As Commonwealth's chief business development officer, I help advisors grow their revenue. Our discussions usually focus on client-facing activities—the proven revenue drivers. Although independent advisors need to run all aspects of their practices—from technology to HR to client service—the only way to grow revenue is by being in front of clients and prospects.
Although my conversations with advisors differ, I've noted some underlying themes emerging. Many advisors are looking to buy a practice or hire an advisor. But there are also several organic growth trends that are shaping advisor practices, and they have both short- and long-term implications. Here, I'll focus on four trends that I think will have the greatest impact.
1) Specializing in a Niche
Having a niche is a proactive strategy for capturing business from a market segment you are well suited to serve. According to CEG Worldwide, 70 percent of top financial advisors—those earning at least $1 million annually—have a niche. These advisors are specialists with expertise in solving particular problems for a very select group of people with similar needs. They also have the potential to be more successful because of their focused knowledge.
Despite this, some advisors hesitate pursuing a niche for fear of losing other business. "What if there's a $2 million prospect who doesn't fit my niche?" they ask. "Do I take her as a client?" If you've had similar thoughts, here's a suggestion: Accept the $2 million prospect as a client! If you can meet this person's needs, there's no reason to say no. To be sure, you can't make an exception for everyone. But it's okay to stray from your playbook on occasion. Just ensure you devote the majority of your time to gaining expertise about your niche—and gaining introductions to ideal clients who fit within it.
Moving forward. If you'd like to grow your business, seriously consider targeting a market niche. It should be both identifiable and profitable—and have financial issues that you have the knowledge and skill set to address.
2) Introductions (Not Referrals) Are the Goal
Did you know that introductions and referrals are two very different ways to meet prospects? With a referral, you might get a name and a way to approach a prospect. With an introduction, you get in front of the prospect (right where you want to be!).
Traditionally, a referral has been a way to measure how well you're doing—unhappy clients don't give referrals. Still, many happy clients don't give referrals either. But an introduction is unambiguous, and it's preferable for a few other reasons as well:
- Once you've been introduced to a prospect, you have the green light to follow up. There's no need to wait for someone else to participate in the relationship. Being in control, with clear action to take, is always a better position than being in the referral netherworld.
- Your client who made the introduction is now vested in what happens next. Most likely, he or she will feel somewhat obligated to keep the conversation going and, implicitly or explicitly, is vetting you for that prospect.
- Since the prospect has been introduced to you by a friend, relative, neighbor, or colleague, the relationship starts from a position of strength and has a better chance of continuing to develop.
Moving forward. Ask to be introduced to specific people whenever possible. When you're offered a referral, look for ways to turn it into an introduction. If your client says, "I told my brother John about you, and he's going to call you," what can you do to turn this into an introduction? You might consider one of the following suggestions:
- "I'd love to meet John. Why don't we all try to meet for coffee next week? Can you set that up?"
- "Do you have John's contact info on your phone? Why don't you send him a quick e-mail now and cc me on it, telling John you've asked me to call him."
3) Your Brand Is Vital
Your brand is integral to your business's growth. Branding is the difference between attracting people to your practice and chasing prospects. Everyone has a brand. What's yours?
Consider what you offer to your clients: your unique value proposition. Can you articulate it easily? More important, can your clients? You want your clients to talk about you—saying the right things to prospects who could be ideal clients. Further, your ability to differentiate yourself can directly affect:
- Your niche
- Your fee discussions
- How often you receive introductions
You'll also want to review your bio. Many advisors list their experience and credentials (e.g., Series 7 registration or CFP® certification) but don't showcase the personal side that's important to building relationships:
- Highlight what's unique to you: family, hobbies, activities, and community involvement.
- Be specific about your interests. If you're a reader, for example, discuss the books you like. If you golf, describe your game so that someone knows if you're learning to use your irons or have an unbelievable short game.
Moving forward. Take a good look at your website. Does it reflect you and your business? In a nutshell, your website and bio should convey:
- Who you are
- The people you help
- What you do to help them
4) It's About the Relationship
Ours is a relationship business. Sometimes we lose sight of that, worrying about things outside of our control. Case in point is the rise of the robo-advisor. Is the science-fiction scenario of man versus machine here in earnest?
Rise of the robo-advisor. It seems that robo-advisors will have a big effect on our business. Websites like LearnVest and Betterment are geared toward some underserved segments of our population. And they're gaining clients—gathering a lot of information in the process. What do they offer?
- 24/7 business model
- Impartial advice
- Ability to execute on-demand to a generation accustomed to smart technology and immediate gratification
Further, as these sites evolve and adapt their offerings, they'll start pursuing higher-net-worth prospects—which could hurt. But technology can enhance the client relationship—it doesn't have to replace it. Robo-advisors will change the business as we know it, but they could make us stronger.
Remember day trading? Think back to another disrupter: day trading in the late 1990s. Day traders were making so much money, commercials showed them trying to decide what to name their islands! But then came the inevitable bust, and most of those companies disappeared. What they left behind, though, put you in a better position to meet client needs by changing what you have to offer, including:
- Integrated financial planning
- Fee-based services
- Model portfolios
- Faster trade execution
- More investment analysis tools
Moving forward. It's vital to understand that business is based on the quality of client relationships. If you spend your time, money, and energy accordingly, you'll prosper no matter the latest technology trends. And if you aren't spending more time on client relationships than anything else, it might be time to recalibrate your practice, ensuring that you are optimizing both your time and your experience.
There's no doubt that working with advisors, and listening to them, makes my job interesting. But coming up with strategies to grow their practices, and giving them tactics that are actionable, is what makes it fun.
Are there other growth trends that are shaping advisor practices? Have you seen these trends affect your practice? Please share your thoughts with us below.