From the July 2011 issue of Investment Advisor • Subscribe!

July 1, 2011

Extreme Networking: Adding High-Net-Worth Clients

Several years ago, prior to my transition from an independent wealth manager to an early-stage private venture investor, I was obsessed and focused on two business objectives: protecting and growing my clients’ portfolios, and protecting and growing my practice.

Of course, the two are not mutually exclusive. Sound investment management practices go far toward securing your assets under management and ultimately lead to referrals that, in turn, grow your practice. But, most independent investment advisors recognize that in addition to effective portfolio and client management, and referrals from clients and centers of influence, there are myriad media, marketing and networking opportunities which offer the allure of greater visibility for their practices.

Toward this end, advisors have misemployed countless dollars and hours on practice promotion and client marketing schemes such as blogging, newsletters, websites, email campaigns, seminars and social media—usually with little to show for their efforts. These impersonal marketing methods may generate new names, but they rarely result in meaningful new client relationships.

Recently, I was speaking with an investment advisor who doubles as a venture populist. His advisory firm actively aggregates, syndicates and allocates high-net-worth investor client capital into private venture investments. As an occasional angel investor himself, the advisor cited how joining a local angel investment group had materially increased his access to that attractive 10% of HNW clients who inevitably constitute 90% of an advisor’s assets under management.

As the availability of institutional venture capital has declined by more than 10% from 2009 to 2010 and with investment in venture funds by limited partners declining in 2010 to its lowest level in seven years, angel investment activity has grown to make up the difference. According to the SBA, there are more than a quarter of a million angel investors funding tens of thousands of startups and small companies each year in the United States. Clearly, angel investors could benefit by engaging wealth managers to implement prudent investment policy on their less speculative invested assets. Angel groups are very fertile prospecting fields for wealth advisors. Of course, to be accepted into an angel group, the advisor has to prove a personal history of private venture investment transactions.

The Salon Experience
There is a more effective networking and practice-building approach for wealth advisors who wish to expand their network of high- and ultra-high-net-worth investors. Become the sponsor and host of an entrepreneurial salon series—a periodic assembly of local entrepreneurs, angel investors, business executives and internet technology professionals from within your practice and (more importantly) your community who meet to present and discuss new startup concepts and business plans.

The benefits are immediate, numerable and material. You grow your network of influential entrepreneurs, investors and business leaders. You make new friends, client and business relationships. You encourage entrepreneurship in your community. Ultimately, your advisory practice benefits by increasing its visibility among influential business leaders of your community.

Steps for Launching a Lab
Launching your own entrepreneurial salon series is simple.

  1. As host and sponsor you provide the venue, the beer and name the group—perhaps, “The [your community] Entrepreneurial Lab.”
  2. Pick a recurring date every 30 or 60 days, perhaps, the first Tuesday evening of every month.
  3. Select a neutral, friendly venue for your meetings like your home or an event room—not your office.
  4. Create your mission statement; for example, “to promote entrepreneurial activity in your community”.
  5. Start with your own Rolodex: the serial entrepreneurs, small business owners, private venture investors, IT professionals and aspiring angel investors. Identify 20–25 names to be your charter members.
  6. Find two local entrepreneurs who are contemplating new business ventures. This is easier than it may sound. Once you put the word out you will be surprised by how many local entrepreneurs are seeking to vet out their ideas, or are seeking funding.
  7. Let the two entrepreneurs present their ideas to the group. Allow 45 minutes for each. Follow with Q&A and encourage a no-holding-back critique among the members and a robust exchange of ideas.
  8. Use email to promote your subsequent meetings and EventBrite for members to RSVP. Encourage members to invite new qualified members to the group and to source new presenters for each meeting.

I have participated in a number of these groups over the years and have watched the membership of new groups swell to more than 100 in less than a year. I cannot imagine a more genuine and organic way to gain early access to new private venture deal flow, network with business leaders and potential clients, while simultaneously contributing to your community.

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