HOLLYWOOD, Fla. – Millions of small business owners are in need of thoughtful financial and retirement planning advice but advisors really need to understand these clients’ special needs and circumstances to offer value.

During a panel here called “Niche Markets: Small Business Owners” at Pershing’s Insite 2012 Financial Solutions Conference, Eliza De Pardo, principal and director of consulting at FA Insight, said the revenue opportunities for this group are significant but small business owners often require complicated services for both their business and personal finances.  

“They need good advice,” De Pardo said. “Relationships are deep and long lasting because the value offered is so significant.”

To show advisors both sides of the coin, De Pardo did list challenges in working with this client type:

-- Broad and deep. Advisors need to have significant technical capabilities. For example, they would need a succession service offering and expertise. “The depth and breadth can be intimidating,” said De Pardo.

-- Clear communications. To focus on this market means advisors need to also refine their marketing efforts. “To be serious about the marketing you need to discuss their multiple needs,” she said.

-- Illiquid wealth.  Because owners might put all that they own into their small business, their money might be locked up in the organization. Therefore, at first glance, they might not look as attractive as other prospective client groups.

-- Pricing structure.  “These types of clients don’t have the types of assets other groups do,” De Pardo said. That means advisors should look at charging more than an assets under management fee. If advisors use only an asset-based fee structure, these types of clients might not be as profitable.

De Pardo recommended that advisors build a client-centric strategy. 

“Build the offering from the clients’ eyes,” she said.  The offering needs to be refined to get it right.  The good news is that most of the clients will be alike with similar issues so it can create some internal efficiencies. She noted one main concern they have is about transitioning to retirement.

Before diving in, it makes sense to do external research to check out your competition. De Pardo advised advisors to check if another local firm owns a niche, as that can factor in how this target market gets defined.

Before picking a niche, De Pardo recommended looking internally at the revenue and profitably of current relationships. 

“Analyze your own client base,” she said. “What are the characteristics?”

Advisors’ technical capabilities should also be evaluated. Is there a core competence that might influence the decision? Along with services, is there a group that is more enjoyable to work with than others?

Brian Jones, an executive vice president at CJM Wealth Advisers, Ltd. and Andrew Reder, managing partner at Kistler-Tiffany Advisors, gave their insight into working with small business owners.  

One topic they discussed in depth was their various sources of revenue. Both advisors did not rely solely on investment management fees. Jones charges a minimum of $5,000 and his largest client fee has been $15,000.  

Reder’s project fees start at the same minimum and go all the way up to $50,000.  He added that if they work on the retirement plan, they charge asset management fees. He said they do not like to call it a “retainer.”  This meeting gets the clients to the table and helps the business owners feel like they are getting something for their money.

The second topic of interest was related to strategic alliances.  Jones said, “We see often that the accounting firm does not know what they are doing.  When that is the case, we bring in our own accounting firm.” 

They also bring in their own estate planning team.  Typically they can find holes in the clients’ existing plans which allows them to bring in their own experts.

Reder’s firm tries to work with the clients’ existing professional relationships, but they will be honest with the client if the person is not doing the job.  He then provides other options with their pros and cons, and notes he will play the quarterback role. Because business owners don’t have time to do this themselves, advisors can really help provide a valuable service by pulling it all together.

The panelists said that if advisors are going to identify small business owners as a niche, they should be aware of the pros and cons of working with these clients. When diving in, they should look at really narrowing their focus, maybe even with a sub-segment of small business owners within the larger group.


Mike Byrnes founded Byrnes Consulting to provide consulting services to help advisors become even more successful. His expertise is in business planning, marketing strategy, business development, client service and management effectiveness, along with several other areas. Read more at www.byrnesconsulting.com.