Further Recovery

In my last column, I detailed the steps I would go through to pencil in offensive and defensive business goals. I created a spreadsheet to help you calculate these under different investment performance assumptions. The spreadsheet and a copy of that column are available at www.billgood.com/freemarketinghelp. Choose the link, “Free Two Year Marketing Plan.”

I posed offensive and defensive goals for a mythical FA with $40 million in AUM. My assumptions were:

• Offensive Goal: Double in two years.
• Investment performance over two years: 0 percent.
• New AUM/mo. to hit goal: $1.67 million.
• Defensive Goal: No reduction in income.
• Investment performance over two years: minus 10 percent.
• New AUM/mo. to maintain revenue: $320,000.

The key questions: Are the goals realistic? If so, how do we move from a goal to a plan? A goal is not a plan.

Channeling New Assets

By “channeling new assets” I mean identifying sources or channels by which you would acquire new assets. To do this, we will analyze the business of our mythical FA with $40 million AUM. I’ll name him, “Justin Case.” How might Justin proceed?

The first and most obvious channel is additional assets from current clients. Of all the advisors I have met — and it’s many thousands — very few have controlled all client assets.

A client marketing goal should be: become or remain sole provider for all financial advice, services, and products purchased by your clients. Here is a plan to capture assets you don’t have:

• Provide good investment advice. (That’s a given especially today.)
• Identify those clients for whom you do not have the “trusted advisor” relationship. For each, create a series of contacts designed to deepen the relationship. These can include additional education, introducing them to people they need to meet and, most importantly, creating a much deeper profile so you can provide exactly what this client needs. (As the trust level deepens, assets held outside the firm flow in. How many trusted advisors does someone need? One per category. You don’t need two dentists. Your client should not need two or more financial advisors.)
• Maintain top-of-the-mind awareness through a disciplined communication process.
• Find and track all outside assets held by each client.
• Move lower-performing and under-managed assets one asset at a time.

The question is: How much of the $1.67 million we need per month can we realistically expect from clients?

It’s time for some educated guesses. A starting point is: Assume you control half your clients’ liquid net worth. Do you think it’s more than that, or less than that, or about 50 percent? Fill in these blanks:

I believe my clients hold $_____ that I don’t control.

By following the five-step Asset Control Formula, I can get ___ percent of that over a two year period.

For Justin’s case, the answers were: $30 million and 50 percent. That’s $7.5 million a year or $625,000/mo. Maybe that’s not realistic. So let’s cut it to $500K.

That leaves Justin needing to raise another $1.17 from somewhere. Possibilities: referrals from current clients; introductions (not the same thing as referrals); networking; strategic partners; seminars; cold calling/cold walking; direct mail. Let’s analyze each of Justin’s remaining channels.

Referrals from Current Clients

Justin has 200 clients who provided a total of seven referrals, and $2.25 million in assets. Quite frankly, that’s a referral deficit.
Bill: What are you doing to develop referral business?

Justin: Trying to stay in touch and do good service.

Translation: Nothing.

A detailed referral marketing strategy, based upon my “Promote Referrals” concept should produce 5 percent of a client base in year one, and if continued meticulously, 10 percent growth in client count in year two.

So let’s assume Justin begins promoting referrals. I would forecast 10 new clients in 2010, and 20 in 2011.

If the average of roughly $325,000 per new client holds, in year one Justin will bring in $3.25 million, or an average of about $270K per month.

We still have to raise $830,000 per month. We need at least one more channel, maybe two.

Introductions