Although many advi-sors dream of landing the prize catch of the ultra-high net-worth client with $10 million or more in investible assets, they could cast a wider net and land clients with $1 million to $5 million in investible assets.

These “millionaire-plus” clients are growing in number because of successful businesses, inheritances and years of saving and investing. These clients — who haven’t always adjusted the management of their finances as their wealth has grown — offer opportunities for advisors who understand the evolving needs of this client group.

Keith Sjogren, director of strategy consulting with Toronto-based Investor Economics Inc. , cites research that shows about 400,000 Canadian households have investible assets in the $1 million to $5 million range; he adds that this community is growing fast. At least a third of this group is retirees and a large proportion are entrepreneurs.

“This group presents a continuing opportunity as their assets increase in value,” Sjogren says. “However, as client wealth increases, the service aspect becomes more complicated for advisors.”

Dan Richards, president of Toronto-based consulting firm Strategic Imperatives Ltd. , agrees this market segment is not always well served: “The $1 million to $5 million market is big enough to warrant an investment of time and effort by advisors.

“At the $10-million level, the client is typically dealing with an existing network of experts in various areas,” he adds. “But at the lower asset levels, there is an opportunity to add value for clients who may not have acquired the help they need as their assets have risen.”

At the $1 million-plus level, the role of the advisor becomes that of a partner in building and protecting family wealth rather than being simply a salesperson offering “one size fits all” products. The focus moves to the multi-dimensional job of relationship management and offering appropriate solutions for a variety of needs, from portfolio management and tax strategies to provisions for long-term health care. If advisors don’t have expertise in specific areas, it’s important they develop access to experts.

“People at this level want a quarterback, or someone who can give them the full checkup, then refer them to the appropriate experts if needed,” says Rob Barbara, managing director with Beaujolais Private Investment Management of Toronto, a firm that deals with clients who have assets of $500,000-$3 million.

Mike Scott, managing director with RBC Dominion Securities Inc. in Toronto, says DS has installed a national network of 150 experts who are qualified in various aspects of wealth management beyond the actual investment of assets. Their talents encompass tax strategies, legal issues, offshore accounts, wills and estate planning, charitable giving, insurance and long-term care.

“Traditional money management is the foundation,” says Scott. “But at the $1 million-plus level, there are many other things to consider, and often the advisor is dealing with the complexities of having two or three family generations at the table.”

Scott estimates DS’s business with millionaire-plus clients has doubled since 2002.

LEVEL OF SUPPORT

“We’ve added specialists at all our branches so advisors can call upon them and make them part of their team,” he says. “This level of support is giving advisors a new lease on their business. They can become the family CFO.”

Advisors say it is advantageous to be qualified to sell individual securities as well as mutual funds. Some advisors have found it worthwhile to upgrade their qualifications to that of portfolio manager, allowing them discretionary authority over their client portfolios. Others have found a licence to sell insurance products is a useful lure to have in their tackle boxes, and those with an accounting background are also finding their skills handy.

Tina Tehranchian, branch manager with Assante Capital Management Ltd. in Richmond Hill, Ont., has focused her practice on small-business owners, many of whom have investment assets in the $1 million to $5 million range but don’t have the benefits that come with working for a large corporation. Because she is licensed to sell insurance products as well as securities, she finds lots of opportunity in meeting client needs for life, disability and critical-care insurance. She also helps many small-business owners establish employee group plans for RRSPs and insurance benefits.

“By meeting various client needs, there is an opportunity to set up multiple lines of business, which enhances client loyalty,” Tehranchian says. “There’s always intense competition for high net-worth clients, and the stronger the loyalty, the less chance the client can be lured elsewhere. The role of financial advisor can be very crucial to this group, and there is potential to build strong and rewarding long-term relationships.”

@page_break@Succession planning for these clients’ businesses and estate planning for their families are additional requirements for this group, Tehranchian says. Also, tax strategies become more important as wealth increases, and clients need advice in such areas as income-splitting, tax minimization in non-registered accounts and the tax-efficient transfer of assets to heirs.

“Taxation issues are critical when dealing with this crowd,” says John Horwood, first vice president with Richardson Partners Financial Ltd. in Toronto. “A lot of clients are biting hard on philanthropy, whether it’s by donating securities to charity or setting up donor-advised funds or charitable foundations.”

Horwood finds that investment funds with built-in tax advantages are also useful products for these clients, who often have significant assets outside their RRSPs. Because these clients typically qualify as accredited investors under provincial securities laws, Horwood says, there is a much greater array of investment opportunities available to them, such as hedge funds, private equity and real estate.

Beaujolais’ Barbara says clients with large amounts of money are becoming more fee-conscious. As an investment counsellor, Barbara’s firm’s fees are based on a percentage of assets, typically about half the rate of traditional mutual funds and are tax-deductible. IE