Advisors don't have infinite time and resources so must choose wisely, report says
Are you spending a disproportionate amount of your time and resources on non-ideal clients?
In many businesses early-stage growth is about volume of customers, and this is no different for financial advisors and their firms. But as their practice grows, the relationships with clients who do not fit the core profile can be draining.
A new report from financial services consultancy Cerulli Associates warns that serving too many non-ideal clients may undermine advisor productivity.
In its survey of practice professionals, 64% said that serving non-ideal clients is the most prevalent productivity challenge for advisors.
With an average 142 clients per producing or revenue-generating advisor, time and resources are finite, and as their practice grows, advisors will face a choice between letting some clients go or losing the benefit of a narrower client focus.
But who is your ideal client?
But the research also highlighted that many advisors may not be able to define their ideal client.
“Many default to generic categories such as ‘retirees’ that are far too broad to have a meaningful application to their business development efforts or differentiation value,” said Marina Shtyrkov, associate director. “Wealth management firms should encourage advisors to identify their niche early on and consider how they can uniquely service that segment of clients in a way that other advisors cannot.”
For example, ‘second career’ advisors may be able to tap the unique experiences and insights from their past profession.
Technology can help
Resource pressures as a practice grows can be aided by technology.
It can be used to service a larger pool of clients while maintaining quality and not overly-stretching advisor bandwidth. According to the research, 69% of advisors believe they can make better use of their existing technology stack.
However, tech is not the only solution as firms can also better manage capacity by, for example, referring non-ideal prospects to another practice, implementing a tiered service structure, or hiring additional support staff.
“Ultimately, practices that strategically align their value proposition with the right client type, fee structure, and AUM segmenting will be best positioned to scale,” added Shtyrkov.
