The focus in the independent advisory world these days seems to be on service models, that is, creating new and better services for today’s investors. Discussions on this topic typically go like this: “What type of clients are you currently attracting or would you like to attract?” Followed by,
“What services do these clients want and need?” But these are the wrong questions to ask. Most of my time is spent talking to firm owners about what they would like their businesses to become and then working with them to build those businesses. Today, owners’ goals usually focus on a target AUM number (like $1 billion) or annual gross revenue (such as $5 million). These aren’t the right goals, though, because once they are attained, business firm owners usually are less happy than before.
All of this stems from having asked the wrong question from the beginning. Rather than starting with the clients they want to attract, firm owners should focus on which services they truly want to provide.
Think of this as another way of asking: “What do you really want to do for the rest of your life?” After all, the vast majority of your time and that of your partners and employees will be spent delivering the financial services you choose to offer.
Make a Choice There are plenty of services to choose from. Some advisors like creating financial plans. Others get a jolt from designing and managing investment portfolios. Others really dig insurance and/or estate planning.
Some advisors even have more specific areas of interest: taxes, stock option plans, small business management, trust and estate planning, etc. Regardless of the exact services you are inclined to provide, it’s worth remembering that financial planning, investment advice, retirement planning and general financial advice all require diverse knowledge and expertise. And providing all of these services may not be of interest to each and every client.
Thus, rather than taking on everything and anything that “will get your businesses to $1 billion,” you should focus on attracting clients who need the specific services you want to provide.
For instance, if you like stock options and compensation plans, focus on business executives. If insurance issues are of interest, zoom in on estate planning and small business owners. If creating and managing investment portfolios is your thing, target pre- and post-retirees. If college funding excites you, reach out to folks with high school age children.
In general, owner advisors can and do hire other advisors to provide the client services that they themselves aren’t particularly attracted to.
Yet in my experience, this sort of firmwide “schizophrenia” results not only in the failure to build the firm the owner(s) really want(s), it undermines the many benefits that come from a focused business in which everyone is working toward the same goals.
To help firm owners identify the client services they truly want to offer, I ask advisors these questions:
1. What is the service that you most like providing to clients? Keep in mind that this is a personal question directed at the preferences of firm owners — rather than a business question about which services would be the most lucrative or are in the highest demand by investors.
2. If you offer that service to clients, what is the next service that they will need and what are any other services they will likely require in the foreseeable future?
It’s important to realize that focusing on one service often leads to adding other services down the road. For instance, one client wanted to focus on planning for stock options. Then she realized that clients with those needs would later need financial planning and estate planning, so she added them. Next, she included investment management, limited to meeting with each client once a year.