As an hourly financial advisor who aims to provide clients a one-time plan so that they can take control of their investing and don’t have to keep paying me, my approach isn’t exactly mainstream.
In this way, my “one and done” philosophy differentiates me, yet it also means that without new business, I am out of business. Getting referrals is key.
Although most advisors probably won’t adopt my business model, there are a few ways that they can differentiate themselves.
For instance, designing a new portfolio with tax efficiency in mind is something that adds a ton of value that I rarely see from other advisors. Taking over a new portfolio has tax issues from both selling securities in the existing portfolio and in building the new portfolio.
Working with clients and their certified public accountants in evaluating the tax consequences versus future benefits is something that I have often been told is unique for an advisor. In fact, there have been many times that I have had to explain to CPAs the asset location strategy to maximize after-tax returns.
I always recognize the moment that CPAs get it, and they are also likely to benefit from this strategy for their own portfolios. They benefit and often want to return the favor by referring other clients.
Another way to differentiate oneself is with simplicity. Rather than using planning software that produces a 100-plus page document, packed full of financial jargon and complex graphs, consider a shorter, more-tailored document that explains things simply.
And when it comes to investing, broader is better, so keep that simplicity going when it comes time to build the client’s portfolio.
I frequently build a stock portfolio with just two holdings: a total U.S. and total international stock index fund. With those two funds, the client owns virtually every publicly held company on the planet.
Also, don’t hesitate to think outside the box when making recommendations. I often recommend strategies that clients or their accountants don’t know about.
For example, I tell clients that the mortgage is merely an inverse of a bond, and it is dumb to borrow money at 4%, only to lend it out at 2% via a bond or bond fund. It is at least tax-neutral and typically tax advantageous as well, so tell the client to pay off or pay down the mortgage.
Finally, use some products typically not used by other advisors. I regularly recommend certificates of deposit over bond funds, which can either be direct CDs with easy early withdrawal penalties or brokered CDs.
Both have essentially no default risk and pay far more than any risk-adjusted bond or bond fund.
Although I have never asked a client for a referral nor done a client plan with referrals in mind, I have found that an unintended byproduct of my approach to planning has been client referrals of friends and family members.
Allan S. Roth, a Financial Planning contributing writer, is founder of the planning firm Wealth Logic in Colorado Springs, Colo. He also writes for The Wall Street Journal and AARP the Magazine and has taught investing at three universities. Follow him on Twitter at
This story is part of a 30-day series on how to generate the best referrals.
