This blog post was in response to some good questions and good points raised through the comments on a blog post located at New Rules of Investing. You can see the blog post and all comments here.

fabeetle's response: Great points guys. I think the main question I see from the comments below is whether or not the HNW will participate in such a site. It makes sense that we are all asking this question, so here are our thoughts:

We tend to believe through our research that the HNW target market is made up of the same contributors and observers as other, less affluent audiences. That said, we would disagree with Stephanie's statement of:

...I don't believe that higher net worth investors will have the time nor the interest frankly to participate in this type of process...and those happen to be the clients we want as advisors.

We believe that the HNW are actually more likely to "participate in this type of process" than other target markets. (One thing that we should point out here is that both Stephanie's comment and our response are very broad statements, the reality is that there are groups within any target market that will and won't participate, we are just wondering which way the HNW have a propensity to act given an appropriate solution).

In October of 2008 a study was released from Google and Unity Marketing, giving some insight into the way that the HNW, or "millionaires", are making purchasing decisions. The article is written with luxury retailers as the audience and to an extent financial advisors could be included in this category. FAs either work with people who don't want to, or can't manage their own money. Whether you agree with this specific linkage or not is not the point. It is the overall purchasing behavior of the consumer that we are interested in. According to Google's Retail Director, John McAteer, millionaires seem to involve the internet in their purchasing decisions more than one might think:

We were surprised by just how much information they wanted online. Just over 90% of millionaires say they always or often read other customers' reviews online, for example, compared with 68% of affluent shoppers.

In our opinion these types of trends indicate that the HNW do have an interest and therefore are actually more likely to participate in reading and writing online reviews.

With respect to the question of the HNW having enough time, John McAteer says that it is this very lack of time that is pushing the HNW to the internet for buying decisions. In the very first Question and Answer we find the following:

"Q: What are the biggest misunderstandings that marketers and retailers have about millionaires?"

"A: There's this deep-seated conviction that the wealthy are very idle people--a sort of "ladies who lunch" crowd. They often don't understand just how time-poor their rich customers are--90% of millionaires in our survey work, and often at very demanding jobs."

We believe that it is this misconception that will allow fabeetle to become successful. The misconception that somehow the HNW are so busy they don't have enough time to logon, read or write a rating or review but they do have enough time to ask for, meet with, evaluate and keep up with multiple referrals, meetings, pitches, value propositions, etc. This research and more suggests that as solutions present themselves to the HNW which allow for them to consolidate a process efficiently and effectively, they become strong adopters. Our calculation is that as we introduce such a solution they will become adopters, and this will benefit both FAs and clients alike.

In our opinion the behavior trends and needs of the HNW audience are already heading in a direction that would make our solution appropriate. The question is whether or not fabeetle will be the one to bring to market that solution.

Of course we could be wrong, but that is what taking risks is about right?

You can read the articles referenced here and here.