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Practice Management > Building Your Business

Sink or Swim

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In Tom Stanley’s book, Marketing to the Affluent, he tells the great story of Otto Kretchmeyer, a German submarine commander who sank more Allied ships than any other submarine commander in the history of the German Navy. Kretchmeyer also lived through the war, which was an accomplishment in itself: Only about one out of every 10 submarine commanders survived the war.

At the end of the war, the Allies asked the commander for his secret. He responded that he did the exact opposite of what he’d been taught in submarine school. In training, he had been taught to surface outside the convoys and shoot his torpedoes in. In the real world, however, he found out very quickly that the most unimportant cargoes were on the outside of the convoys, and the important things like food and ammunition were always in the middle of the convoy where they were most protected. He also found out that as soon as he fired torpedoes from outside the convoy and below the surface, the sub-hunters would come after him with a vengeance. If you have ever seen the movies “Das Boot” or “U-571,” you know you don’t want to be in a submarine when depth charges go off.

Kretchmeyer realized that these tactics would probably get them all killed in short order. So he decided to change strategies, and attack by surfacing right in the middle of the convoys. By doing so, he was able to fire torpedoes in both directions and sink a number of Allied ships carrying the most important cargoes, and he was protected from retaliation because they couldn’t shoot at him while he was on the surface without shooting each other in the crossfire. The technique worked like a charm.

What does this have to do with your financial advisory business? Well, if you are like most people in the financial industry, you have been taught to shoot your marketing messages in from outside the convoy. Cold calls, mass mailings, public seminars, and advertising are all shots from the outside in.

What you want to do is identify the communities of people you want to serve and then surface in the middle of their convoys. Their convoys are organizations, association meetings, private parties, and clubs. These are what I call rich niches. Once you are inside a rich niche, you can develop relationships and then turn those relationships into business. Let’s see how other advisors are using this tactic to build their businesses.

O Canada!

The first example is an advisor named Jeff who lives in the Midwest. One of Jeff’s brothers is a physician; the other is a podiatrist. One of the niches Jeff has discovered is a group of 25 Canadian physicians who live in his city. He has three or four of those Canadian physicians as clients. Because he’s developed specialized knowledge and expertise, he can provide an exceptional level of service to these clients. Jeff makes a point of surfacing in the middle of their convoys. Last year, Jeff was the cook at their Fourth of July barbecue.

All these doctors know each other, and they’re finding out that Jeff is an expert at solving the unique problems that they have. This gives Jeff a competitive advantage over other advisors. Wealthy investors will always chose to work with a knowledgeable, trusted niche expert to whom their friends introduce them and whom they know and like.

The Company Store

My friend Hal makes over a million dollars a year serving just one rich niche, Chevron. In fact, he has limited his niche to two facilities at Chevron: an oil production facility close to his home, and another facility several hours’ drive away. Hal tells me that when the company is about to have layoffs, he starts working his network of contacts within the company and comes up with a list of people who are eligible for a retirement package. Since Hal has worked in this market for the last 15 years, he knows many people in the niche and typically can arrange an introduction to some of the folks who are leaving the company.

Hal claims that he has a 100% closing ratio when he is introduced to someone this way. One of the most powerful things about niche marketing is that if you do a good job for your clients, you’ll get multiple endorsements from happy clients, as Hal does. When a prospect hears good things about you from several people they know, they’re very likely to want to work with you.

Hal tells me that his favorite client is a truck driver who worked at Chevron for more than 30 years and has $350,000 in his rollover. Hal’s father was a truck driver, so not only is Hal an expert in this niche, he has a natural affinity for the people in it.

The Midas Touch

Peter, an advisor I worked with in Texas, was interested in the franchise market. In the right franchises, the owners are prescreened so you know ahead of time that they’re successful.

After a bit of research, Peter decided to buy a Midas muffler franchise. It turned out that you had to have a net worth of more than $750,000 just to qualify, so Peter knew that every Midas muffler franchise owner fit his description of the ideal client, at least in terms of net worth. Peter bought a franchise, and when he attended Midas conferences, he was happy to learn that he was the only financial advisor there.

Peter says franchisees typically fall into two categories: Those owners in their 30s and 40s who are aggressively building their businesses by buying additional franchises, and owners in their late 50s or early 60s who are thinking about selling their businesses. Since Peter only wants to work with people who have investable assets, he has developed strategic alliances within the organization to help facilitate the sales of franchises when the time is right.

Peter has not only found this to be a very lucrative niche where many people are coming to him for advice, he has also found that the franchise business itself is an excellent addition to his income. He recently purchased a second Midas muffler franchise.

How Much Is That Business in the Window?

In the last couple of years of coaching financial advisors, I have found that the single largest source of accounts worth $4 million or more is the sale of businesses. One advisor I worked with created a strategic alliance with an investment banker who sells between three and four businesses per month. Scott set up a joint venture to share revenue with the investment banker.

When they find a person who is interested in selling their business, Scott does a complete financial and investment plan to help the potential seller understand exactly what the tax consequences will be, how much money the client will have after the sale is consummated, and what he can expect in terms of income from his investments.

Answering these questions and helping the owner maximize the benefits of the sale of the business creates a tremendous competitive advantage for the investment banking firm. The vast majority of the owners are happy with the investment banking services, they’re pleased with Scott’s financial planning services, and they end up investing their money with Scott’s planning firm. Through the strategic alliance, Scott is consistently “surfacing” where there are very wealthy clients who are about to have a major transitional event that brings liquidity to their net worth.

Professional Cross-Pollination

In the mid-1980s, the financial planning association chapter in Phoenix was one of the larger chapters in the country, with about 300 members. An estate planning attorney got on the board of directors and eventually was elected president. Once a month, she would be the master of ceremonies at a financial planning meeting.

This is a classic example of surfacing in the middle of a convoy. Everyone in the association knew the president, so she had a very high profile and was very well respected. She worked closely with most of the movers and shakers in the financial planning community in Phoenix, and developed a very high profile with very little effort. Her business went through the roof and is still booming today–all because of the relationships she created roughly 15 years ago, when she had the smart idea to look outside her own profession and make herself known where other centers of influence might be.

Be Aware of the Convoys You’re Already Within

And finally, this story is about an interior designer I know. Her business was booming, and it became so successful that she was able to buy a much larger home in the country, sort of a mini-estate, with a substantial amount of land. The new home was a long drive from her children’s private school, so when the family moved, the children started attending a nearby public school instead.

Shortly thereafter, her revenue dropped dramatically. It turned out that most of her business came from–guess what–the other parents she met at her children’s private school. She’d been in the middle of a rich niche and didn’t even realize it. When her children changed schools, it became painfully clear that without that convoy, she didn’t have any way to meet wealthy potential clients in a social environment.

Create Your Own

You can create your own convoys by inviting clients to special events and having them bring their friends. This is a great opportunity for their friends to ask your clients about you. If your clients feel your services are worthwhile, they’ll actively work to sell their friends on becoming your clients.

Once you identify a convoy that you can surface in the middle of, your business will be transformed. To be successful in the new millennium, you must learn to do things differently than you were taught in submarine school. It worked for Otto Kretchmeyer, and it can work for you.