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Practice Management Gurus’ Advice for Tough Times: Target Your Ideal Client

Practice Management Gurus’ Advice for Tough Times: Target Your Ideal Client

During bad times advisors usually pay more attention to practice management gurus. And with gyrating global markets wreaking havoc on investors’ portfolios and confidence, wealth managers need all the help they can get.

Underscoring the increasing demand for sophisticated practice management advice, Peak Advisor Alliance, the country’s largest coaching and resources program for financial advisors, added two high-profile specialists, Vickie Seitner and Scott Wood, as executive business coaches earlier this month.

In addition, one of the advisory business’ most respected practice management experts, Pershing Advisor Solutions’ chief executive Mark Tibergien, is attracting widespread industry attention with his recent provocative essay in The Investment Management Consultants Association’s journal Investments & Wealth Monitor; Tibergien asks: Are ultra-high-net-worth clients are really worth the trouble?

Clients who have approximately $50 million or more in investable assets are alluring because they offer the promise of substantial revenue, interesting work and potential referrals to others in their elite circle. But, as Tibergien notes in his article, “Straddling the Peak: Balancing Excellence and Profitability with Ultra-High-Net Worth Clients,” those benefits come at a steep cost: high maintenance clients with complex requirements requiring “serious investments in infrastructure, technology and talent.”

Ultra-high-net-worth clients are only worth it, Tibergien concludes, if a firm structures its business model carefully and finds the right clients, charges them the right fees, and takes the rights steps in advance to protect the firm from a potential client loss.

Create Matrix for the Ideal Client

Elaborating on his thesis in an interview with Wealth Management Letter, Tibergien said advisors interested in pursuing this market segment should create a matrix and list the qualities of their ideal client, based on a review of their current clients and which ones they would want to replicate.

“Money is the easy part,” he said. “They should look for other characteristics they find compelling or can make a connection with. For example, is the prospects’ wealth inherited or created from a business? Is your point of view more aligned with the parents or the children? If you are about the same age, do you have interests in common? Once you see who you’re aligned with, you know who to pursue and who to avoid. And you can create a compelling value proposition because you know what needs you’re trying to meet.”

Cultural affinity is also critical for attracting high-net-worth clients with at least $1 million in investable assets, said Wood, who has spent the last twenty years in strategic development and training financial advisors and registered reps at Mutual of Omaha.

“It’s critical to meet like-minded people,” Wood said. “You want to see if there are any areas you are passionate about that match the clients. Not only will that compatibility factor serve as a solid foundation for your relationship, it puts you in a position to get quality referrals if things work out well.”

Unfortunately, in these volatile times, things may not always work out well. In the current environment, according to Seitner, it’s critical to manage clients’ expectations with as many “high-touch opportunities” as possible.

“Communication is always important, but when the markets are so volatile, it’s even more so, especially for nigh-net-worth clients,” said Seitner, who has a Masters of Science degree in industrial/organizational psychology and spent ten years as a branch manager and trainer at Charles Schwab, before launching her own coaching and consulting business.

Hedge Against Potential Client Loss

Advisors working with ultra-high-net-worth clients need to be particularly pro-active in protecting against potential client loss, according to Tibergien. “Taking on one really large client who can diversify the resources of the firm at the expense of other clients is a high risk strategy,” he said. “It’s the same principle as the diversification of their investment portfolio. If you have concentration risk, you have to figure out how to manage out of it.”

Advisors need to make sure they are not “solely dependent” on one client, Tibergien said, and make sure they are “properly hedged” in case they do lose a major client.”

Seitner and Wood cited their boss, Ron Carson, owner of Peak Advisor Alliance and founder and chief executive of Omaha, Neb.-based Carson Wealth Management Group as an example of how to do it right. Carson is ranked the leading independent broker-dealer advisor in the country by Registered Rep. “Firms that are investing in their business are growing,” she said. “They are paying up to have A-plus employees, investing in coaching support and investment management tools. Firms that see these costs as expenditures and not investments are not growing.”

Helping advisors grow is their goal, but so is “improving their quality of life,” Wood said. “If they grow their business from $1 million to $2 million but are miserable, we haven’t done our job.”

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