Everyone In The Pool
In study after study, “sourcing new affluent clients” is almost always the No. 1 business concern of leading professionals—including financial advisors. This means you’re in the middle of a hyper-competitive environment.

One obstacle advisors are likely facing as they try to build their affluent clientele is the increasing overlap of services and products offered by various professionals. There was a time that investment advisors provided investments, life insurance producers provided life insurance and accountants restricted their services to accounting and tax advice, and so forth. Those days are gone. The ability of various professionals to deliver a wide array of expertise is more and more the norm. Moreover, a holistic approach is also a particularly attractive model for many of the affluent, as evidenced by the enormous appeal of multi-family offices.

With intense and intensifying competition, how do financial advisors gain the advantage? One fundamental characteristic you need to embrace—heart and soul—is being client-centered.

Client-Centered Professionals Financially Excel
What’s fascinating is that from a strictly financial perspective, there’s a dichotomy among professionals whose practices rank as the most successful. One type of practice is considerably more profitable, at least in the short term, but it’s the one you absolutely, incontrovertibly must avoid: the practice of the devious financial predator. The reason this practice is so profitable is that the only thing it really sells is vaporware. There are no real operational costs, so just about everything save “marketing expenses” goes to the bottom line—more precisely, into the pockets of the predators.

Financial predators are delivering a fantasy. Their success is generally based on skillfully conceived mendacity and misrepresentations. Financial predators have proved to be very capable in sourcing new wealthy clients. It tends to be relatively easy, as they can make outrageous promises—reality is not in the least bit a limitation. To find new clients, they must simply find somewhat gullible affluent individuals who buy in to their deceptions.

Client-centered financial advisors, in stark contrast, are put in check since they only engage in lawful activities and bright-line transactions. But those with a strong business development focus are the most effective legitimate professionals sourcing new affluent clients. By and large, financial predators can’t maintain their endeavors. While they’re very profitable at first, in time they’re highly likely to implode. When they do, their house of cards falls down.

Client-centered financial advisors, on the other hand, can build high-net-worth practices that go on indefinitely. They persist and expand because the welfare of their clients is the primary objective. Over the years, they create more in aggregate personal wealth than financial predators do.

We bring financial predators into the discussion because they’re the only ones who have the potential to build bigger high-net-worth practices than sincere, client-centered financial advisors, if only in the short term.

Conclusion
There’s no question that, by and large, competition for affluent clients is extreme. Even though there are more of them, and they have more wealth, the competition is going to get worse as the industry faces technological disruptions and specializations become blurred. It’s just going to get harder for most advisors to do very well economically. But that need not be your problem. There are still a number of systems and methodologies you can use to create and grow an exceedingly profitable practice with the affluent.

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.

 

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