By Richard J. Skelly
How does a financial advisor build a client base as America and the rest of the world's economies slowly crawl out of "The Great Recession"?
Seasoned financial planning professionals, all of whom started their firms in less-than-stellar times for the market, recommend several tactics but say the most important one is this: Find your niche client base and build your practice from there.
"In my opinion, you can add more value than ever to your clients during tough economic times," argues Barry Glassman of Glassman Wealth Services in McLean, Va. He started his firm in 2009, as the market was still recovering from its September 2008 meltdown.
"The best way to develop a client base is to find a niche," Glassman advises young recruits to the financial planning field. Glassman recalls cold-calling to build his client base back in the 1990s, the days before the national do-not-call list.
"I developed a niche among lawyers and law firms. I began writing a syndicated financial planning column for law publications," he said. Without meeting a lot of lawyers, he became known within that community. Within six months of starting out on his own, albeit with some clients from his previous firm, Glassman had more than $300 million of assets under management.
Brad Stark, a cofounder and principal of Mission Wealth Management LLC, with approximately $600 million in assets under management, agrees that finding a niche is an important part of a sound business plan. Stark and his partner Seth Streeter launched the Santa Barbara, Calif.-based firm in March 2000, just in time to see the tech bubble burst, followed less than two years later by 9-11.
"Originally, [what we did] was really detailed financial planning, which now everyone is doing, but back in the 1990s no one was doing it," Stark maintains.
"When things went from greed to fear, people realized, 'Maybe I should be planning.' Over the last decade, everyone has now moved into the purple cow space that we once had. Financial planning and wealth management are popular terms now. I wonder how many of the people that called themselves planners are actually wealth managers, how many people who call themselves financial planners actually do it as opposed to using it as a marketing tagline."
A big factor in his success, Stark said, was that he had a pipeline of CPAs who used his services. He and his associates were able to add to that initial client group with other sources for new business.
"We now have multiple pipelines of business," Stark said. "Initially it was CPAs, and we were part of some national referral programs, but we also ran special events for our clients and had outreach programs to CIOs, attorneys and other professionals."
The other lesson: "Don't ever stop your marketing efforts," Stark says. "If you stop your marketing efforts because you've become too successful, you'll hit a slowdown six to nine months later and it'll take you a year to get back up and running the way you were. You don't ever want to lose that momentum."
Stark advises young planners to a) get the most education they can by entering CFP programs right away and, b) team up with other successful people, that is have a mentor or two.
"Search out the highly successful independent advisory firms and see what it takes to get on the partner track and ride their coattails. Help support an organization to show your value, so you can tap into the hardest part of your business, which is gaining new clients."
Stark also advises young financial advisors to live frugally and be ready to reinvest in growing their client base.
"Every extra dollar you spend on your fancy car or fancy apartment takes away marketing dollars you could be spending on growing your business," he says.
Another advisor, Jerry McQueen of McQueen, Ball and Associates in Bethlehem, Pa., has 17 employees and over $1 billion in assets under management. He began his business in 1981.
"You have to be incredibly service oriented and find some niche where you're an expert," McQueen advised.
"For me, it was corporate compensation, stock options, deferred compensation and qualified plans. I used my background as a CPA to get in and get clients."
McQueen did research on local publicly traded companies in New Jersey and New York City, who have headquarters close to Bethlehem. After finding Fortune 500 companies in his area, he then sold them on the idea of letting him educate their executives on tax issues, deferred compensation, "and ways to integrate company benefits with their own individualized planning."
"There were a lot of years when I didn't make a lot of money. I'm a fee-only wealth advisor. But I used my background as a CPA to put together a package for executives."
This leads back to finding a niche. "Ultimately, service is everything. If you can find the things that are most important to your clients, make sure you can provide that to them," McQueen advises.
"For someone coming in today, there's going to be a transition, there's a lot of gray hair, a lot of people who will be retiring from this business, so working for a fee-only firm as an analyst is sort of the dues you have to pay," he adds.
"Young people need to hook up with a firm that is service oriented, not sales driven, a fee-only advisory firm because they're already service oriented."