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How many new clients does the average financial advisor acquire in a year? I have been asking advisors and sales managers this question for several months. The most common answer: two.

In an age of declining fees, greater churn from intergenerational wealth transfer and increased competition from robo advisors, that’s not going to be enough. Many advisors are already generating less revenue from the same number of clients, so advisors need to pick up their acquisition game. The situation is exacerbated by the Department of Labor’s fiduciary rule, which raises the standards on retirement investment advice; that will further compress fees that wealth management firms charge clients and divert more advisor attention away from business-growing activities. Firms are recognizing that they need a better approach to growing their business.

Traditionally, advisors have gotten new clients through the sales and marketing “funnel” concept — feeding more prospects into the top of the funnel to land more new clients coming out of the bottom. That strategy might still work for large organizations with significant marketing firepower and a widely defined target audience, but it’s a counterproductive strategy for many others. Casting a wider net is a classic case of mistaking motion for progress.

Overall, the nation's wealthy are expected to add to their growing fortunes in the years ahead.
June 15

Smaller wealth management practices should instead sharpen their focus on micro segments of customers, strengthening capabilities that will most efficiently build a more homogeneous client base. By leveraging smarter techniques and emerging technologies, advisors can devote their scarce time and resources to targeting a smaller number of high-value prospects with the greatest likelihood of becoming clients. Doing so will increase the advisor’s win rate and improve client satisfaction, thus creating a virtuous circle of referrals. The most effective advisors we see are already doing this and are successfully separating themselves from the pack.

The key to a better-honed target client is moving beyond seeking new clients based purely on a prospect’s net investable assets. That’s traditionally the most common criterion and — let’s face it — the only attribute employed by many wealth firms to segment prospects. But while investable wealth level is a good place to begin segmentation, it’s a horrible place to stop. Many advisors are already using social media tools such as LinkedIn and Facebook to target segments of the market with greater specificity, based on demographics and situational information.

While investable wealth level is a good place to begin segmentation, it’s a horrible place to stop.

Effective tools, including predictive analytics and content and contact management systems, are improving all the time. They enable wealth managers to use new techniques to effectively court narrower niches of better-fitting clients — such as, for example, pediatric dentists in northern New Jersey, ages 40 to 55, who own their own practices and generate annual revenues of more than $1 million.

The smartest firms will target these subsegments and hone specific conversion communications playbooks for each group. While every prospect is different and will require a nuanced approach to convert over time, the tried-and-true techniques that enabled an advisor to convert his or her last 10 similar clients can be implemented, and improved upon, for the next 10 prospects. A well-honed touchpoint strategy aimed at converting prospects to clients, based on prior successes and experimentation, could guide advisors through a playbook over many months, suggesting when to make a personal connection and when to send automatically generated content on specific topics. Once clients have signed on, the same approach can determine which clients have additional assets elsewhere that could also be targeted.

The magic that comes with a greater focus on a more finely honed target client is this: As advisors focus on servicing specific client segments that have similar situations and needs, those advisors become better at client service, making their advice more valuable and their clients happier. Happy clients become genuine advocates and connectors when their advisor helps them overcome their challenges.

As wealth managers incorporate more technology and greater focus, the industry will divide further. Advisors servicing the largest, most sophisticated accounts will likely enjoy stable fees, while advisors serving the rest of the market will continue to battle declining fees. That should encourage wealth managers to seek out previously unheard-of working relationships with competitors to help focus on specializations. It’s all part of a shift from an inside-out world, where wealth managers dictated terms of the relationship, to an outside-in model, where clients have a greater say about what products they want, how they’re delivered and what fees are charged.

Adapting to new challenges and evolving are survival requirements in wealth management. Advisors targeting granular segments of the market will be the most successful producers. Wealth management will continue to rely heavily on advisors having a trusted personal relationship with each client, but the best advisors will find the sweet spot between offering clients high-tech and high-touch services.

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