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In last week’s column, I outlined the first four steps a rookie advisor needs to take to build a $250 million practice within 10 years:
- Find the right client community in which you can stand out.
- Clearly define how you’re going to deliver value to that niche.
- Identify the clients with whom you work.
- Build your profile and credibility to become the safe choice for investors in your niche.
How to win multi-million dollar clients
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At the foundation of this approach is narrow focus and clear differentiation. This was reinforced by an email in response to the article from a fee-only advisor based in Europe who specializes in Americans living overseas. In eight years, he built a $180 million practice.
Here are five additional steps to hitting $250 in your first 10 years:
Step five: Focus on your pipeline
Next on the list is having a “pipeline mentality,” in which you make it a priority to build a robust pipeline of qualified prospects with whom you’re in regular contact.
I wrote about this last spring in my article, Why Landing Clients is Like Dating. In that article, I outlined the elements of cultivating “clients-in-waiting” who’ve given you permission to stay in touch and who you’re regularly in front of with a “communication catalyst,” something where there’s a clear and obvious benefit. Importantly, what you share with prospects to stay top-of-mind doesn’t come across as marketing material but rather is something that your clients receive – in a sense you’re giving people a window into what life would be like as a client.
The reason this is so critical is that one of the fundamental changes in the past 20 years is how remarkably long it takes from the initial conversation with many prospects for a decision to move, in part because most investors with whom you’re talking already have an advisor that you have to displace. A heightened skepticism about the extent to which clients will actually be better off with you adds to this timeframe, as does the absence of a sense of urgency among many prospects to make a decision.
The result is that converting prospects has gone from being an event in which the focus is on your meeting with them to a process. And having the patience to stay in touch with prospects for months and years with something of value is at the core of that process.
For a pipeline to work, you need high-quality information delivered at a high frequency – at least quarterly, although depending on the client more frequency can be better. When I talk to advisors who’ve won over new clients through this approach, I’m struck by how often clients tell them that one of the reasons they moved was that they heard from the advisors who were courting them more often than they did from their existing advisors.
Step six: Generate early revenue
So far, I’ve focused on activities that have a mid- and long-term payoff – raising the question of what rookie advisors are going to do to pay the bills in the meantime. Even for new advisors who enter the business with a bit of a financial buffer, there’s still the need to start seeing cash flow.
That’s where most new advisors seek to tap into their existing network. Every rookie advisor has compiled a list of their contacts, but many struggle with the initial approach, concerned about coming off as a “salesperson.” And indeed that’s a legitimate concern if you call friends, tell them that you’ve entered the investment industry and ask if they’d like to meet to discuss their financial situation. After all, you don’t want to come off like someone who’s just joined Amway, Herbalife or one of other the multi-level-sales firms, looking to recruit people to build your “downstream.”
Historically, many rookie advisors have sent a low-key letter inviting people to get in touch should they have any questions or be interested in sitting down. Responses to these letters are typically dismal – to get results, you have to be more creative and proactive. For example, one advisor invited his network to a short sandwich lunch in his firm’s boardroom featuring a well-known economist that this advisor had studied under at the local university, talking about a historical perspective on economic growth in the United States.
Another advisor used the pipeline principle and sent his network this email:
Given turbulent markets of the past few years, once a quarter I invite clients to a breakfast to discuss recent events. As well, I send clients a monthly email in which I forward one or two articles from my ongoing research. With your permission, I’d like to add you to the distribution list for the articles and the invitation list for the breakfasts. A sample article is attached; please let me know if I can add you to the people who receive these.
Many rookie advisors I talk to say that they get an initial bump of assets from their friends and family but that their network is exhausted within the first year or two. That’s to be expected – but meanwhile those initial assets can be instrumental in buying new advisors time to plant the seeds for additional clients down the road. For more on what’s entailed, this article outlines Three Ways to Turn Casual Contacts into Clients.
Step seven: Maintain a marketing mindset
Another key step to getting to $250 million is maintaining your marketing mindset as assets grow. Of course, advisors entering the business who don’t make prospecting a priority don’t last long. But a common pattern is that as advisors hit $100 to $150 million, their focus shifts. After all there are clients to call and to meet. There is enough income that financial pressures are no longer paramount. And it’s easy to put off the discomfort and rejection of reaching out to people who aren’t clients.
That’s why many advisors get stuck at $100 million, operating in a comfort zone where they no longer need to push themselves. Yes, they’ll get market lift on their practice and receive occasional referrals – but often that’s largely offset by withdrawals by older clients to fund retirement expenses and by client losses.
There’s nothing wrong with settling into a routine where you manage $100 million in assets – after all, at that level advisors can still make a positive impact on clients’ lives and enjoy the payoff from the hard work to get to that level. But advisors who aspire to hit $250 million in assets have different priorities than those comfortable at $100 million. These advisors maintain a marketing mindset as their business grows, putting as much emphasis on attracting new clients as on serving existing ones.
Often this shows up in how advisors spend the weekly meeting with their assistant. Is the primary focus on discussing upcoming meetings with existing clients? Or is there a balance between the time devoted to talking about existing clients and to discussing prospects who are candidates to come on board? Along similar lines, what are the key measures that advisors use to track progress and how much time do advisors spend on prospecting? Advisors who maintain a marketing mindset pay a lot of attention to the number of new prospects added to their pipeline and to broad prospecting activity. In fact, advisors focused on dramatic growth in their business spend at least 20% of their time on prospecting activity – and in some cases this can be twice that level.
Step eight: Leverage your staff to deliver an outstanding client experience
One big downside to a marketing mindset is that it inevitably detracts from the time and attention you can give to existing clients. Advisors who are seeing dramatic growth in their books address this in two ways.
To start, they put in place a clear consistent process to ensure that clients have a first-class experience. There are lots of good sources of ideas on how to make clients feel good about your interactions. These articles on Three Steps to Effective Client Meetings and The Best Way to End Client Meetings are examples.
Putting the process in place is actually the easy part – it’s day in, day out implementation that challenges advisors who put a major priority on prospecting. To deliver a world-class experience to your clients and still focus on prospecting, you have to delegate as much of the routine contact as possible. And that’s where hiring the right team comes into play.
Recently, I moderated a panel with three of a firm’s top advisors. One of the questions from the floor was about the biggest mistakes they’d made. All three pointed to mistakes on hiring staff: The first talked about waiting to hire staff too late, when small things had started falling through cracks. The second said he’d made mistakes hiring the wrong people, not spending enough time in the interview process and checking references. And the third advisor described a situation in which he wasn’t willing to pay an extra $5,000 to hire an outstanding candidate and ended up (to his later regret) settling for an “okay” candidate instead.
The only way for rookie advisors to get to $250 million in assets is to surround themselves with the best possible talent as early as they can – and then to give that talent the mandate to be the key point of contact with all but the very largest clients.
Step nine: Ensure you have the right raw materials
The final ingredient to building a big practice from scratch relates to having the right raw ingredients.
That starts with health and energy. Top performing advisors invest in themselves just as they do in their business. Indeed, when I talk to top performers, I’m always surprised by how many start their days with early morning workouts.
This extends to the mindset on investing in your business. In my experience, advisors with rapid growth trajectories are almost always spending heavily on their businesses, even if their personal lifestyles suffer in their early stages in the business. Rather than asking “ How little can I get away with spending on staff?” or “How little can I get away with spending on marketing?,” they ask “ How much can I afford to invest?”
Patience is the final ingredient for advisors who see rapid growth. That doesn’t mean these advisors don’t want to see results quickly; but serious prospects make decisions on their timeframe, not that of the advisors who are courting them. Patience is the final critical ingredient that helps advisors with ambitious growth plans turn their goals into reality.
conducts programs to help advisors gain and retain clients and is an award winning faculty member in the MBA program at the University of Toronto. To see more of his written and video commentaries, go to www.clientinsights.ca. Use A555A for the rep and dealer code to register for website access.
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