With the world still coming to terms with a major reformulation of the political order in Europe, and preparing for what promise to be unpredictable electoral contests in Germany and the US – investors currently face an uncertain world. Increasingly frequent terror attacks in Europe and elsewhere are fueling a rise in right-wing populism and protectionism that threatens to destabilise the global economic order.
The confirmation of real estate mogul Donald Trump as candidate for the Republican Party in the US is a case in point, with Trump threatening to pull the US out of the World Trade Organisation in order to protect jobs in the US from the forces of globalisation.
In Europe also, protectionist instincts will need to challenged as new trading arrangements are determined with the UK and negotiations continue around the troubled Transatlantic Trade and Investment Partnership with the US.
The picture is not clear then, and there are many moving parts which look set to disrupt markets over the medium term. So where should investors looking to hedge against current uncertainty turn?
While there is much uncertainty, and while stock markets globally took a hit following Brexit and are watching developments nervously, recent data from leading investment house MSCI could give pause for thought for those who think the days of double-digit returns are over.
A report issued by MSCI in February revealed that US commercial property funds in 2015 grew a staggering 15.6% according to the PREA/IPD US Quarterly Property Fund Index1. Even more remarkably, investments in US commercial property have seen a cumulative return of 129% over the past six years.
In fact, US commercial property has outperformed other asset classes, including US bonds (up 4.39% over the period 2011 to 2015), stocks (up 13.45%), corporate bonds (up 4.72%) and commodities (down 10.93%)2.
Simon Fairchild, an Executive Director at MSCI puts it like this;
“U.S. real estate open-end funds have produced double-digit returns for six straight years. This period encompasses the remarkable recovery from the doldrums of 2008/2009.”
But Brexit happened, a Trump Presidency looks far less unlikely than it did at the beginning of the year and growth continues to slow in China – surely these themes will change the dynamic?
A key skill for any investor is being able to recognise opportunity – even in times of uncertainty. Market watchers should note of recent announcements from Juwai – China’s biggest international property portal – which is reporting interest in UK property having climbed 40% since the Brexit vote.
So, what is driving growth and interest, even against a backdrop of such uncertainty?
While uncertainty abounds, savvy investors realise that market fundamentals don’t change on the back of a single political development. And as in the UK, the fundamental forces at work in the US’ commercial property market create a sound environment for investors.
Global pressures and uncertainty are likely to keep interest rates in the US low over the medium term, ensuring a steady flow of foreign money into the US economy. This in turn will continue to drive demand, and ensure good returns for those willing to invest in supplying this dynamic.
One opportunity to do so is the investment from the Rycal Group, offering entry to the Carlton James Group who have an investment portfolio focused on the hospitality sector in the US. Carlton James been investing in this market for a while now, delivering returns averaging 17% for the last five years. With a strategy based upon wide-ranging geographical intelligence, Carlton James look also for additional Revenue Generators – for example taking into account a development’s proximity to highways, malls and economic infrastructure – as well as local economics.
Simon Calton, CEO of the Carlton James Group and Rycal Group, says: “Geopolitical upheaval and changes of government have an immediate impact on share prices and investor confidence and can lead to rapid and unnerving market fluctuations. We saw this in the immediate aftermath of Brexit and we should expect more as November’s Presidential elections in the US draw nearer.
“What we have also seen in the subsequent weeks however, is these fluctuations correcting themselves as they adapt to the new reality. The lesson is that investors should keep an eye on the longer-term, and the market fundamentals.
“The US economy remains buoyant and, with the world unsure as to the status of relations between the UK and the EU, is likely to benefit from investors looking for a greater degree of certainty than is currently available in Europe.
“Rycal have a strong track record of making our investments work by developing detailed exit strategies, a diverse portfolio of properties and deep investment intelligence, and we expect Carlton James to be a real source of growth over coming years.”
This is the abbreviation used for ‘High Net Worth Individual’. Why is this important to your marketing? Most CMOs will tell you that the best way to blow away a target CPA number is to market to high net worth individuals, i.e. promote your wares in front of an audience who can instantly afford whatever it is your company does, not waiting for next pay check, not waiting for a business partner, just ‘I like it, so I’ll have it’. Not only this, but HNWIs have a habit of purchasing goods and services in multiples. This is usually music to the ears of most Sales Directors, ergo the Board.
HNWI definitions vary according to where in the world you happen to be. For example, Investopedia has it as:
“The most commonly quoted figure for membership in the high net worth “club” is $1 million in liquid financial assets.” 1
… whereas other countries have lower definitions, and some specialist agencies significantly higher.
In particular, one regulatory body defines high net worth for investment purposes as having an annual salary over £100,000.00 per annum, whereas an international high net worth agency may define this as high as £5M liquid assets, sterling.
To classic marketers the realm of high net worth marketing may seem like a mysterious target to reach. Many companies have tried and become disillusioned with trying to reach HNWs for a variety of reasons, not least of which is the size of the budgets necessary to achieve it as a standalone firm. Most approach it in the spirit of a customised B2C campaign, or even a B2B campaign if the targets also own significant businesses. However, these approaches have historically reaped minimal success if executed only once or twice.
Depending on your company’s offerings, most HNWs are highly likely to have an advisor, or even several advisors, with whom you must ‘pass muster’ before you will be allowed access directly to them. This can be frustrating for most sales forces, and, unsurprisingly, most sales forces give up due to the fact that they have more pressing targets to meet, thus contributing further to the HNW project challenges.
However, for those lucky to have good timing, or a well-known product and suitably attractive service, direct access can be gained and very quickly they discover what all HNWs have in common. They are all ‘time poor’. They will want to be convinced of your offering, although rarely have time to address it, and are much more likely to stack up a few good things with one of their trusted advisors and crash through them in an afternoon at the Dorchester. So we see also that knowing and cultivating their advisors is key.
You will also quickly discover the immense complexity of each HNWs set up in terms of tax, holding structures, estate planning, philanthropy and more. So be prepared. It might also be wise to have senior sales personnel assigned to these tasks, preferably from a background with which your target HNWs will be familiar. Likewise, it may be beneficial to have in your arsenal several possible offerings as during the cultivation phase of your fledgling relationships you will be uncovering actual needs from your HNW which you may be able to fulfil for them quickly and efficiently. Needless to say, personalised attention, and lots of it, is an absolute must, which leads us to the next challenge.
Time is money, and these approaches take up an inordinate amount of person-hours. If you are unable to commit these kinds of resources to your HNW project, you might consider also a high net worth marketing agency, of which there are surprisingly few, although one of two of them do actually deliver excellent results.
In addition, you may find that most HNWs are averse to risk, especially with the current global economic considerations. Once you have your first HNW client, it’s advisable to spend as much time on and with them as you are able. HNWs usually travel in the same circles, holiday in similar places, know a lot of the same people, and from this first account you may be able to segue others by way of referral. As we all know, word of mouth is the best marketing tool on the globe.
Furthermore, in the early stages of your new relationship with your first HNW you might want to consider taking every conceivable opportunity to demonstrate exclusivity, loyalty, and a willingness to always ‘go the extra mile’. Remember too that discretion is a big word in this space, so not the best of ideas to naturally assume your new HNW client might want to mingle with others, including other HNWs, for many reasons.
Ian Gordon, Head of Banks Research at Investec commented recently:
“In theory at least, your high net worth customer ought to be a source of new business account possibilities,”
“It is about making the whole worth more than the collective individual parts.”
That’s all very well you may think. But this still leaves most companies with the problem of how to start their active efforts in the high net worth marketing stakes. And how to get past the immense effort and number of person-hours required to get things moving properly.
John Winters, a Senior Director at SKS Media Singapore, a global high net worth marketing agency comments:
“We are familiar with the challenges facing most companies looking to enter or expand within the high net worth marketing space globally. It can indeed be daunting at first due to the immense efforts required, which is why many clients come to us to help get them started…..”
As an example, SKS Media have one of the largest high net worth databases on the globe which can be included in client campaigns for HNW attraction in a variety of sectors including luxury goods and services, asset and wealth management, private banking, real estate, and investor attraction for various top drawer offerings. Adding in to the digital efforts, SKS also have a sizeable ‘agent base’ globally who carry client offerings directly to their individual ‘black books’, thus generating interest through this direct one-on-one engagement, and various other channels designed to attract interest to a specific offerings. Digitally, these also include ‘Intellipost’, invented and invested by SKS in 2010 whereby client messaging is left if highly targeted areas of the web known to be fertile for a cause, often exploring new niches for which clients are unlikely to have resource e.g. polo, super yachts, golf, luxury cars, and certain types of financial instruments only ever used by HNWs and UHNWs. They also sport a sizeable HNW social network globally through which client messages can reach their HNW targets, and a HNW Partner Network to match. Interestingly, SKS also offer the PCN (‘Private Capital Network’), through which clients can receive direct referrals via ‘word of mouth’. Also offered are the TV, Radio, Outdoor, Events, PR and Partner Development areas as a full service advertising agency, albeit only in the HNW space.
But given the subject matter, what about the ‘personalised approach’?
“Once significant interest is collected for a particular client, the strength at SKS is in the pre-qualification and individual ‘old school’ follow up we afford each potential new prospect for a client. In the HNW space this is both expected and prerequisite to any campaign. In this regard we are extremely ‘granular’, as this is proven to be a superior option for direct ROI to the client. Many clients prefer to use us as their ‘marketing/direct sales arm’ for the HNW space as we have been doing this so long now……”
So it may be of some reassurance that whether you are starting out in the HNW space, or looking for increased exposure and direct sales from this potentially lucrative area for your business, there is help at hand so that you don’t necessarily have to incur the enormous cost of doing it alone.
Either way, high net worth marketing is still extremely attractive for many reasons. In fact, it you are going to promote anything it is good common sense to put it in front of an audience who can instantly afford whatever it is, right?