advertising. Today's psychology shows not only that you should now want name plus idea recognition, but that it now takes nine to twelve unique contacts before you are likely to get it (or, rather, that it takes nine to twelve exposures before your prospect gets it about what you really do and whether s/he wants to do it with you). Direct approaches (meaning you go after each prospect by repeated, direct communications that you make) usually should include a mix of various media to deliver your messages. You might try bundling special bulletins of interest to the segment, plus audio or video business brochures that target the special issues of the segment, plus sponsored workshops you conduct in your areas of expertise related to the segment, plus published articles authored by you, plus infomercial-type videos you deliver to the market segment Once you are on this trackñfocusing on market segments that are more finite than you've ever tried to attractñyou will begin to love the results. You will learn that the more specific your messages are to the more specific segments, the better your results will be. And don't forget that you can offer your financial decisionmaking process as a service that you've especially tailored to the special needs of your highly segmented prospects. To do this, you might want to employ a unique checklist of how prospects should plan ahead and what special credentials they should look for in people who hold themselves out to provide certain expertise. My rule: set the standards and become the competition; don't simply follow someone else's standards and spend your time competing. The hooknose coho salmon might take a lesson from the jacks in this regard. You could offer free or minimal fee initial evaluation interviews. If you charge a feeñwhich has certain meritsñyou would want to make sure that each prospect understands what benefits and services the fee provides. This could be a "summary consultation and recommendation of steps to be taken to arrive at informed financial decisions" or something else of a value that the prospect can see substantiates paying your fee. You could provide written materials (handouts of sorts), a Discovery Agreement, or other tangible evidence of the value and meaning of doing the initial interview with you. Make Planning Come Alive Planning, whether it's an estate or general finances you are talking about, is a pretty boring concept, an endeavor prospects imagine they have to slug through, which is mostly over their heads, causing them to have to trust the complicated brilliance a planner brings to their situationñif they can find a trustworthy planner who fits their needs. This is one of the major reasons that so many people of means do not enter into the planning process. And what have we done to make it fun, entertaining, or less of a burden than the prospect imagines? Not much, but now is our best chance ever. Emotionally, the word planning is passive as a statement of how, compared to the benefits statements you can make about the results planning can provide. Planning is the planner's jargon; benefits are what the buyer wants to hear about. Marketing means to bring alive in the mind of your prospects the possibilities of achieving their dreams. They all have some idea of who they are and what they want to be. When they begin to learn that you know, understand and can help people like themselves, in similar situations, then they will be attracted to you. You probably have all the ingredients you need and just lack the recipe to put it all together. Making Bread Pick the segment you want to develop. Identify your best clients and others you know in this segment. Peel back their shell and isolate the primary characteristics you want to work with. Based on the situations and issues the segment is most concerned about, devise the messages you want to deliver. Each message should imply or state your expertise (knowledge plus experience) dealing with a situation at issue for the prospect. Decide the best ways for you to deliver these messages to that segment. Mix your media in a blend suitable to the audience receiving these messages, as well as to your business. Once the marketing mix is underway, watch carefully for cases that rise to the top. Take them and bake each one carefully. (If the mixture heats up too fast, you may have more cases than you can handle. Slowly dilute the marketing mix until the boiling slows to a steady, manageable rolling boil or high simmer.) As with any yeast-based recipe that continually rises, ingredients need to be watched carefully for quality and replenished from time to time. Old timer prospectors used to carry their sourdough close to them, using some but never all of it whenever they cooked up a batch of bread, rolls or flapjacks. From time to time they added sugar, flour, water or salt to maintain the quality of their base. You will also want to do this with your marketing mix. The more attention you pay to the details of attracting the right prospects for you, the better your results will be. Your level of success will correlate to the degree you create and tend a personally suitable recipe for attracting certain estate planning and financial planning prospects. John H. Melchinger coaches personal financial services advisors how to market their professional practice to high income and high net worth affluents. Effective market identification, segmentation, selection, penetration and development, with compelling packaging and promotion, make his clients among the best planners in the business. His marketing techniques, how-to books, articles and presentations have become classics in private practice marketing. John donates one day per month to non-profit organizations that request his support for workshops, seminars and fund-raisers. www.melchinger.com john@melchinger.com