Drop Those Useless Client Labels

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As we enter the final days of 2015, many advisors will be taking time to review the year.  Some will reflect on the turbulent markets, others will look at missed opportunities for growth, but most will write off 2015 as a moderately successful year. 

But instead of looking back, it is even more important to consider your game plan for next year. The good news is that there’s a lot of upside to being an independent advisor in 2016. Understanding how to capture that upside and maximize your practice’s effectiveness will make all the difference.

Is there a move in your game plan? READ MORE: Following the Money: Cities Where Wealth is Growing Fastest

In general, there’s a greater appetite among investors for what independent advisors do best: provide high-touch, personalized service to clients. According to Cerulli Associates, assets are continuing to shift away from wirehouses toward independents. By 2018, independent advisory businesses are expected to comprise nearly 40% of assets under management, compared with less than a third (30.7%) a decade earlier.


This shift in the marketplace should mean greater revenues, but it also means increased competition. With this in mind, the following tips are based on my outlook for independent advisors in the coming year.

1.     Segment, but don’t oversimplify. With increased interest from investors, comes an increased need to micro-segment prospective clients.Basic demographic labels, like high net worth or mass affluent, won’t adequately allow you to develop the client-advisor relationship and establish your role as a valued counselor.

The advisors who will stand out in 2016 will be the few whose unique client understanding extends beyond demographic labels to better enable holistic financial planning and service. For these advisors, net worth is one of many factors to consider among phase of life, occupation, relationship status, the presence of dependents, personal interests and hobbies, charitable causes and so much more. Advisors who segment based on what is important to the client, versus just AUM or revenue, can build services and niches that can’t be replaced by generalists or online advisors.

2.     Be a techno advisor. A techno advisor is a practitioner who offers the high-touch personalized service of the pre-Internet days, while taking advantage of all the efficiencies new software, applications and managed services, like turnkey asset management programs, or TAMPs, have to offer. This advisor leverages online scheduling tools, is social media savvy, offers clients access to web portals to track their personal progress and is not averse to tools like videoconferencing, when it is convenient for clients.

The techno advisor embraces technology and looks at outsourcing almost everything in their business — everything except the client relationships.

3.     Analyze your revenue model. Fees will come to a fork in the road beginning in 2016.  On one prong you have the upcoming proposed Department of Labor fiduciary rule and on the other you have online advisors, validator clients and the media all challenging your revenue model. The successful advisor in 2016 and beyond will strengthen their value proposition (beyond investments) as well as reduce the dependency on commission-based products in favor of advisory services or other forms of compensation such as retainer or fee for service.

4.     Bring the plan into the open. Traditional cash flow-based financial planning is being replaced by goals-based co-planning. The notion of the big-binder financial plan that will never be opened by the client after the initial meeting should be jettisoned. Co-planning, or looking at scenarios in real time and making adjustments, creates client engagement and buy-in. The financial plan goes from something the advisor created to “our plan” that everybody owns. 

More important, advisors should start focusing on goals-based reporting, too. Advisors are already doing a great job of discovery and implementation in goals-based planning processes but they are missing the final, most critical step. By reporting on progress to goals, the advisor is consistent with the planning process and the short-term noise of the markets.

If you don’t know where to begin when you sit down to develop your 2016 practice strategy, start by thinking about where you spent the bulk of your time in 2015. As an advisor, your time is your most valuable asset. If your answer includes completing a lot of tasks manually that could otherwise be automated or streamlined through technology or a service like a TAMP, chances are you’re missing out on valuable client-facing or prospecting time.

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John D. Anderson is managing director, practice management solutions for the SEI Advisor Network (seic.com/advisors). He is also the author of seic.com/practically speaking, SEI’s practice management blog.

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Financial planning Practice management