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How to Move Upmarket With Clients and Assets

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Financial advisors looking to grow their client base and assets under management should target mass affluent investors who have the potential to accumulate at least a couple of million dollars in investable assets.

That’s a key recommendation included in Cerulli Associates’ third-quarter Cerulli Edge report — U.S. Advisor Edition. ”Advisors interested in moving upmarket can whittle that massive marketplace down to high-potential prospects through a niche marketing strategy based on two criteria: career trajectory and industry,” according to the Cerulli report.

The global financial analysis firm cautions, however, that this is a long-term approach that essentially targets younger “high-potential prospects” within the mass affluent market. Those investors don’t have $2 million-plus in assets currently but they will “become the next cohort of affluent and potential HNW households.” They personify the concept of “emerging wealth.”

Moreover they “can provide meaningful referrals and inject the advisor’s book of business with younger clients” and “will become increasingly important as advisors look to sell their practices,” according to Cerulli.

So who are these prospects among those millions who have the potential to amass millions for advisors to manage?

They’re physicians with high base salaries (a median $220,000 for the top eight jobs in Forbes’ List of the 20 Highest Paying Jobs in America), former athletes and entertainers who have changed careers but retain their networks, and business owners and entrepreneurs, who are still “worthwhile prospects” even though their assets tend to be tied up in their businesses, according to Cerulli. Silicon Valley, with its high-paid tech engineers and executives, is another promising niche market.

Advisors who want to capture this promising market need to employ an energetic marketing strategy, according to Cerulli. Referrals will likely remain the single most important source for attracting these clients, but advisors should also consider marketing strategies that build on those affiliations, including digital marketing; hosting events and attending relevant conferences; and engaging in strategic alliances to build visibility. In addition, advisors should consider niche marketing; for example, promoting experience with the highly regulated health care industry to attract physicians as clients.

Advisors who succeed in attracting these clients, however, should be prepared to encounter some obstacles along the way.

There may be strains servicing existing clients as more wealthier or potentially wealthier clients come on board. In that case, Cerulli suggests that advisors transition those smaller accounts to junior advisors or split them with nonproducing advisors. In both cases a “team structure” would help.

Advisors may also need to spruce up services to match the “more sophisticated needs” of affluent clients as they accumulate wealth. When investable assets top $2 million, “personalized advice becomes a necessity and needs shift to capital preservation, estate planning and increasingly complex product sets (separate accounts, alternatives, private equity),”  according to Cerulli. And “high-touch wealth management” also likely becomes a key factor.

“Each practice needs to evaluate whether it can meet those needs adequately and which services are better outsourced to a home office of third party,” according to Cerulli.

Advisors serving these affluent investors should also be prepared to become one of several advisors for those clients. “As investors amass wealth and their financial situations become more intricate, they tend to search for financial advice beyond a single provider, while remaining loyal to legacy relationship,” writes Cerulli.

Currently 40% of advisors focus on investors with investable assets between $500,000 and $2 million as their core client; 13% target clients with assets topping $5 million, but only 10% target affluent investors with $2 million to $5 million in investable assets as their core client,  according to Cerulli.

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