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Tracy Wallace, an advisor working for a small RIA, is seeking a way to rev up his marketing and expand his book of business.

Tracy Wallace, an advisor working for a small RIA, is seeking a way to rev up his marketing and expand his book of business. For guidance, we spoke to our new, and now permanent, panel of experts: Hellen Davis, president of Indaba Training Specialists, a management consulting and training firm in Treasure Island, Fla.; Philip Palaveev, senior manager for Moss Adams, a Seattle-based accounting firm specializing in financial services; and Chip Roame, managing principal of Tiburon Strategic Advisors, a Tiburon, Calif.-based market research and strategy consulting firm for financial institutions and investment managers.


You love what you do, but your business isn't growing as fast as you'd expected. That's the dilemma facing Tracy Wallace, 44. For the past seven years, he's been a fee-only financial planner with Weaver Capital, a three-person firm in Suwanee, Ga. After trying his hand at a series of other jobs, he finally has landed one he loves. Wallace manages about $10 million in assets for approximately 50 clients; the firm's total is about $50 million in assets and 300 accounts. He knows it's time to boost his client base, but the question is how?

Wallace's path to the financial-advisory business was far from straight. He attended one year of college at Baptist University of America in 1981, but dropped out after he got married and decided he needed to start working. He first worked in a Frito Lay warehouse, managing product flow. After about two years, he left to take a job managing a health club. Next, he worked for an insurance company managing government relations. When he was laid off, he became an insurance agent. Three years later, he got his Series 7 and joined a local independent firm as a registered rep.

But Wallace grew increasingly uncomfortable with the commission arrangement. “I struggled with the issue of whether the transactions were really in the client's best interest,” he says.

That's when he decided to make the switch to an RIA. After a brief search on the Internet, he found a list of local fee-only advisors working with Schwab and contacted Weaver Capital. After a single meeting, they agreed to join forces. The arrangement: Wallace would share revenues with the principal, a 75-25 split. That 25 percent pays for Wallace's use of investment models created by the principal, as well as his access to research. In addition, the principal and his administrative assistant take care of compliance. Wallace's main focus is creating financial plans. He and the principal split the cost of the software used for developing those plans.

Now, Wallace feels it's time to work on building more business by increasing his client base. While he brought over about 20 clients from his old practice, new ones have mostly come from word of mouth, client referrals and from contacts in groups with which he's involved, like school and church. Until now he hasn't explicitly asked for referrals; he's mostly hoped that his work would encourage clients to bring in other like-minded individuals. He's also thinking of raising his minimum, which is $100,000 in liquid assets. “With some clients, considering the time I put into working with them, I might actually be losing money,” he says.

To build his book, Wallace is thinking of joining a local peer group, in which about 10 small-business owners in noncompetitive areas meet every month to discuss business issues, figuring it would bring in more business and help create leads. He also recently got his Series 65 and is working on his CFP certification. Once he gets the designation, Wallace plans to finish his BA, since new rules only allow college graduates to use the CFP designation. He's hoping to enroll in a school that will give him academic credit for the CFP course.


Hellen Davis:

The only way to make more money is to build assets under management. To do that, one has to see more clients. If Wallace is going to strictly do planning, he's never going to get where he wants. That's not where the money is. There is always a certain amount of attrition, usually 10 percent a year. So, an advisor has to bring in 10 percent of new clients just to tread water.

I think he has to put aside four to six hours a week for prospecting. Spend it having breakfast or lunch with clients who are making money for him. During that time, he should ask for referrals. Now, I realize that's something advisors don't like to do. But here's one approach that tends to work: First, you say, “I want to thank you for all the business you've given me all of these years.” Then you tell them, “You want to enjoy your retirement with your friends. But, if they don't see a planner, they're not going to be able to play with you.”

He also has to look at each individual client and decide whether that person is a winner or a loser for his business. Then he needs to tell the unprofitable ones that he can only allocate a certain amount of time to their accounts. Anything beyond that, and he'll bill at an hourly rate. He'd have to slowly make this shift over time. To ease the blow, he can tell these clients that they won't be billed if they call his assistant — and then explain the different responsibilities he and his assistant have. New clients, obviously, will get the news upfront. There's one caveat: Make an exception for clients who are influential in the community. Being too frugal about service with these kinds of individuals can be the kiss of death in business. Every once in a while, you'll have a client who's a loss leader — someone to whom you have to offer your services below cost because, ultimately, it will be worth it.

Another important step is to understand why clients do business with you and not someone else. Is it because you're a nice guy? Because they trust you to provide the best advice? Or is there something else? Once he's identified his draw, he should try to concentrate on that area and farm out as much of the other stuff as possible. It may mean overhauling his business model. If clients like you because you're great when you're in front of people, then don't do the planning. If it's because you're a fantastic planner, then get somebody else to prospect for you.

Philip Palaveev:

The thing Wallace has to look at is how he creates credibility with his clients. In order to get people to trust him with their financial futures, Wallace has to maintain a minimum level of credibility. That means it's very important that he get the CFP designation.

I always say the profession has three stages: technical knowledge, establishing relationships and business development. It's very difficult to establish relationships and develop business without the technical knowledge. A designation will help him with that.

I also think he should consider trying to change his arrangement with Weaver Capital — change the whole focus of the relationship. On the surface, it sounds like what I call a silo firm, a collection of separate businesses. I don't find those arrangements to be that appealing. Instead, can they leverage Wallace's time and energy in a way that helps the principal develop more business? Can they find a way to better utilize his skills with existing clients of Weaver?

I'm suggesting that Wallace create capacity for the principal and, at the same time, learn the technical and relationship sides of the business. He would be more of a service provider and would get a salary.

People who have fairly recently entered the profession struggle mightily with business development. Wallace might do better receiving that form of compensation and helping Weaver, instead of trying to build his own book of business. It's a radically different approach that, long-term, may be more helpful.

Chip Roame:

I think Wallace shouldn't think about minimum account size. Will you tell someone who's probably going to sell a business soon to go away? It depends on the client.

I also feel he's missing a big marketing opportunity. He should go back to his first job, or to the health club, for clients. Those are his constituents. He can, for example, ask the health club for permission to put on a seminar for them. He can call it “Keeping Your Finances Healthy,” or something along those lines.

Also, he should start thinking about certain products. Clients need insurance. They need disability, long-term care and so on. I don't think he should shy away from that. For example, there are no-load annuities he can offer. That's an RIA kind of product.

He's also missing a productive client-referral opportunity. About 55 percent of all clients are typically referred by another client, not a CPA or lawyer. That's why, if you don't do anything else, you have to ask your clients for referrals. If you have trouble looking them in the eye, then send them a postcard or mention it in passing in a letter. And, he can have a cocktail party for clients and ask them to bring a friend. It's not quite a referral, but it's close. In addition, he should amp up his volunteer work. If he's currently active in a number of organizations, he needs to get on the finance committee and start networking. The idea is to be in a position where people can see you displaying your financial skills. In your community, you want to be seen as a financial expert.

I like the idea of joining a small-business group. Another possibility is to find an advisory networking group. He would look for 10 to 15 advisors with whom he could meet and talk about how to build his business. It might be people from different locations who get together at the FPA or Schwab conference. He can even do it with advisors who are local. The number of ideas he gets will more than make up for the occasional client he might lose to a member.

Fix My Business is a semi-regular feature that seeks solutions to real-world advisory problems from a group of consultants and industry insiders. Submit your questions to [email protected]

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