By Anthony Glomski and Russ Alan Prince
Your $5-Million High-Net-Worth Practice
By design, the clientele of an accounting firm’s high-net-worth practice is the wealthy, defined as having a net worth of $10 million or more.
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We know that with clients at this level of net worth, you can indeed build a $5 million high-net-worth practice.
Admittedly, the $10-million criterion is somewhat arbitrary. But in extensively researching the wealthy, coupled with “in the trenches experience,” clients with a net worth of $10 million or more consistently prove very rewarding for most accounting firms.
This reward is because of:
- The revenues they provide to the high-net-worth practice
- The revenues they provide to other practices within the accounting firm
- The clients’ referrals they provide (especially when accountants facilitate receiving referrals)
Bear in mind that there are specific attributes and qualities that make the wealthy exceptional clients for most accountants such as …
- They regularly need a variety of services and solutions that accountants can provide: From producing financial analyses and statements to the valuation of business interests and various forms of consulting to often extensive wealth planning needs, the wealthy can make great clients for accountants who can deliver multiple forms of expertise and an exceptional experience.
- They pay well for value: While most everyone wants a bargain, the wealthy are intensely results-oriented and understand the benefits of high-quality services and advice. They are usually very willing to discard price when they see meaningful value. However, it is up to you to communicate the value of your expertise.
- They pay their invoices in full: Realization is a major issue with accountants. By concentrating on delivering value that truly matters and communicating the fact, you will have little problem getting paid – in full.
- They make decisions: Generally speaking, the wealthy are quite adept and comfortable at decision-making. While they may consult with others, they are usually able to determine what they want and are going to do. Compared to other types of potential clients, for better or worse, this cohort is less inclined to flounder and procrastinate.
Without question, the wealthy can be exceptional clients. Also, when it comes to different types of accounting practices, catering to the wealthy is undoubtedly one of the most profitable. There are various ways to become wealthy with some different attributes, needs and wants.
The Road to Wealth
There are many ways to become personally wealthy. The seven major kinds of personal wealth generation are:
- Equity wealth: Throughout the world, equity wealth is the most common route to affluence. This type of wealth is created by having an equity stake in a prosperous revenue-generating entity, which is usually an ongoing successful enterprise.
- Post-equity wealth: This is wealth created when the owner of the “enterprise” sells his or her stake to another person or company and subsequently gets rich (or richer). Equity stakes are often illiquid assets, so many people only realize many of the benefits of personal wealth once the sale is complete.
- Corporate wealth: Senior officers in public and private corporations have amassed sizable estates from handsome compensation packages, including bonuses, deferred compensation, restricted stock, and stock options.
- Celebrity wealth: From entertainers to athletes to social media influencers, fame translates into money. To make it all work, some form of business structure is usually required to transform their type of wealth into equity wealth.
- Inherited wealth: “Trust babies” of all ages are the beneficiaries of someone else’s success – most commonly because of a successful company. While captivating and sometimes attention-grabbing, they are comparatively rare. In fact, in most calculations, inherited wealth represents less than 10 percent of all private wealth.
- Illegal wealth: Either in the form of criminal activities or flight capital, illegal wealth is extensive and extreme. It is worth noting, however, that the wealth of most successful criminals is derived from their control and “equity ownership” of an illicit enterprise.
- Fortuitous wealth: The least likely and least predictable way of getting rich is by getting lucky; say by winning the lottery or finding an abandoned Van Gogh painting at the side of the road.
While there are various ways to become wealthy, having a stake in a successful enterprise is the most likely way to do so. Either the business is successful enough to make the entrepreneur affluent (i.e., equity wealth), or by selling the business, the entrepreneur becomes wealthy or wealthier (i.e., post-equity wealth). Therefore, a little more insight is warranted when it comes to wealthy entrepreneurs.
Wealthy Entrepreneurs Drive to Excel
In all the research we have conducted over the last 30 years, and in all our hands-on experience over that same period, we have never run into a case in which wealthy entrepreneurs were not intent on excelling. While most of them did indeed want to become affluent, all of them wanted to build substantial companies. Although many would attribute a portion of their success to a serendipitous turn of events, their commitment, capabilities and efforts were what made them so accomplished.
A large percentage of wealthy entrepreneurs tend to be motivated and talented men and women who seriously commit to investing in themselves and their companies. For them, doing well and having a successful business is just not good enough if they are not on track to achieve their potential.
It is not just about money. For many wealthy business owners, part of their reward is the ability to take great care of their loved ones and, in many cases, meaningfully help others. A large percentage are using their skills and wealth to help change the world for the better.
Running their companies is rarely easy. Consequently, most wealthy entrepreneurs are looking for ways to become increasingly knowledgeable, competent and successful, which is often where you come in. They tend to make excellent clients for accounting firm high-net-worth practices. Still, you must decide who are the best wealthy clients for your high-net-worth practice.
Your High-Net-Worth Practice Today
Take a moment to consider where you are today.
- Who are your preferred clients for your high-net-worth practice?
- How do they (or did they) make their money?
- What financial products and services (if this an option) do you provide them?
- How are you compensated?
- What additional expertise can you provide these wealthy clients, and how will that change what they pay to your firm?
Our approach is extremely tactical. It is all about getting concrete results and getting them fast. The best way to do this is to leverage where you are today to get a good idea of what is needed to build your $5 million high-net-worth practice.
The revenue you get from wealthy clients is how you get compensated and what you must do to reach your financial end-goal. Naturally then, you need to work extensively and smartly with the wealthy.
Wealthy business owners are considered the preferred type of client for most high-net-worth accounting practices. Other types of wealthy individuals can also be the way you build your $5 million high-net-worth practice. Knowing who you want to work for – determining the menu of expertise you deliver – often determines the way you need to operate.