Inside Edge: The right stuff

(November 2004) This fall has seen the unveiling of three new studies for advisors seeking to attract affluent clients. According to these reports, the most profitable and sustainable business models for these advisors involve three key elements. It’s about being on the right platform, having the right service offering and building the right team. Let’s take a closer look at what these studies reveal.

The right platform

Most advisors recognize the most efficient and profitable businesses are built by serving the needs of clients with larger investable assets. According to a study released last month by The Taddingstone Consulting Group, financial planners are hobbled in their efforts to attract and retain high-net-worth clients simply because they can’t offer a full range of product solutions. The research, based on interviews with more than 50 advisors, is biased towards those who are well-established and whose clients are affluent individuals.

These advisors recognize it’s increasingly difficult to compete without offering individual securities. According to Keith Sjögren, who heads up Taddingstone’s wealth management arm, advisors “fear that the lack of a securities licence could be a blow to the future of the industry.” In fact, the advisors surveyed cited this inability to access adequate products as the largest barrier in serving high-net-worth clients.

The right service offering

Advisors in Canada, the U.S., the U.K. and Australia agree wealth management will be the dominant business model in the future for those serving the needs of affluent investors. John J. Bowen Jr., CEO and founder of New York-based CEG Worldwide, has been taking that message across Canada as one of the keynote speakers at this fall’s Advisor Forum. (For more on Bowen’s presentation, please click here.

While investment planning is still seen as the key to profitability, 93% of 579 Canadian advisors interviewed by Bowen’s company said success will require a broader wealth-management approach, through serving increasingly complex client needs with an array of products and services. Bowen believes advisors will need to offer life insurance and estate planning solutions, tax planning, retirement planning, and cash flow and debt management, among other services. Results were similar among the above-mentioned countries.

The right team

The third piece of the puzzle is about setting up your business to deliver services that meet affluent clients’ demands. Consultant Mark Tibergien, a principal with U.S.-based Moss Adams LLP, told Advisor Forum delegates the optimal model is the “ensemble approach,” with a top senior advisor working alongside several associate advisors, backed by administrative support.

“They improve their ability to serve more clients in a productive way and generate a better return for the practice,” says Tibergien.

Larger firms attract larger clients. Affluent clients have more comfort with a bigger firm because, as Tibergien explains, “if something happens to you, they will still be taken care of.”

Not every advisor is going to evolve their practice along the lines described above. But some will — and they will be your competitors.

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This editorial was originally published in the November 2004 edition of Advisor’s Edge magazine, a sister media property of Advisor.ca in the Rogers Media ADVISOR Group.

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11/17/04