Many FAs select a top down growth target, e.g., $100,000 new production or $10,000,000 in net new assets or perhaps 15% growth year over year. Another way of estimating your growth for the year is a bottom’s up approach that focuses on how you plan to grow your business. In this approach, you calculate where your new business is going to come from by category.
Start with the categories for organic business growth, i.e.,
There are essentially four ways to increase a client’s value to the business. You can and should develop plans for each of these areas:
There are 15 to 20 ways to grow the business externally from client introductions to cold calling and cold walking. All approaches for new client acquisition work for some advisors to some degree. I believe in focusing on what we view as the five primary methods that are most productive and develop plans for each of these primary client acquisition approaches:
Networking and continuing development of client social relationships are a natural part of business acquisition and may or may not be “programmatic.” Let’s convert all growth opportunities in production as some opportunities generate revenue and some asset growth, which converts to revenue, so revenue is a common base.
Organic Growth Opportunities
Planning fees – Let’s say your firm allows you to charge for financial plans or you are in fact a planner, a CFP. Fees for plans vary widely but let’s assume a modest fee of $2,500 for a plan and you have a goal to sell six plans per year. Resultant revenue = $15,000 which equates to $2,000,000 in new assets at 75 BPS.
Increasing client returns on assets (ROA) – You select perhaps 20 clients whose ROA is less that say 50 BPS. Review their portfolios and as part of your next proactive contact, you suggest various portfolio improvements that are appropriate for your client. Because of DOL, you may also need to move the client’s assets to a managed account. Let’s assume 10 clients agree to the recommended changes and you yield $2,000 per client. Resultant revenue = $20,000 which equates to $2,670,000 in new assets at 75 BPS.
We would not to make any recommendations that are not warranted but if portfolios have not been reviewed for over a year, the asset allocation might be out of balance with the client’s current wants and needs or current market conditions. (See my paper “A Five Step Process for Moving from a Transactional to a Fee Based Practice”)
Acquire assets held away by current clients – While most FAs believe they have 100% of client assets, firms believe that number is perhaps only 50%. Many HNW clients maintain more than one advisor. In many cases, there is value in having your assets managed by a single advisor in order to have a comprehensive and logical asset allocation and a holistic portfolio diversification by client. The client also gets more efficient financial planning, less effort, single view of net worth, etc. Set a goal of increasing assets from current clients of $4,000,000. At 75 BPS, this equates to $30,000 in revenue.
Increase savings and provide asset protection and other insurance – Of course, there are many types of insurance and annuities you can offer to clients. For sake of simplicity for this example, let’s say we just focus on Long Term Care. Let’s target four policies of $100,000 each. If each policy yields $2,500 in revenues this would be $10,000 revenue in total. This equates to $1,333,000 in new assets at 75 BPS.
Total revenue from organic growth =
Total = $75,000 in revenue or an equivalent of about $10MM in new AUM at 75 BPS.
New client Opportunities
Introductions from clients – You have put the proper plans in place and deliver high quality service so you are referable. Clients know you are open to a select number of new clients mode. You have a comfortable and consistent way of seeking introductions. Throughout the year, you receive six introductions to client family members or friend and business colleagues. You convert three prospects to clients who have an average AUM of $500,000 clients. This is $1,500,000 in new assets. At 75 BPS, this is $11,250 in revenues.
Introductions from centers of influence (COI) – You have built strategic relationships with a four COIs. You contact them every 6 weeks or so to provide valuable information on the markets, to check in, to invite them to your events, and share ideas over meals. You have been doing this for 2 or 3 years with those COIs and eventually receive introductions. Let’s assume you get four introductions over the year and convert two million dollar clients. This brings in $2,000,000 in AUM. At 75 BPS, this is $15,000 in revenues.
Book of Life -- Networking (personal and corporate) – You have built a current list of your family members, people from places of previous employment, your country club, the Rotary or similar organizations to which you belong, religious affiliations, small businesses you may work with, medical/dental/legal practices you know and/or use, employees affected by layoffs, school classmates, people who you participate with in hobbies and other life interests, etc., etc., etc. Generally it has been said people know at least 250 other people. If you construct a list, without judging their potential for client-ship, you may identify dozens of quality prospects. Let’s assume four individuals are willing to meet with you over the year and you convert two to $250,000 clients. This is $500,000 in AUM. At 75 BPS, this is $3,750 in revenues.
Niche Marketing -- There are many ways to develop niches. Using “client wisdom” will identify opportunities for introductions whether one on one or through group meetings. For example, who does your client work for, what hobbies do they participate in, etc. You may be able to conduct “targeted roundtables” for small groups of employees, e.g., sales people, in one or more of the companies where your clients work. For these groups or “niches” either after work or at a “lunch and learn,” you can meet people by discussing relevant topics like “State of the Markets” or “The Value of a Holistic Financial Plan.
For groups of women, you can conduct a targeted roundtable for “Financial Needs of Women in Transition.” Conduct one seminar per quarter with a goal of meeting with two individuals over the year from each event. Meet with only eight individuals and convert only four prospects to $250,000 clients results in another $1,000,000 in AUM. At 75 BPS, this is $7,500 in revenues.
Use LinkedIn to Identify Connections of Your Connections and Get Introductions at Lunch or Dinner – Conduct lunch or dinner a quarter for a connection of a connection. If you convert only two $500,000 clients that results in another $1,000,000 at 75 BPS or $7,500 in revenues.
Total revenue from new client acquisition =
Total = $45,000 in revenue or an equivalent of about $6,000,000 in new AUM at 75bps.
Total Business Development = $16MM in equivalent new AUM or $120,000 in revenue from your nine business development programs over the year. If you run a hundred million dollar book, this is a 16% increase in AUM. If you plan each marketing activity and block time for execution, you can get this done. The key is to execution. Some of these projects will take more time than others. I suggest devoting at least 20% of your time to Business Development. This gives you at least 400 hours a year or 10 full weeks over a year’s time, more if you work longer than a 40-hour week.
Naturally, you can see that the sum of small numbers of organic growth and new client acquisitions from multiple sources adds up to meaningful new business. You choose the paths you wish to follow based on your skills and interests, and yes, ambition. Using a simple methodology, you can put plans in place to make your growth objectives come true.
Whether you do a tops down or bottoms up approach or both, it’s critical to plan your work and work your plan. Tops down and bottoms up are plans that must be followed up “religiously” by strategies, tactics, and actions to implement your plans, i.e., working your plan.
Peter Drucker once said, “Plans are only good intentions unless they immediately degenerate into hard work.”
Which opportunities will you incorporate into your growth plans and how much time will you block to execute on your strategies, tactics, and actions? By when will you start and how will you measure your results?
If you want to improve your business by exploring ways to create new levels of client service, “signature experiences” if you will, make an appointment on my calendar to discuss if and how I can help you.
David I. Leo
David Leo is Founder of Street Smart Research Group LLC. He is an author, speaker, coach, consultant and trainer to financial professionals. David is an experienced business manager who works solely with Financial Advisors, Planners and firms who want to organize, structure & grow their businesses by attracting, servicing, and retaining affluent clients.
If you would like additional details or have any questions about his articles or an interest in coaching schedule a free 45 Minute Strategy Session @ https://calendly.com/davidileo or contact him @ David@CoachDavidLeo.com. Call 212-598-4229 (Office) or 917-379-1249 (Cell) and visit @ www.CoachDavidLeo.com