Sourcing new affluent clients for investment management services is unquestionably one of the top priorities of financial advisors, investment advisors, wealth managers and other professionals. The ability to bring in new assets is usually a function of bringing in new clients—especially affluent clients.
For investment professionals, accountants and attorneys are regularly the two most targeted types of centers of influence. The complication is that many of them are not very inclined to provide viable introductions to money management specialists.
There are two principal reasons for failing to build significant high-net-worth investment clienteles in cultivating centers of influence. They are:
• Not knowing what to do.
• Knowing what to do and not doing it.
By integrating the networking best practices of self-made millionaires with the most effective behaviors of ultra-successful professionals sourcing the affluent, we’ve developed a framework for cultivating centers of influence called street-smart networking. This is the “what to do.” There aren’t any secrets involved. In fact, the framework is very straightforward and methodical.
Street-smart networking is an implementation model. The professionals who achieve success with it regularly achieve considerable success. That’s because they put in the time and effort required to get results. Make no mistake: Becoming a street-smart networker is hard work.
The core to becoming a street-smart networker is developing a deep understanding of the respective world of each prospective center of influence. This is accomplished on a one-to-one basis by using the assessment instrument. At the same time, it’s often very useful to have a broad-based understanding of the different types of centers of influence. Here we’ll be addressing key issues in the worlds of accountants and attorneys.
At the end of the fourth quarter of 2013, 412 professionals were surveyed. The sample consisted of 223 accountants and 198 attorneys. All the professionals have a minimum of 10 years’ experience. Moreover, all of them have businesses they are responsible for that focus on the affluent.
Overall, more than 85% of the professionals found 2013 to be a tough year (Figure1). Looking forward, about nine out of 10 of them anticipate that 2014 will continue to be challenging. This is proportionately more the case for attorneys than for accountants.
A clear indicator of the difficult business environment is that about a quarter of the professionals took home less income in 2013 than they did in 2012 (Figure 2). The income for about 50% was flat. Only about one in five earned more last year than the previous one. The overall difference between the accountants and attorneys was minimal.
What’s clear is that accountants and attorneys are feeling the pressure. The business environment in which they operate is problematic, which often results in stagnant and lower incomes. Moreover, 2014 is not going to become appreciably easier for them to succeed.
When queried about what it’s going to take to turn things around—become more successful—more than nine out of 10 reported being able to source more wealthy clients (Figure 3). This perspective is consistent among both the accountants and the attorneys.
About half the professionals see opportunities in enhancing their business models. Three-fifths of the accountants, compared with two-fifths of the attorneys, identify this as a means of becoming more successful. There are many ways for these professionals to tweak and modify their practice models to generate substantial new revenues. The complications arise in them not taking a process-oriented approach to doing so. Meanwhile, few professionals are considering an “overhaul” of their business models as practicable.
The difficulties facing these professionals can make it all the more problematic for investment advisors to source new affluent clients from them. On the other hand, the pressure these prospective centers of influence are under can actually work to the benefit of street-smart networkers.
Perspectives On Financial Advisors
Nearly three-quarters of the professionals report being constantly approached by financial advisors (Figure 4). A fifth of them are approached periodically. Only about 6% are rarely, if at all, solicited by financial advisors. Clearly, financial advisors are continually approaching these types of professionals. To cultivate them requires being able to meaningfully stand out from the crowd.
While accountants and attorneys may very well have prospective affluent clients seeking the services of financial advisors, they tend to make such introductions now and then. A little more than eight out of 10 professionals make occasional introductions to financial advisors (Figure 5). Proportionately, slightly more accountants are making such referrals at this rate than attorneys. Only 6% of these professionals are making such introductions regularly, while about a sixth are rarely, if at all, connecting their affluent clients with financial advisors.
Of the 369 professionals who are providing financial advisors with introductions to their affluent clients, three-quarters will generally provide two or three investment specialists for the affluent client to consider (Exhibit 6). This is a little more the norm for attorneys than for accountants. Almost a fifth of the professionals are recommending three or more financial advisors. Only 7% are advocating a single specific investment expert to their affluent clients. This is more likely among accountants than attorneys.
In cultivating centers of influence, there are a number of positioning approaches used by financial advisors. Topping the list is the explanation that they’ll do a “good job” for the affluent clients of these professionals (Figure 7). About 85% of accountants and about three-quarters of attorneys report that financial advisors actively promote new investment ideas and strategies. Third on the list of approaches is the advisor’s offer to introduce these professionals to other professionals with whom they can do business.
It’s worthwhile to note that these three most well-worn positioning approaches are of limited value for most accountants and attorneys (Figure 8). Putting these positioning approaches in perspective:
• It’s a given that any other advisor these professionals would introduce to their affluent clients would do a “good job.”
• About a sixth of the professionals wanting to stay cutting-edge are interested in new investment ideas and strategies. However, unless the investment ideas and strategies a financial advisor is promoting are truly novel and relevant to the
accountant’s or attorney’s wealthy clientele, they’re not going to command their interest.
• The accountants and attorneys tend to know all sorts of other professionals. Unless the introduction to another professional is going to fairly quickly result in new business, these types of introductions are often time-wasters.
The way in which many financial advisors are trying to motivate accountants and attorneys to introduce them to their affluent clients is not particularly effective. While these positioning approaches will probably generate referrals now and then, they’re not very likely going to enable financial advisors to build substantial high-net-worth business.
What’s essential to being effective in cultivating centers of influence is developing a deep understanding of them. However, it’s evident that few accountants and attorneys believe the financial advisors who are approaching them do indeed understand them (Figure 9). A little more than a fifth of the professionals believe the financial advisors understand their business models. Slightly more than a sixth say the financial advisors understand their goals and objectives. More telling, only about one in 10 say financial advisors are attuned to the nature of their clientele and their other professional relationships.
It’s clear the accountants and attorneys believe that the financial advisors approaching them are focused mainly on themselves and their personal expertise. Developing an insightful understanding of centers of influence is foundational to the street-smart networking framework.
The ability to capably cultivate centers of influence, such as accountants and attorneys, is likely to be critical in building a substantial and noteworthy money management business. Most financial advisors are not being very effective in this endeavor. From the perspective of accountants and attorneys, they’re often focused on the wrong issues and related matters.
Street-smart networking is a framework with a proven track record of success enabling the range of professionals to garner new affluent clients from centers of influence. Those investment experts—financial advisors, hedge funds, wealth managers, private equity firms and the like—wanting to dramatically grow their assets under management are well counseled to focus their efforts.
Russ Alan Prince is president of R.A. Prince & Associates Inc. and executive director of Private Wealth magazine.
Brett Van Bortel is director of consulting services for Invesco Consulting, the sales consulting group within Invesco Distributions Inc. The opinions expressed are those of Russ Alan Prince and Brett Van Bortel, and are based on current market conditions and subject to change without notice. These opinions may differ from those of other Invesco investment professionals.