Feature
Prying Eyes
Michelle Leder
11/01/2006

Larry Samuel passes his days chatting with your doorman and your porter, scribbling into his notebook. He talks to your bartender and the waiters at the restaurant where you dined last night. He talks to your gardener and your dry cleaner. He shops for high-end cars and boats and chit-chats with your favorite dealers. He even hangs around your child’s school. (School security guards alerted by worried parents have asked him to move on.)

Samuel and his retinue of helpers spend their days and nights in the same places that you and your friends may spend yours: in the summer, East Hampton, Martha’s Vineyard or Maine’s Northwest Harbor, and in the winter, Naples or perhaps Scottsdale. Samuel likes to call what he does "field research." Back at his desk in New York, he distills his observations into reports that he sells to some of the country’s largest corporations—companies with seemingly endless appetites for information about your preferences and how you like to spend your money.

"This is a funky, offbeat type of information that straight data collection and the focus-group research just doesn’t [capture]," says Samuel, who has a PhD in American studies and an MBA in marketing. "There’s all kinds of information out there if you just look for it," he adds.

A growing number of people are looking for it. As the ranks of affluent individuals grow—the number of U.S. residents with at least $30 million in assets increased by 10.2 percent last year, according to the 2006 Merrill Lynch–Capgemini World Wealth Report—so too does the appetite for information that helps companies successfully pitch products and services to them. These companies turn to people like Samuel, whose consulting firm, Culture Planning, takes a somewhat unique hands-on approach. Other better-known research and consulting firms, such as Capgemini, the Spectrem Group and Phoenix Marketing International, which have been tracking upper-income demographics for more than a decade, use more traditional techniques, such as surveys and focus groups, but their goal is the same: to pinpoint what drives individuals to spend, save and invest.

Just a few years ago, only a handful of financial institutions conducted or purchased research on the affluent market. Today, many more companies—from air charter firms and yacht builders to "lifestyle management" consultants—are hoping to buy actionable insights into this demographic. Indeed, chances are your alma mater or your favorite nonprofit has done a fair amount of research before calling you to ask for a donation.

This intensive analysis has sparked an increasing array of highly customized and creative product pitches. Technology has made it easier to collect and track many types of personal and often very detailed information, much of it available on the Internet. As Samuel noted during a presentation to JPMorgan Asset Management: "Exceptionalism is now virtually required to make an impact in marketing to the rich."There is an unprecedented need, he said, "to raise the marketing bar by delivering truly unique and meaningful things and experiences." Personal information is traded outside and within commercial institutions like a precious commodity:

  • Natasha Pearl, chief executive of New York-based Aston Pearl, which bills itself as the "private bank for everything but money," often fields calls from hedge fund managers seeking insights into her clients to better sell them on a particular investment strategy. Because Pearl’s firm manages such personal details as arranging for a multigenerational family birthday, negotiating an art sale or even helping to select a private school, she gathers valuable data on her clients’ likes and dislikes. "They can’t get to the individual families,so they call us because we provide services to the families," Pearl says.


  • At Sentient, a private jet membership company that primarily serves individuals with at least $10 million in assets, an existing client who refers a traveler who eventually purchases flight time typically receives a case of his or her favorite wine, according to Kevin Vaughan, Sentient’s chief marketing officer. Vaughan does not read oenophile’s minds; Sentient customers complete surveys that ask for their preferred in-flight beverages.

  • Researchers at major universities and nonprofits are learning how to pore over SEC filings made by public companies. Their mission is to ascertain the net worth of company executives and the best way to target them with personal fundraising appeals.

  • To obtain customer leads for a new division focusing on individuals with at least $25 million in investable assets, private bankers at UBS, the Swiss-based financial services company, maintain close contact with their investment banking colleagues, who alert them when an entrepreneur is about to sell a company. With mergers and acquisitions activity stepping up of late, Frank Minerva, head of the UBS division, says, "It’s important for us to have a good relationship with the investment banking side" of the business.

    Researchers are learning how to pore over SEC filings. Their mission is to ascertain the net worth of company executives and the best way to target them.
    The most invasive reconnoitering has not gone unnoticed by its increasingly resentful subjects. Indeed, many wealthy individuals are ramping up their efforts to hide as much of their personal information as possible. For example, a growing number are eschewing family foundations, with their publicly available financial records, in favor of donor-advised funds, which are more discreet. "A lot of these people don’t want the world to know who they’re giving their money to—the particular causes—because they feel it’s nobody’s business," Pearl says. Some of her clients have even hired Internet technologists to try to shield personal information from Web search engines, such as Google, but their results have been mixed. Search engines still serve market researchers and fundraisers as a one-stop shop for many types of often personal, yet public, information, such as divorce agreements, insider stock sales and real estate records.

TOP VIEW
Market researchers targeting wealthy individuals are going beyond traditional surveys and focus groups, embracing techniques usually associated with private detectives. The information they uncover is increasingly popular with—and incredibly valuable to—a growing number of companies, ranging from luxury goods vendors to private banks. Affluent families who dislike this scrutiny and attempt to erect barriers to it have prompted these researchers to become more sophisticated.
Behind the Battlements
NancyAnn Akeson runs Total Personal Services, a Garden City, N.Y., administrative firm that people hire to receive their mail and screen their phone calls. Her company manages important correspondence such as bills and financial statements. Few pieces of junk mail—and even fewer unsolicited phone calls—make it past her vetting process. Akeson says she and her staff have read and heard nearly every manner of pitch from companies proffering products to her clients. "Someone is always trying to sell these people some additional service," she says. "But most don’t want to be sold to. They want to buy."

Unfortunately, erecting an administrative wall does not block all financial information from market researchers, particularly in transactions that, by law, are entered into the public record. If a private business owner sells his company to a publicly traded firm, for example, the law requires the buyer to disclose the details in SEC filings. One New York-based technology entrepreneur, who sold his company five years ago for more than $50 million in what he assumed would be a deal that would go unnoticed, was amazed when someone from the large public university that he had graduated from 20 years earlier came calling, armed with detailed information on the sale. "They had to have read the SEC filings," he says.

But market researchers’ efforts to sort human beings into marketing buckets based on where they vacation, what kind of car they drive or even how they choose to donate their wealth can backfire and alienate the very people whom they allege to comprehend. "There seems to be a real voyeurism involved here," says Bob Kenny, a visiting scholar at the Marpa Center at Naropa University in Boulder, Colo., and founder of the More Than Money Institute, a nonprofit group that helps affluent families examine the role of money in their lives. "When it comes right down to it, people like their privacy, and they don’t like being stereotyped."

Michael Klowden, CEO of the nonprofit Milken Institute in Los Angeles, acknowledges that individuals find it distasteful that such information is so readily accessible with a few mouse clicks. But as a trustee of the University of Chicago, he understands how important that data is to the school’s development staff. Annual proxy statements filed with the SEC, which detail such items as salaries, bonuses, stock options and the nonprofit boards on which executives might sit, are vital weapons in the fundraiser’s arsenal. When the Milken Institute or the university’s fundraisers target a particular individual for a donation, Klowden says, "It’s important for them to know what that person’s interests are and what sort of message would grab that person’s attention."

By refracting individuals through a prism comprised of not only their net worth but also of the types of experiences they seek in life, Samuel claims that he is able to provide better understanding of these interests. Research he conducted earlier this year for JPMorgan Asset Management classified affluent individuals into five categories, based on the way he witnessed people spending their money.

  • The "Thrillionaire" constantly seeks out new experiences and is willing to spend significant amounts of money on adventures, whether it be sailing a bigger yacht or taking a personally guided hike up Mt. Everest.
  • The "Coolionaire" views creativity as the essence of life and likes to surround himself with beautiful, unique objects. He is often found at galleries looking to snap up the hottest new artists.
  • The "Realionaire" takes a less-equals-more approach to wealth, as first described in the best-selling book The Millionaire Next Door. He prefers to stay out of the limelight as much as possible.
  • The "Wellionaire" focuses on looking good, feeling healthy and thinking positively. He enlists a personal trainer, nutritionist and personal chef, and usually spends a week or more at the spa every year.
  • The "Willionaire" is determined to make the world a better place. Berkshire Hathaway CEO Warren Buffett, who said that he is giving the bulk of his assets to the Bill & Melinda Gates Foundation, is one example.

Kristen Batteria, a spokesperson for JPMorgan Asset Management, says this type of research helps a financial advisor who wants to peddle mutual funds, for example, gain a better understanding of the customer on the other side of the desk. "Not every client would feel comfortable being invited to a steak lunch at Peter Luger," Batteria says. "Some clients would be much more interested in being invited to an art event instead."

Pam Danziger, author of Let Them Eat Cake: Marketing Luxury to the Masses as Well as the Classes, also makes her living selling research on affluent consumers. Her Stevens, Pa., firm, Unity Marketing, conducts quarterly surveys that analyze a sample of the top quartile of U.S. households based on income. Like Samuel, she has devised a taxonomy of affluent individuals. Among her categories are "butterflies," whom she describes as the most highly evolved people—individuals such as Oprah Winfrey, Buffett and Gates. "These are people who buy a lot of things, but they know that these things are not going to make them any happier," she says.

The market for this research is lucrative: The consultants often command $35,000 and up for their analyses, and their fees can spiral to tens of thousands of dollars more depending on the scope and complexity of the project at hand. "This is such a powerful segment of the economy, and there are a lot of firms that are trying to jump on the bandwagon," says Ron Kurtz, president of the American Affluence Research Center, a traditional market research company in Aventura, Fla., that focuses on the top 10 percent of the most affluent households in the U.S. Despite the growing number of firms performing this type of work—Kurtz has been studying the market for the past 20 years—he has not noticed any significant decline in the number of affluent individuals willing to respond to his surveys, which typically run four pages.

However, the appetite for this kind of information is not limitless. Don Wiegandt, a managing director for JPMorgan Private Bank in Los Angeles, sees a steady stream of wealth studies cross his desk, hawking theories about the clients he serves. He admits to reading them, but says he uses them only as a "gut check" of what he witnesses in his day-to-day work. Sentient’s Vaughan says he receives calls every week from sundry marketing firms flogging their research.

But people like Samuel, whose firm previously concentrated on a wide range of income groups before focusing exclusively on the affluent beginning in 2004, are unlikely to be deterred. He argues that while chatting with your doorman, he has your best interests in mind. "It’s important for me to have a better understanding of the high-net-worth individual so that my clients can have a better understanding," he says. "It’s not insidious at all. Really, it works to the client’s advantage."

Michelle Leder is the author of Financial Fine Print: Uncovering a Company’s True Value.

Illustrations by Gary Hovland.