Who are the best prospects if you are looking to target high net-worth clients? Conversations with chairman’s club-level advisors and top producers at a cross-section of firms suggest that one prime source of clients is successful entrepreneurs.

These are not small-business owners — proprietors of corner stores, dusty auto-repair shops or one-man welding shops — but principals in substantial enterprises whose businesses are throwing off substantial cash or who may be liquidating some or all of the equity in their businesses.

This focus on business owners is especially pronounced among those who are prospecting at the top end of the market for accounts of $1 million or more. One advisor who targets this segment looks for businesses with 10 or more employees and with either annual sales of more than $5 million or annual profit (before taxes and the owner’s salary) of at least $500,000.

During recent research with clients who have substantial assets and who had selected a new advisor, I held in-depth conversations with a number of business people who met this standard.

Here are 12 common threads that ran through the conversations with these business owners:

1.  Their most important and trusted professional relationships tend to be with their accountants, followed by their lawyers. Predictably, the rockiest relationship among the professionals with whom they deal is with their bankers.

2.  Most have the bulk of their net worth tied up in their businesses. But they don’t appear to be greatly concerned about this. (Confidence in the future is a hallmark of successful entrepreneurs.) In most cases, their personal financial affairs are inextricably tied up with the finances of their businesses.

3.  The single biggest hot button among these business owners is ideas to save personal and corporate taxes. There was considerable uncertainty about whether they were always getting the best advice on this from their accountants and lawyers, who tend to work in small or mid-sized firms.

4.  Most have relationships with a life insurance agent for benefits for their employees, although in some cases, their corporate controller or human resources person deals with the insurance agent on this. Few have a group RRSP program in place for their employees. Some but not all have been approached by the insurance agents handling their business needs about their personal situations.

5.  While almost all have term insurance, few have more sophisticated insurance solutions in place. In instances in which these solutions are in place, there are cases in which there has been little or no contact with the insurance agent who sold the policy once it was placed.

6.  A common concern among many business owners in their 50s and 60s is the future ownership of their businesses. Some have children and other family members in place, but they are unsure about how to transition ownership in the most tax-efficient fashion while maintaining the income they will need in future years. Others have no obvious heirs within their businesses and are contemplating the sale of their enterprises, often with considerable trepidation.

7.  One idea broached during the conversation is finding an advisor who would take a comprehensive “wealth-management” approach to the client’s financial affairs. This would include developing a financial plan and putting in place specific road maps for cash flow, investments, insurance, retirement, taxes and estate planning.

There is substantial interest in working with an advisor who could provide a one-stop solution for the client’s financial affairs, but there is also some skepticism. Where would the existing accounting and legal advisors fit in? How could clients be sure they are receiving good advice in all of these areas? And how much would this service cost?

8.  With regard to competitive opportunities, business owners fall into several categories:

a)  those with no relationship with any financial advisor — life insurance agent or investment advisor — for their personal needs;

b)  those who had worked with a life insurance agent at one time but whose relationship has suffered due to lack of contact;

c)  those with a strong relationship with a life insurance agent but with no or a weak relationship with an investment advisor. (Some top-producing life insurance agents have added the capability to sell mutual funds, but for many top life insurance producers, investments are very much a sideline);

d)  those who feel well served on both the life insurance and investment sides.

@page_break@9.  Almost none of the business owners interviewed have ever been approached about individual pension plans or retirement compensation arrangements, and there is virtually no awareness of these solutions. In light of the focus on tax reduction, this would suggest a clear opportunity.

10.  The catalyst for changing advisors typically relates to underperformance, lack of contact or a personality mismatch. In selecting a new advisor, there was only one case of a firm or individual who was chosen because of visibility in the business owner’s community; in most cases, new advisors were selected through referrals from the client’s accountant or friends.

That said, there were cases in which the new advisor made the initial contact through cold calls, luncheon seminars and being interviewed on the local radio station, proving once again that everything works if you do it frequently enough.

11.  The recurrent theme in talking to these business owners is how pressed for time they are. And a common irritant with their previous — and sometimes current — financial advisors is the expectation that the client would go to the advisor’s office to meet rather than the advisor coming to the client. This is a particularly common complaint in Toronto.

12.  Patience and persistence are critical in targeting this client segment. Some of the clients interviewed talked about advisors who had pursued their business through steady contact over a period of months and, in some cases, years. (Arguably, the need for more patience is not limited to going after business owners but is a growing trend in most client segments.)

While preliminary in nature, this research suggests an opportunity exists for advisors to position themselves as a resource dedicated to the needs of entrepreneurs — and to build a profile as the “go to” resource for one or more communities of business.

While not easy — what is, in today’s hyper-competitive environment? — the time and effort to position yourself as an advisor who understands and is focused on the needs of business owners could yield very big dividends in the years ahead. IE