High net worth (HNW) clients are fascinating to work with, but complicated to work for, as they have varied backgrounds and specific needs. This complexity creates challenges when looking after them, particularly when it comes to property and property finance.
For a start, HNW clients’ property transactions are not straightforward; it is rarely as simple as selling the family home and buying another. It is therefore essential to understand why they are buying property and what they intend to use it for, as this will affect the financing of the asset.
Many international clients want a second residential property in London to be used as a base, or even for their children to live in while studying, for example. However, many lenders are cautious about financing a property the client is not demonstrably going to live in, as it could be used for rental income. It is therefore necessary for HNW mortgage brokers to have relationships with lenders who can take a view on a client’s personal circumstances.
In addition to buying unusual property, HNW clients often have unconventional income structures. Many assume wealthy clients have little reason to take out a mortgage and that those who do will be able to secure property finance with ease. This is wrong on both counts. HNW clients generally like to maintain their liquidity instead of tying up their wealth in a single asset. Furthermore, the wealthier a client is, the more complex their finances are, making it harder to arrange finance.
Key points
- HNW clients can be fascinating, but complicated.
- Many of them have unconventional income structures.
- Forging links with a trusted network of partners is a vital part of looking after HNW clients.
Like any buyers, HNW clients need to arrange loans based on their incomes – and these incomes, while high, are rarely as simple as a set salary of X amount a year. HNW clients often receive extensive income from dividends, vested stocks, shares and so on. Alternatively, they may have no income at all, but simply be cash rich.
The wealthier a client is, the more complex their finances are, making it harder to arrange finance
Those dealing with HNW clients therefore need to be able to find bespoke solutions. For mortgage brokers, this means forging relationships with a wide range of flexible lenders who can provide tailored solutions. It is also imperative to have a thorough understanding of the unusual finance solutions available to wealthy borrowers, such as lombard lending.
Lombard lending, which generally requires a minimum loan size of at least £1m, is a suitable route for clients who are cash rich, but have limited income, as lombard loans are secured against marketable assets such as shares. We recently arranged a lombard loan for a client buying a £3m property, who had sold his business and was technically unemployed, meaning he could not secure a normal mortgage. This sort of creative approach is essential for successfully dealing with HNW clients.
Another challenge in looking after HNW clients is the ability to work on a worldwide scale. This is technically challenging, especially in regard to property, because transactions are understandably much simpler when the client is living, working and paying tax in one location.
From a practical standpoint, providing an excellent level of service can be more difficult, meaning businesses that deal with HNW clients should prepare to adapt accordingly. It is unrealistic to expect very wealthy clients to fit their lives around the limits of your business hours and premises.
Having flexible staff and physical offices in a range of locations is hugely beneficial. Some of those specialising in this type of client have benefited from opening offices in Monaco and Dubai, following demand from clients.
Providing this level of personalised, convenient service can help overcome another challenge: understanding a client’s full situation and dealing with this information sensitively. Developing a thorough overview of a client’s situation is key when dealing with HNWs, but it is often a challenging process. Many wealthy clients are not simply looking for residential property finance in the UK; they might have buy-to-let portfolios, invest in commercial property and have a holiday home in Europe.
They also have a global portfolio of assets that they need to protect and insure. These assets are typically more complicated than can be covered by a conventional insurance policy. Such clients do not want to have to disclose their circumstances over and over again to different brokers, so it is helpful to be able to finance and protect all of their assets in one centralised location.
This also assists with the difficulty of providing a private and confidential service. When arranging a property transaction, it is important for a mortgage broker to have a thorough understanding of their clients’ backgrounds and asset structures. However, wealthy clients are understandably often extremely private, particularly those who run global businesses or are in the public eye. Creating the necessary level of trust can be a challenge, but the approach outlined above is a good strategy for building strong client relationships.
Creating the right relationships does not just apply to clients. Forging links with a trusted network of partners is another vital part of looking after HNW individuals. For brokers, lender relationships are obviously most essential – we need to be able to introduce our clients to the most prestigious private banks to ensure they receive a holistic, tailored service.
However, during any property transaction, clients will generally need to be directed towards a number of property professionals. Clients often prefer to deal with services and partners that have been directly recommended to them. A personal recommendation from a trusted existing source holds more weight than a search engine result or an advert. As such, HMW broker experts strive to develop a network of partners for foreign exchange, legal and tax services.
This is a slow and careful process and should not be rushed. Client trust is hard to earn, but can be quickly lost, so building a thorough relationship with a partner to ensure they are a reputable recommendation is important. Ultimately, the aim is to anticipate a client’s needs and make sure you have a recommendation to hand before they even think to ask.
Overall, it is imperative to take a creative, patient and tailored approach to working with HNW clients. Wealthy clients have understandably high expectations, but their complicated backgrounds can often mean many bumps are encountered along the way.
There is no easy way to overcome all of these challenges. It is a matter of experience, in addition to continually building relationships and maintaining the brand’s reputation. Dealing with HNW clients will always be challenging, but when done properly, it is also a fascinating and rewarding process.
Islay Robinson is chief executive of Enness
