Success Characteristics

Based on a detailed analysis of the 187 respondents who answered the survey in my June column, I have isolated what I can only call breakthrough results.

To analyze these results, I first segmented all of those who reported having assets under management greater than $100 million — an unarguable indicator of success. I then compared several subsets of advisors to our $100M-plus profile. In so doing, I was able to isolate three factors that appear to define today’s successful advisor. I also isolated a factor — selling skills — which, surprisingly, is not a critical success factor.

At the Top, It’s a Team World

When I crunched my numbers for this survey, I was not surprised to learn that no advisors with a $100M asset base answered my question about support staff with “No support staff.” Not surprisingly, the overwhelming percentage of people producing in that range have at least full-time service support, and in many cases other staff as well.

Ditto for those with $51M to $100M in AUM. I had to go to the $25M to $50M segment to find a small group of people with no help.

Further, I found that 74 percent of all respondents to my survey are in business with just their staff. But when you get to those advisors or groups producing in the $100M class, half of them are involved in partnerships.

So we conclude: Do you want to go to the end of the rainbow? Get a team, or get on one.

Bigger is Better

Various consultants to the industry and countless firms, mostly national and regional wirehouses, have preached that greater production, superior client service, and other benefits will flow to the person who jettisons some portion of that low-end clientele.

I have argued against this on three grounds. First, it creates a situation some years down the road when your business stops growing because two out of five sources of your top clientele come from your bottom clientele. Hurling the bottom clients off your truck cuts off these sources.

Second, I have received countless anecdotal reports of the intense ill-will generated by this strategy. It is said that one unhappy client will spread dissatisfaction to 38 others.

Third, I think it is a breach of trust to take someone who extended their trust to you and throw them off the truck.

To these arguments, I add one more: 79 percent of advisors with over $100M of client assets have over 300 clients. End of argument.

It’s a Fee-Based World

The industry has been trending toward a fee-based business. Since the 1980s when firms and advisors realized the overwhelming challenge of both managing money and also raising it. The trend toward fees picked up in the mid-’90s, and it is completely clear that the successful pattern is to operate as a fee-based planner.

As the results of our survey show, 68 percent of people operating a business with more than $100M in assets identify their primary business style as “financial planner (mostly fee-based).” Nothing else is even close.

Very interestingly, 29 percent of the people with more than $100M specified “other.” As you can tell, a good number of these are really fee-based practices. So it is reasonably safe to say that upwards of 85 percent or 90 percent of the people with more than $100M have substantially converted their business to fees.