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Growing from the inside out

July 27, 2022
clock 5 MIN READ

What opportunities (and threats) are hiding in your business?

I tend to be an optimist, so let’s start with the opportunities. If you are like many advisors, numerous opportunities exist within your current client relationships such as:

  • Additional wallet share
  • Referral opportunities for people who matter most to your clients (e.g. children, grandchildren, parents)
  • Deepening the relationships across the household, beyond the primary decision maker.

There are also likely threats to your firm’s profitability and revenue (beyond volatile markets), such as:

  • The percentage of clients in the distribution phase and distributions generally
  • A potential lack of diversity in clients by age and phase (accumulation versus distribution phases)
  • A lack of relationship beyond the primary decision maker (i.e. both spouses)
  • A lack of connectivity with your clients' children and/or grandchildren (G2 and G3)

There is compelling data that should serve as a reminder and warning that retaining your client assets over the long term isn’t a given.

According to Pricemetrix’s 2020 study, "Women as the next wave of growth in U.S. wealth management," 70% of women leave their advisor a year after their spouse’s death. According to a Cerulli Associates report, only 13% of affluent investor’s children stay with their financial advisor.   

Now that I have properly scared you, here are three actionable steps to help you capitalize on your opportunities and address your threats:

  1. Understand the opportunities and threats in your business.
  2. Systematically get to know who matters, starting with the highest risk relationships.
  3. Connect and add value to those who matter (I’ll explain how and give you a tool to help).

Uncover opportunities and threats

This is a two-step process. Step one is to do an age and phase audit of your business.

If you have all your client data in your CRM, this will be an easy exercise. Start with the youngest birthdate in the household, and group family members by generation.

Use this table as a reference:

Generation Years born Age as of 2022
Millennial 1981-1996 26-41
Gen X 1980-1965 42-57
Boomer 1964-1946 58-76
Silent 1945-1928 77-90

Unless you are working with all ultra-high-net-worth clients, you can generally assume that the household members who identify as baby boomers and the silent generation are (or are close to) in the distribution phase of their lives. Assume that your millennial and Generation X clients are in the accumulation phase.

What percentage of your clients are in the distribution versus accumulation phases?

The higher the percentage in the distribution phase, the more you need to add assets to maintain your revenue. These are also your higher priority targets to focus on in the next step, when you systematically get to know who matters.

Look back to grow forward

Step two: Review the past three years and consider these questions:

  • What are your annual outflows from distributions versus inflows from net new assets? Has market growth been artificially supporting your business growth?
  • Is your retention rate 95% or higher? (This is the industry average.)
  • When a spouse passes away, do their assets stay?
  • When clients pass away, do their assets stay?
  • Are you getting introduced or referred to your clients’ children?

You should be able to figure out pretty quickly if you are breaking even, decreasing or growing in revenue based on your net new assets each year without the market’s help (or hindrance).

If you answered “no” to any of the other questions, you have identified an opportunity or threat in your business.

Connect with purpose

At this point you should have a shortlist of client households who may be the greatest opportunities or threats—those who produce the greatest revenue, but with whom you don’t have a relationship or even know who matters most to your clients. Start with these clients with the goal of understanding who matters to them.

Going forward, systematically get to know who matters to all of your clients. You can do this by adding it to your client review agendas if you aren’t already asking, “who matters most to you?”

The key is to not just ask the question, but to capture their answers in your CRM in a reportable way. Specifically, capture their names, relationship, and birthday or age, and of course anything else important they share. You will want this data in step three.

 Build a bridge to who matters

Once you know who matters there are infinite ways you can connect and serve those people (likely G2 and G3, your clients’ children and grandchildren). Build a scalable way to connect and start to serve who matters using the Ideal Client Persona Toolkit.

Lean into the three drivers of growth and scale:

  1. Specialization: who you serve and/or a technical specialty
  2. Partnership: how can you outsource or partner strategically to deliver value at scale?
  3. Integration: use of technology and workflows to efficiently do what you do   

Here are some ideas to get you started:  

  • A Roth IRA for minors to connect with grandchildren and children.
  • Help your clients’ children make their 401(k) selection in their first job.
  • Hire an ice cream truck to come to your next client appreciation event.
  • Offer pictures with Santa if you host a Christmas client appreciation event.
  • Include content that speaks to your greatest opportunity, such as financial literacy, in your newsletter or social posts.
  • Offer a lite-level service that includes a simple financial plan and investment management. You can outsource on a subscription, flat-fee, or hourly-basis.  
  • Use the intel you captured in step two, specifically birthdate or age to send relevant communications or host an event at your office around significant life events (e.g. everyone who has a child graduating high school receives a special guide and invite to The Financial Must-Dos Before Graduating College in a sharable format. You also share this in your newsletter and on social media).

Use this article as a roadmap to grow from the inside out.

Stay tuned for a follow-up to this piece, where we explore the Gen X and millennial generations, and their financial perceptions and preferences, to help you best serve your clients today and in the future.

Shauna Mace, CHPC

Head of Practice Management

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