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Understanding UHNW Clients’ Insurance Priorities

Feb 16, 2022

Financial advisors understandably seek value for their clients. They may feel an ethical and professional obligation to seek the lowest-priced insurance or heavily weigh price-for-value when they evaluate insurance options.

This prioritization of cost, however, runs counter to the preferences of UHNW clients. The Wharton study founds that a large majority of UHNW clients – approximately 80% of the survey’s UHNW respondents – prefer appropriate coverage and service, even if accompanied by a higher cost. This figure increases to 95% for clients at the $50 million (or higher) wealth level.

Risk Management (Insurance) Preferences

While all categories of wealthy clients rank financial stability as the top criterion for evaluating an insurer, UHNW clients also highly value the ability of insurers to handle complexity. Simply put, UHNW clients have more complex balance sheets combining a wide range of risks and assets, including family businesses and valuable tangible assets, and they prefer insurers who can better respond to this complexity.

Fundamentally, UHNW clients are looking for advisors and insurers who understand the complexity of their wealth and coordinate all assets and risks. According to the Wharton study, the lack of coordination may represent an industry failure, though there is a growing trend toward family office services, financial planning services, and outcomes-based wealth management that entail a total balance sheet approach. In other words, as a financial advisor, you may want to consider bringing an insurance agent or broker specializing in UHNW clients onto your team.

The Wharton study concludes that there are “potential open opportunities for wealth managers to bring to bear the direct treatment of total balance sheet asset management including risk management of those assets.” Advisors can build trust and strengthen their relationships with UHNW clients by incorporating a deeper understanding of risk into their services. This path can increase your clients’ risk-adjusted investment returns — as well as enhance their emotional security, happiness, and client satisfaction.

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