Challenges in dealing with HNI clients

HNI segment remains a sought after client base among financial advisors for the fact that the investment amounts are huge, so it is an opportunity to build and multiply our AUM quickly. Also, Advisors are mostly keen on having HNI's on board because the amount of investment they can get from one client here would be equivalent to the investment of a number of small retail investors. So, the return on time and efforts put is quite high in the HNI segment. Although the HNI segment is lucrative, but it comes with its own set of challenges.

Here are some challenges faced by advisors while dealing with HNI clients:

Access: The first most difficult thing to do is getting the first meeting with an HNI. Usually, HNI's are busy people, it won't be wise to barge into an HNI's office, or in a social gathering if you happen to catch a sight of him/her, and getting an appointment is not easy. The best way to approach an HNI is undoubtedly through references, through his/her social circle or colleagues at office. If you have friends and acquaintances working in corporates, you can seek references for their bosses. You can be a part of elite social clubs, attend conferences, seminars, to get relevant contacts. Once you get a meeting, keep in mind that your impression counts, what you wear, what you talk, punctuality, your persona; matters.

Unique Needs: HNIs' goals are different from the common investor. They do not face the universal problem called “lack of money”. Remember, they are not investing for their children's education or their first car, or a house. In fact there is no specific goal, rather the idea behind investing is, they want their wealth to be preserved and grow. Becoming rich is tough, but maintaining status quo is more complicated, the emphasis on wealth preservation is high because the loss if they lose, is huge, HNI's want to exploit opportunities as they come, they are looking for for unique ideas, they may even exploit global investment opportunities, so it's important that the advisor remains abreast with the latest trends and updates in the markets, it is essential to pay attention to global events, the impact they may have on the Indian markets, foreign tax policies, impact of currency risk and the opportunities that are in store.

Exotic products: HNI's generally have exposure to markets and products, they can assess your ability and knowledge in few meetings. It's important that you have the ability, creative ideas and investment options to exhibit your skills, so the investor can place trust in you. Real estate has remained a popular investment option among HNI's, being a tangible asset and offering good returns. But in the recent past, properties have disappointed investors, amidst a dismal growth scenario and with increased government regulations pertaining to real estate, the future is also unpredictable. So, a lot of HNI's have distanced themselves from property and are looking at alternate investment products, which is an opportunity for you. Having structured products in your basket like PMS, bonds, FMP's, insurance, etc., is a requisite. Also big businessmen may have surplus working capital at times, a liquid fund can be a good bet for him/her, to park the surplus cash and get a better return than saving account, and also it offers high liquidity, so the investor can withdraw and re-invest in the business whenever he wants to.

Personalized Services: Even within the HNI segment, not all investors are the same. There are HNI's who were born rich, these people have inherited the riches from their ancestors; and also there are HNIs who have created the riches on their own, like entrepreneurs or people in the topline of corporates. The history and backgrounds differ, thus the needs, perspectives of people are different, and the expectations are high. The service standards need to be maintained and you must provide personalized services to each investor keeping in mind his/her unique background, needs and outlook. Although we do attempt to provide personalized services to all our clients, but here the level of personalization required is much more than the non HNI clients.

One redemption can significantly bring down your AUM: Losing one HNI client or a big redemption can be a big setback for your business, because that one client's investment would be a significant percentage of your total AUM. Hence, like we suggest our investors to expose their portfolios to multiple asset classes, sectors and stocks, even though all these options are not equally lucrative, but the idea is to provide a shell, in case one part of the Portfolio falls back. Likewise, we must diversify our client base, a mix of both HNI's and retail clients will provide us the core strength to stand tall even if a vital client quits.

So, we see, that HNI is a remunerative segment, but it is a demanding segment too, there are challenges in dealing with HNI's, be it acquiring or servicing them. You need to be extremely attentive to their needs, provide personalized attention and customized services. But if you understand and develop expertise in handling the super wealthy, it is an opportunity, a happy client can refer you to other HNI's in his/her circle, and that way you can create a niche, and build your AUM quickly.

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