Notes

Elliott and Associates Corporate Advisory Tips and Review: Client Prospects

3 tips to help advisers zero in on the best client prospects

As the advice industry evolves, focusing on landing the right clients increases in importance

Today's advisory landscape presents unique challenges for advisers. The numerous forces at play are mostly outside advisers' control, including fee compression, consolidation, rising operating costs and highly correlated markets.

There is, however, one thing that is very much in an adviser's control: the clients with whom they engage.

This realization came to me during my decade-long career as an RIA. Early on, I often felt alone on the island of independence, unsure of where to take my business. I quickly realized I needed to focus my attention on a subset of individuals that provided my practice with real scale. High net worth (HNW) individuals, defined as those with $5 million or more in liquid net worth, proved to be the clients I needed—and wanted—to work with, and who yielded a mutually beneficial relationship.

In this country there are millions of millionaires, 84% are self-made, and 75% accumulated their wealth through entrepreneurial endeavors and real estate investments. I knew I wanted to focus my practice on them, but first I had to understand what these wealthy, business-savvy individuals valued in an adviser. How could I stand out among the other advisers vying for their attention?

As I built my business, I learned a lot about strategic prospecting. Here are three tips to help advisers center their efforts on the most rewarding rung of the prospect ladder.

1. Differentiate to dominate.

The population of advisers is steadily growing, each year commoditizing the service and minimizing its value. The equation is as simple as the most basic of economic tenets: supply and demand. With so many people offering similar services, it should be clear why the fee you charge is constantly under pressure.

Finding a point of differentiation among the masses is not an easy feat. The struggle tends to lead many newly-minted advisers straight into a sea of sameness filled with canned value propositions and two-dimensional pie charts.

A few years of trying to grow your practice with this conventional and tired approach is sure to frustrate even the most astute of advisers. To truly differentiate yourself in a congested marketplace, play to your strengths and borrow a page or two from your all-star client's playbook. You know the public markets and your successful wealthy clients know the private market, where they made their money in the first place. Combining opportunities in the public and private markets creates a winning combination, and the ability for adviser and client to connect on a very tangible level, one an adviser offering a traditional 60/40 portfolio will never understand.

2. Change the conversation.

To attract and retain HNW individuals of the entrepreneurial mind you have to speak their language, understand what they expect from your relationship and then articulate and implement a philosophy that explains a formula for wealth creation.

HNW individuals want an entrepreneurial solution that they are not currently getting from the wealth management industry. The problem is financial advisers have largely constrained the asset allocation discussion to publicly traded stocks and bonds, and often times sprinkle in complex products that no one at the table understands, not even the adviser.

Advisers need to reconfigure how they look at their portfolios for HNW individuals. They need to think more like their entrepreneurial clients and less like an adviser – think more in terms of stocks, bonds and entrepreneurs – and include an allocation to Main Street, not just Wall Street.

3. Let nature take its course.

One of the biggest concerns facing advisers at present is the advent of the robo-advisers — online platforms that promise equal or better performance than human advisers at a fraction of the cost (0.15-0.35% in fees versus the industry standard 1%)

Rather than trying to compete with the robo-advisers, allow evolution to take its course. Embrace your new competitor for what it is and what it will do for the industry. The clients that robo-advisers will take over are lower margin accounts that typically require a disproportionate amount of work and attention compared to HNW clients. But, if they see your service as a commodity, you are better off letting those clients go anyway. Consider it an opportunity to reinvest that time towards prospecting and articulating your philosophy to high-margin clients that get it.

Entrepreneurial-minded HNW clients value an adviser who offers access to off-market deals that are tangible and relatable to how the client grew their wealth in the first place. As your business evolves, these are the deals you need to deliver to the investors you need to focus on.