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5 ways to move upmarket

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There’s one question I get more often than any other from advisers these days. They may phrase it in multiple ways, but it essentially boils down to this: How do I move upmarket and serve larger, wealthier and more-profitable clients?

For starters, it’s important to understand that moving upmarket doesn’t have to mean catering only to the very wealthiest few or adopting a family office business model (although those are certainly ways to move up).

What I recommend is positioning your practice so you increase your average client size by 20% or more within the next 18 months — all while serving your clients extremely well. That’s the type of upmarket strategy that is realistic for most advisers and will enable them to stand out from their peers.

Here is the five-step process for moving upmarket that we teach our advanced coaching clients.

1. Assess the challenges and opportunities. Start by making sure you are fully aware of the landscape you’re working in. I would argue that extremely skillful advisers have never been more needed than they are today, due to developments that include:

  • Societal changes. If the last election doesn’t tell you there are society-wide changes afoot, you’re not listening. There’s likely a lot of change coming, and a lot of noise that will accompany that change. Your ability to provide clarity and informed choices to clients will be valued more than ever.
  • Regulatory changes. Will there be more regulations going forward, or far fewer? President-elect Donald Trump campaigned pledging to reform the regulatory landscape, including the potential for a full repeal of the Department of Labor fiduciary rule. However, most of the industry has very little clarity yet on how this will play out.
  • Robo advisers. Automated services are helping more investors recognize what I and many others have been saying for years: Investments are becoming commoditized. Investors are increasingly convinced that, if you simply offer investment management, they don’t need to pay you very much. Even worse, increasing numbers of investors are discovering they don’t need you anymore.
  • Mobility. All of us — including clients — can do business and conduct transactions and get advice from just about anywhere now. The expectation is that you should be able to do it as well.
  • Virtualization. When my partners and I talk with investors about introducing them to advisers, we hear more and more than they’re happy to work with someone virtually. Many even prefer that approach to working with someone local in their own community.
  • Aging and longevity. The likelihood of living to 100 is increasing with each passing year. That presents enormous challenges for clients trying to ensure their wealth lasts, and also offers enormous opportunities for advisers offering creative solutions.

2. Select your ideal client focus for moving upmarket. Obviously, the way to move upmarket is to attract more wealthy investors and families. Of the approximately 125 million households in the U.S., 4.5 million can be considered affluent (over $1 million in investable assets), according to our research, in conjunction with WealthEngine.

Within that group are plenty of specific niches. However, when we drill down, we see that one group in particular represents a disproportionate share: business owners. Affluent households headed by entrepreneurs total 1.6 million, making it the largest subset.

Successful business owners and entrepreneurs represent a huge opportunity for advisers.

  • One-third of U.S households with investable assets of between $1 million and $5 million own businesses.
  • Three-quarters of households in the $5 million to $25 million range own businesses.
  • Among the truly wealthy — those with $25 million or more — nine out of ten are business owners.

My advice: Focus on attracting and serving successful business owners. They have complex needs beyond simply investing that you can position yourself to address.

3. Choose one of four winning business models. There are four distinct business models in our industry — investment adviser, financial adviser, wealth manager and elite wealth manager — all of which work to varying degrees depending on your personal and professional goals.

  • Investment adviser: No financial planning. Totally focused on money management. Financial adviser: Limited amount of proactive planning in addition to money management.
  • Wealth manager: Combined investment and advanced planning that deals with the foundational non-investment concerns of the affluent — estate planning, wealth protection, tax mitigation and charitable impact.
  • Elite wealth manager: bring targeted wealth management strategies to wealthy business owners and the very affluent.

Again, there’s no wrong business model. But to put yourself in the line of money and move upmarket — especially if you want to serve business owners with complex situations — the elite wealth manager model is going to work best.

4. Position yourself as a talented expert to your market. Most advisers have hidden talents —that is, their talents are hidden from the people, families and businesses that could benefit most from them. Chances are you know how good you are and how much you can make a difference — but not enough other people know it.

Thought-leadership efforts can position you as a true expert among the client base you want to serve. Let’s consider the successful business owner market and how you can be perceived as brilliant by its members. Some ideas:

  • Produce white papers, articles and ebooks that detail the specific financial challenges business owners face, and offer a process or methodology for solving them.
  • Produce webinars on specific advanced financial strategies to help business owners (succession planning, buy-sell agreements, various types of insurance, etc.). Busy entrepreneurs appreciate on-demand insights they can get on their schedule.
  • Give in-person presentations to business owners and groups/associations that serve them.

5. Execute. Of course, positioning yourself as an expert in solving a group’s financial issues won’t get you far unless you can actually provide the solutions and services they truly need. When it comes to the business-owner niche, we find that the vast majority of successful entrepreneurs want to grow their wealth even more — often much more.

As an adviser, you can help them address an area that often gets short shrift — their personal wealth outside of their business assets — using a broad range of strategies. Among the most impactful approaches I’ve seen work with business owners are:

1. Private placement life insurance to reduce current taxes in an investment portfolio.
2. Non-qualified retirement plans to invest significant amounts of money that grows tax-deferred.
3. Captive insurance companies to protect wealth from being taken.

The desire to move upmarket is strong among all adviser groups — from newbies to highly experienced veterans looking to step confidently onto the highest rungs of success. Taking these types of focused, deliberate steps can put you in a position for strong and sustainable growth for years to come — and give you access to the type of clients you need to outrun the competition.

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