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New Research: Debunking the Affluent Minimum Myth

At least half of the $1 million+ clients didn't start out that way.

ORLANDO — “I’ve always been conflicted about establishing minimums,” began Kevin with what seemed to be an expression of relief. He then asked, “you’re saying, despite the fact that our firm doesn’t pay us on smaller accounts, that many $1 million+ clients started off as smaller accounts?”

What got Kevin’s attention were a handful of 2018 Affluent Research factoids regarding minimums. It’s often been said advisors need to establish a clear minimum account level when targeting the affluent. The rationale is that you can’t be the Walmart and Nordstrom of financial services (which is sound thinking). However, when it comes to today’s affluent, how they started working with their financial advisor tells a different story regarding minimums. 

Our recent findings completely debunk the idea that financial advisors should adhere to strict minimums when targeting today’s affluent. As you can see below, 51 percent of $1 million or greater clients initially began working with their advisor with less and some with much less.

Asset level when first engaging your financial advisor

  • 12 percent    < $100K
  • 9 percent      $100K–$249K   
  • 16 percent    $250K–$499K
  • 17 percent    $500–$999K

As an example, maybe the new client was upwardly mobile but had yet to accumulate $1 million to invest or maybe this new client simply wanted to give his new advisor a trial run before entrusting him with all of his assets. In these situations, we’ve found it much more effective for advisors to establish an ideal client profile, rather than a strict new client minimum.

Let me explain—let’s assume your ideal client profile are: professionals with families, earning $200K plus and/or $1 million plus investable assets and in some stage of pre-retirement. This provides you with a natural narrative that is conversational and far more likely to make sense and be perceived as sincere: 

Most of our clients are busy professionals, such as yourself, juggling the dual challenges of managing a career and raising a family.” 

Here, you’ve actually framed one of your differentiators and opened the door for conversation. Whereas, explaining your minimum with:

“I typically work with clients with $1 million or more in assets” or, “I can’t take on a new client with less than $1 million in assets.”

Regardless of the scripting, citing minimums can be off-putting (arrogant or disingenuous) and/or misinterpreted—all of which leads to lost opportunities.

Although you might think I’m contradicting myself (I’m not), you should always be attempting to manage all of your prospect’s assets—and many will oblige. That said, what our affluent research is telling us—at least half, and probably more—$1 million+ clients didn’t initially give their new financial advisor $1 million upon initial engagement.  

If you think about it objectively, all of this makes sense. For those with the assets, even though you come highly recommended, they don’t really know you. You’ve said and done all the right things to get hired, but some will have that little voice in their head saying, “let’s see if you’re as professional and client-focused as you appear before I entrust you with all of my family’s assets.” Others will want to work with you as they earn and invest their way to affluence.

The silver lining hidden in these findings is that after you’ve proven yourself, earned their trust and respect, those who initially gave you a portion of their assets are likely to consolidate their remaining assets with you. Those who have gained affluence under your guidance will continue following your advice as their financial affairs become more complex. 

Why? Because our affluent research continues to tell us that they want a go-to financial advisor who can oversee the multi-dimensional aspects of their family’s financial affairs. 

They want you! However—minimums? Debunked!   

Matt Oechsli is author of Building a Successful 21st Century Financial Practice: Attracting, Servicing & Retaining Affluent Clients.

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