Advisors to rich say AI isn’t a gamechanger for landing new clients

Ultra-High-Net-Worth Client Acquisition: Why AI May Not Be the Silver Bullet

The pursuit of ultra-high-net-worth clients is a coveted goal for many wealth management firms. Recently, market data firms have been touting artificial intelligence (AI) as the key to finding these elusive clients. However, leaders at elite advisory firms are skeptical about the effectiveness of AI in this endeavor.

Matthew Fleissig, CEO and co-founder of Pathstone, a registered investor advisory with $182 billion in client assets, believes that while AI can surface data and contact information on ultra-high-net-worth individuals, it’s only half the battle. He notes that building a relationship with these clients requires a more personal touch, such as providing exceptional service and creating memorable experiences. For instance, Pathstone once arranged a private jet for a client to travel from New Orleans to Albany, New York, in under an hour, allowing them to be with their mother before she passed away.

The Limitations of AI in Client Prospecting

Fleissig argues that AI for client prospecting hasn’t been the game-changer that startups claim it to be. He believes that these databases have been around for a long time, and the addition of an AI overlay is merely a way to mine the database more efficiently. Most of the time, it’s similar strategies of aggregating data sources that are public or available for purchase, and trying to feed lists of people. He thinks that his company can already do this themselves.

A growth executive at a high-end national RIA, who wished to remain anonymous, shared similar sentiments. After conducting at least 20 demos of AI client prospecting tools in the past six months, he found that most are built on widely available large language models like Claude and GPT. He questioned the value of paying $100,000 for a service that his IT team could replicate for a fraction of the cost.

The Importance of Personal Networks and Referrals

Andrew Douglass, head of growth at AlTi Tiedemann Global, emphasized the significance of personal networks and referrals in acquiring ultra-high-net-worth clients. He noted that for the past five years, client referrals and personal networks have accounted for 40% and 30%, respectively, of AlTi’s organic growth. Another 30% comes from networking with experts like trusts and estates lawyers and accountants who are likely to be working with clients going through a liquidity event.

Douglass believes that having a strong reputation and being recognized as a subject matter expert in the industry is crucial for attracting ultra-high-net-worth clients. He thinks that consistently providing value and showing up at industry events, such as the Heckerling estate planning conference, is more effective than relying on AI-powered prospecting tools.

While word-of-mouth referrals may not be scalable and can be slow-going, Douglass argues that advisories focused on the ultra-rich are looking for quality, not quantity. The sales cycle with an ultra-high-net-worth client can take 12 months or longer, but the potential payoff is substantial. AlTi Global’s annual target for organic growth is 25 to 30 new clients in the U.S., which could add $1.5 billion to $2 billion in new assets.

A New Perspective on AI in Client Prospecting

Eden Ovadia, CEO of AI client prospecting startup Finny, acknowledges the skepticism surrounding AI in client prospecting. However, she views AI as a complement to traditional outreach rather than a replacement. Finny can be used to promote exclusive events to the right audience, identify clients who may need advice after a life transition, or even monitor existing clients for signs of dissatisfaction.

Ovadia believes that AI can surface more data about clients or prospects than even the advisors themselves know. She thinks that AI can be a valuable tool for wealth management firms, but it’s essential to approach it with a critical and nuanced perspective. Fleissig, on the other hand, is more excited about customers finding Pathstone through AI platforms like Gemini and ChatGPT, which have generated five inbound inquiries from clients worth at least $100 million in the past two weeks.

Ultimately, the pursuit of ultra-high-net-worth clients requires a multifaceted approach that combines personal relationships, exceptional service, and strategic use of technology. While AI may not be the silver bullet that some market data firms claim it to be, it can still be a valuable tool in the right context. As the wealth management industry continues to evolve, it’s crucial for firms to stay open-minded and adapt to the changing landscape.