WealthManagement Magazine

Developing Your Business Mode

The financial advisory world is in flux, and there's no doubt that you are fully aware of changes in the business. But with all the white noise from regulators, financial services companies and the affluent the odds are you're not quite sure what new business model will emerge from all these changes. My firm keeps telling us we have to change our business model, explains Paul, a financial advisor

The financial advisory world is in flux, and there's no doubt that you are fully aware of changes in the business. But with all the white noise — from regulators, financial services companies and the affluent — the odds are you're not quite sure what new business model will emerge from all these changes.

“My firm keeps telling us we have to change our business model,” explains Paul, a financial advisor I've worked with, “but other than transitioning to fees and selling additional products, nobody has presented us with this new business model.”

Relax. You might find comfort in the fact that the entire financial services industry is making this much too complicated when it's rather simple.

Because the majority of research has been focused on attracting, serving and retaining the affluent client, the new business model that will be presented here (in next month's issue) has been created accordingly. But rather than simply outline the business model, I thought it would be more helpful to walk you through five key, but simple, questions (presented with Paul's responses as a guide) to help you create your business model.

Your Perfect Model

  1. What Business Are You in?

    This question is trickier to answer than it appears at first glance. Paul's first response was that he was in the business of making his clients money. Fair comment, but as we reviewed criteria that the affluent use in selecting a financial advisor, he began to rethink his initial answer.

    Paul wanted to focus on the affluent. But not all his clients were affluent, and he had never focused all of his attention on the affluent. This posed a dilemma. Seventeen years ago he was trained as a stockbroker but now he has an assistant that helps create financial plans for some of his clients. Plus, he no longer buys and sells equities. Counting mutual funds, 70 percent of his business is annuitized.

    The more we looked at the eight criteria, the clearer it became to Paul that he was in the business of being a solutions provider, a servant in regards to the multidimensional financial affairs of the affluent. He determined he was in the business of being the “go-to” financial professional for the affluent.

  2. Who Is Your Ideal Client?

    Everyone has heard the old adage you can't be all things to all people. Never has this been more obvious for financial advisors. If you are serious about attracting, serving and retaining affluent clients, you need to focus 100 percent of your time and energy on working towards that end. If not, you will struggle.

    That said, for you to begin to create a new business model you must be able to define the profile of the clientele you want to help — this does not have to be a complicated affair. Paul concluded that households with a minimum of $1 million of investable assets were his ideal, with his sweet spot being between $1 million and $5 million. He determined that this was the level where he could add real value, get paid properly for his services, be appreciated for this work and generate the best stream of introductions and referrals.

    Using a similar thought process, you need to determine the profile of your ideal clients.

  3. What Are Your Deliverables?

    If you are truly targeting the affluent, you must be willing to become their servant. I say that tongue-in-cheek, but not really. Our research states that they want a trusted “go-to” financial coordinator, so, therefore, that is what you must be. If this requires expanding your services, establishing a strategic alliance with specific experts, bringing on another team member or possibly joining a team — you must do what is necessary to deliver the goods.

  4. What Is Your Value Proposition?

    Being able to articulate your value in a simple and concise manner is essential. The idea is to create a word picture so you aren't pigeonholed in a category like broker, insurance, planner, etc. Every team member needs to be fully capable of articulating what you do and how you do it. The real issues regarding your value proposition are that you must practice what you preach and be committed to your ideal profile client.

  5. What Is Your Infrastructure?

    How many clients can you properly serve? What levels of service are you offering? Everything from the quality of your support personnel, partners, the technology you use, your contact management system and your office environment is important. All the aforementioned and more play a key part in being able to deliver a consistent client experience with the capability of growth.

Give yourself a month or so to address these questions. Next month I'm going to share with you a simple business model designed to attract, serve and retain affluent clients.

Writer's BIO: Matt Oechsli is author of Building a Successful 21st Century Financial Practice: Attracting, Servicing & Retaining Affluent Clients. oechsli.com

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