CIFPs conference update: Expert reveals three-step plan for practice profitability

(June 15, 2004) Advisors targeting high net worth (HNW) clientele need to return to their roots as relationship-builders to win the clients they seek, according to Pierre McLean, vice-president of national sales with Franklin Templeton Investments.

“Many of you now find yourself managing assets perhaps at the expense of what made you successful in the first place,” McLean said in his plenary address to advisors attending the CIFPs second annual national conference in Ottawa this week. “What made you successful in the first place, I suspect, is talking to clients — this is how most of you started in this industry.”

The number of HNW households is set to explode in Canada, from about 350,000 to 900,000, as the intergenerational wealth transfer hits. With HNW clients typically defined in Canada as those with more than $1 million in investable assets, the amount of money seeking professional management sounds staggering.

The competition for these clients will be fierce. It would be difficult to find a financial advisor who did not want to grow the number of wealthy individuals in his client list, but McLean says too many advisors are taking the wrong approach to the task.

According to McLean, managing assets is not the best use of an advisor’s time, since it can easily be delegated to another team member. He reminded his audience that most advisors’ strength lay in developing and maintaining client relationships.

With more time devoted to client relationships, the successful HNW advisor is likely to have more satisfied clients, which can often generate referrals, said the speaker.

Another common mistake McLean sees is the advisor who tries to compete on the basis of price and product. By doing so, advisors are encouraging their clients to shop around for a better deal. They are essentially admitting to their clientele that they offer nothing more than the competition.

The successful HNW advisor realizes his wealthy clients are more interested in the process involved in financial planning. They are more likely to see the value a planner brings to their portfolio and are willing to pay for the advice they receive.

“The [advisors] who compete on process and engage their clients on the basis of ‘if you deal with me, this is the process we’re going to take together,’ they have a high level of commitment and price is no issue,” he said. “[HNW clients] have very specific issues and concerns. They’re used to dealing with experts in their everyday affairs. They are not afraid to pay for advice and they seek expertise.”

McLean’s presentation was entitled “Re-Engineering Your Practice for Profitability” and he laid out a three-step plan to that end.

The first step is to articulate the value you bring to the relationship. McLean warns against simply developing the “30-second elevator pitch,” as this can come across as too sales-oriented.

Another common mistake is defining your process with products. Clients are more interested in how you arrive at their proper portfolio design, rather than what you think should be in it. You need to develop what McLean calls a “distinct value proposition,” outlining what makes your practice special and what you will do for the client.

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Second, the advisor needs to systemize their business to ensure they can deliver on the promises in their distinct value proposition. This includes segmenting the book and possibly cutting loose the lower value clients. (For help identifying your lower value clients, click here.)

The final step is to “capture” the clients you are targeting. McLean says the ideal number of households for a single advisor is 140 — any more and the level of service drops off. Of course, a larger team in the office allows a practice to grow beyond that “ideal 140.”

By following these steps, McLean says the advisor will build true franchise value. Rather than commoditizing clients, where sheer number is deemed most important, strong franchise value relies on a more robust and potentially smaller book of clients.

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com

(06/15/04)

Steven Lamb