"Without a defined focus, advisors risk never establishing themselves in one marketing sphere or becoming known to any one community of prospects."

The Perfect Match

By John Bowen

When most advisors start in the business, their filters for suitable clients include virtually everyone. But as advisors grow, their filters narrow. Eventually, they may discover a filter that is broad enough to catch enough prospects, yet narrow enough to include only the prospects with whom they can generally work with on a fairly profitable basis.

This process of arriving at a workable filter is haphazard, however, and rarely results in a precisely defined, highly profitable target client. With so many opportunities, many advisors jump from one to another without establishing a long-term marketing strategy. Without a defined focus, they risk never establishing themselves in one marketing sphere or becoming known to any one community of prospects.

To be successful, you have to be intentional about creating a marketing plan that enables you consistently to attract exactly the right clients for a high-profit business.

There are important benefits to having this kind of focus:

• It allows you to focus your resources on those activities with the highest payoff. Once you've identified a market that you can service profitably, you can focus on it and, more importantly, make the best use of your time.
• It will be easy to get referrals because you understand the deep and narrow issues that affect this target group. You will become known inside this community as the expert that really understands their issues.
• Working with only one target market will allow you to become proficient in helping members address their financial challenges.

Your challenge, then, is to narrow your focus and concentrate on one defined group of clients. To do so, first decide on a niche market that is best suited to you and your practice. Next, look at some specific client characteristics to create a profile of the ideal client within that niche.

Nearly every advisor interested in creating success and developing a high quality of life will want to target affluent clients—those with at least $250,000 in investable assets. Even better, those advisors who are positioned to do so should aim higher, targeting clients with at least $1 million in investable assets.

It is much too broad, however, to simply say that you'll work with the affluent. To be effective, you must narrow your choice further, choosing one of the many niche opportunities within the affluent market.

We define "niche" as any specific market that is particularly suited to your talents, skills, and interests. Each of us has unique talents and comparative advantages in different areas. By matching your own skills and interests with those of your niche group, you'll establish the quality of life you can get only from working with a group of people with whom you have a strong affinity.

Often your choice of a niche will result from aligning your skills and interests and the community where you work. If you excel in stock option planning and live in an area with two major employers that use stock options as important parts of their compensation packages, this may be an excellent niche. If you enjoy helping clients secure their retirement and there is a retirement community nearby with wealthy retirees, this could be your niche. If you love sailing and live near a wealthy seaside community, match your avocation with the interests of affluent yachters.

Niche opportunities are everywhere among the affluent. To narrow your choices, think first in terms of segments and then of specific niches within that segment. For example, self-employed professionals are a segment. Within that segment, however, there are many niches, such as cardiologists, trial lawyers, or high-end architects.

It is also quite helpful to think about your current client base. Who are your most profitable clients? Which niches do each of these clients belong to? Are there other niches you want to explore that you are not currently serving?

In general, it's not a good idea to focus on the institutional niches, such as small qualified plans, 401(k)s, foundations, municipalities, and non-profit organizations. While many advisors tend to be attracted to these niches, these markets are extremely competitive and generally offer low profit margins. In addition, turnover of the primary decision-makers is frequent, making it impossible to develop long-term relationships with the key people.

Once you have identified the niche that is best suited to you, your practice, and your location, you must identify the specific clients within that group with whom you would most like to work. To draw this profile of your ideal client, look at each of the following characteristics and determine your preferences for each.

Investable assets. Nearly everyone wants to move up market; your challenge is to figure out exactly what your next level should be. To do this, take the top 20 percent of your clients and estimate the average investable assets of each group member. Then multiply that figure by five. The result will be the target you should shoot for. For example, assume that the top 20 percent of your clients have, on average, $500,000 to invest. Multiply $500,000 by five. This means that your ideal client will have investable assets of $2.5 million. As you look at your niche, it's important to be sure that the individuals in that niche do indeed have your target investable assets level.

Minimum assets under management. Research by CEG Worldwide clearly points to the success of high-minimum strategies in generating higher income (see chart below). For most advisors targeting the affluent, by definition their minimum required assets under management should be $1 million.

Minimum fee. Also consider setting a minimum fee. If, for example, your fee is 1 percent, then the minimum annual management fee for a $1 million client would be $10,000. If you decide to take clients with less than $1 million, they would still be subject to that $10,000 fee.

Minimum and maximum age. Think through your targeted niche. Is there any age range that you should specifically target? If your niche is senior executives, for example, are you targeting executives near retirement and in their late 50s and early 60s? Or are you targeting senior executives early in their career, like those in their 30s?

Geographic location. Not only do many advisors spread themselves too thin by pursuing too many different types of opportunities, they make it worse by spreading their limited resources over multiple locations. Most successful advisors (by net income) stay focused on one particular geographic location market per principal.

Financial challenge to solve. The members of your niche should have a shared perception of the financial challenges they face and a desire for solutions. What type of challenges do members of your niche group have that you would be most satisfied in addressing? Are they problems the niche group is willing and able to pay you well for solving?

Client acquisition methodology. How would you most prefer to acquire your clients? Referrals from other clients? Referrals from others advisors, such as CPAs or attorneys? Presentations to groups within the niche?

Access to influential individuals. Many of the most successful advisors look for clients who can act as centers of influence and introduce them to prospects within their targeted niche.

Personalities. Many advisors find they work better with one particular type of personality than others. More importantly, there are some personality types they avoid because they do not have success with them. Determine which personality types you want to work with and which you should avoid.

Personal enjoyment. Life's short—there's nothing worse than working with a client you don't enjoy. This happens most often either because there is a mismatch in your value proposition-the client is not a member of your niche—or there is a personality type conflict. In any event, this should be the final test before you take anyone as a client.

It's only by deciding precisely which type of clients you'll work with that you'll be able to serve these clients well. Likewise, it's only by serving your clients well that you'll achieve substantial success. Take the time to create the critical focus in your practice that will lead to this kind of success.

Reprinted from: FINANCIAL PLANNING