From the November 2009 issue of Research Magazine • Subscribe!

Ideal Client Profile

Make sure you know what kind of clients you want.

The converse of the age-old adage that "you get what you look for" is that if you don't have in mind what you're looking for, then you're going to end up with whatever happens to come along. Unfortunately, that's how most financial advisors build their businesses.

If someone can fog a mirror and write a check that clears, then that person is considered a qualified client. The end result: a weak book, a weak practice and a business with no leverage.

A key secret to business success is to build something once, then use it many times.

But if your clients have nothing in common, then you can't build the "something" -- the specific expertise applying to certain types of people and their financial circumstances -- that enables you to exert substantial business leverage as you come to understand and master their common financial challenges. As a result, you are doomed to have a less efficient and less profitable practice and business.

Besides "be successful on purpose," having an ideal client profile (ICP) is probably the single most important piece of advice offered by CEG Worldwide in our coaching programs. When your clients have substantial commonalities -- not just commonalities of interest, but common problems and challenges to overcome -- you gain huge leverage across every aspect of your business, from knowing just what your clients need and how to get it for them to putting together a spot-on expert network.

Most important, you have greatly increased your value to such clients, and can expect to be commensurately rewarded over the short run and long run.

Eight Factors

The eight ICP characteristics that we teach advisors to focus on are:

o General description

o Geographic location

o Investable assets

o Minimums

o Financial challenges

o Source of clients

o High-net-worth personality

o Personal enjoyment

Advisors are asked to write out all eight factors so they can hone and refine their ICP and make sure that everyone in their firm knows it cold.

Think about it this way: "These are our ideal clients, this is what we're looking for and this is whom we'll serve extraordinarily well and therefore be of great value to. And in markets like the ones we've just gone through, these are the clients who we want to make sure we hold onto by making exceptional client contact and demonstrating strong leadership."

The first factor is a general description. This includes stage of life (e.g., working vs. retired), industry or occupation, specific job and company, marital status, educational level, age range, source of wealth and perhaps most importantly, the niche they fall into.

Ask yourself what specific factors will help solidify and identify this group as a separate group, as a niche that you can serve particularly well. A working description of a general summary might be something like this: "Working senior executives of high-tech companies, specifically the XYZ and ABC firms, college-educated, married with children, ages 45-60."

The second factor is geographic location. Time really is money, and in today's world it's unrealistic to think that you can work exclusively with high-net-worth clients by phone or always have them come to you. So, to save travel time for both you and your clients, make sure they're not too far away from you. For example, you might say, "We work with clients in the greater Atlanta metropolitan area," or "Our ideal clients live/work within 15 miles of our offices."

Third is amount of investable assets. It's important to differentiate between income, net worth and investable assets, with the last of these being the most relevant assessment of your ideal client's wealth.

Related to investable assets is the fourth factor of minimums, including both minimum assets under management or account size -- what you are actually given to manage -- as well as your minimum yearly fee.

It's crucial that these factors work in tandem, because if you accept a client who has less than your normal minimum for assets under management, and still charge your normal minimum fee, you might get in trouble with state regulators or the SEC for not offering services that are proportional to your fee. Of course, you shouldn't be undercutting your minimums in any case, but if you do, make sure you're doing it in a rational fashion.

The fifth ICP factor is financial challenges. Again, this is the core of how you build value for your clients and for your business. For example, if you're working with senior executives, you'll want to develop substantial expertise in addressing financial challenges associated with concentrated stock portfolios, defined benefit plans, long-term incentive plans, stock option plans, ensuring a smooth transition to retirement and providing for clients' legacies upon retirement and death.

Also, to gain leverage in dealing with the financial challenges of clients in any niche, you'll want to build a highly specialized expert network including -- depending on your client niche -- a suitable CPA, a high-end life insurance expert, an estate planning attorney and so on.

The sixth factor is to consider your source of clients. That is, how will you acquire them? Will it be through referrals, strategic alliances, seminars, or something entirely different? As previously discussed in this column, the very best source of new clients is referrals from existing clients, colleagues and strategic alliances with relevant experts in other fields.

High-net-worth personality, the seventh factor, refers to the eight high-net-worth personality types identified by CEG Worldwide. What's important to know is that each of us is not meant to work with everyone. We all have personalities, and so do our clients, and as a result we'll be naturally more or less compatible with different kinds of people.

So, as part of your ICP you need to understand which types of high-net-worth personalities you are best suited to work with. If you have a client whose personality conflicts with yours -- one sign is if you've awakened in the middle of the night thinking about a conflict with a client -- then you need to fire that client.

The final factor is personal enjoyment. Life is too short to spend your time and energy working with people that you and your staff don't enjoy, people who are inherently rude, overly demanding, disproportionate time drains or just plain old hard to work with.

While this isn't the first factor on the list, it's still an important part of your ICP, and for your and your staff's sake, make sure you really do enjoy all your clients.

Successful on Purpose

Your goal, as always, is to be successful on purpose, and defining and sticking to an ICP is truly square one. Some 25 years ago the industry icon Harold Evensky was speaking to a group of financial planners about how he had transformed his practice and moved up-market to a minimum account size of $1 million, which back then was pretty astounding.

An audience member said: "How can you do that? How can you possibly have clients with $1 million?" Harold replied: "Well, you only accept clients who have $1 million to invest."

Your ICP should be part of your business plan and your marketing plan. Your staff should know it cold, and your minimums should be real, with exceptions made on an informed and deliberate basis, that is, have the exceptions really be exceptions and not common occurrences.

Ultimately, having and sticking to your ICP amounts to drawing a line in the sand and saying: "I'm going to be in charge of my business. I'm going to determine not only whom I'm going to work with, but whom I'm best suited to work with, and I'm going to populate my business only with clients who are profitable and enjoyable to work with."

You'd be surprised how much fun it is to get up and go to work when you've built your business with the basic tenets of profitability and enjoyment in mind.

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