The Delphic oracles of ancient Greece had the right idea when they wrote, “Know Thyself.” But as simple as it sounds, knowing who you are takes time and energy to discover. It’s about determining both your strengths and weaknesses and using that self-awareness to combat your limitations with the right resources, and ultimately, leading you closer on the path toward success.
As an advisor, knowing yourself and your business is essential to developing your practice as one you can confidently stand behind. Now more than ever before, investors are demanding that you peel back the layers, find your value proposition and who you should serve, and be able to market yourself accordingly and transparently. Once you decide who you are and where you want to focus as an advisor, you’ll be able to use your energy to connect with the right types of investors and form a mutually beneficial relationship—the ultimate “win, win” for all parties involved.
Jefferson National’s latest “Advisor Authority” study reveals findings from 1,400 RIAs, fee-based advisors, and individual investors with the goal of helping advisors better understand themselves, their key differentiators and which type of clients they serve best in order to align their practice to fit the frame. According to the study, financial advisors fall into three profiles: tactical managers, active advisors and relationship builders.
Getting To Know Yourself And Your Firm
Getting to know yourself may sound like a basic approach from a self-help book—but it has value and is simply the first step toward growing your practice for the future. So, where do you start? The “Advisor Authority” study defines financial advisors into three broad profiles:
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The Tactical Manager – Uses active investing strategies and low-touch engagement with clients (Low-touch, meaning client interaction that is less frequent and more likely to be digital than in-person.)
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The Active Advisor – Uses active investing strategies and high-touch engagement with clients. (They are action-oriented in their approach to investing as well as client interaction.)
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The Relationship Builder – Uses a more passive investing strategy and high-touch engagement with clients.
Among the advisors surveyed, 36 percent fell into the tactical manager profile and 36 percent fell into the relationship builder profile, while 22 percent fell into the active advisor profile. As for the tactical managers, 18 percent oversee more than $250 million in clients' assets under management (AUM), while 21 percent of active managers do. Yet only 8 percent of relationship builders manage more than $250 million in AUM.
Which category do you and your firm fit into? Once you determine this, then you can start to get a better understanding of your distinctive value proposition, i.e. your competitive advantage, and determine how to differentiate yourself, your brand, your processes, your efficiencies, etc. Ask yourself, “Where do I fall in the spectrum? What am I good at? What should I focus on?”
Additionally, think about where you could improve, and how you can round out your practice to better serve clients or attract a new type of client—whether by outsourcing, taking on a new partner or incorporating better technology. For example, if you realize you are a relationship builder and are less focused on investments, then you can decide whether you need a third-party investment manager to help you manage assets.
Knowing And Identifying Your Clients And Your Prospects
An advisor is a business owner, much like a doctor. The toughest part is balancing serving your clients while building your business at the same time. How do you do both? It’s a challenge. When it comes identifying your clients and your prospects, “Advisor Authority” defines two predominant investor profiles:
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The Return Seeker – Prefers active investing strategies with a low-touch engagement from their advisor.
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The Relationship Seeker – Prefers passive investing strategies with high-touch engagement from their advisor.
The vast majority (73 percent) of return seekers are millennials. Among these millennial return seekers, 69 percent have $1 million or more in investable assets. They prefer active investing strategies with a low-touch engagement from their advisors. Relationship seekers are on the opposite side of the spectrum compared to return seekers. In addition to preferring passive investing strategies with high-touch engagement, they are likely to be older and less affluent. Half of relationship seekers are boomers, and among these boomer relationship seekers, 69 percent have less than $1 million in investable assets. Relationship seekers rated years of experience (74 percent) as their top factor for selecting an advisor.
You cannot be everything to everyone. Instead, you should focus on fine-tuning who you serve. Ask yourself, “Given my competitive edge, which type of clients can I serve best?” and “Where should I spend time prospecting?” Whether your client is a return seeker or relationship seeker, those who you align with on investing strategies and engagement preferences—and who require your area of expertise— are the investors you should be prospecting. The most successful advisors and the most successful firms are built on strong relationships.
Advice Going Forward
Advisors have two jobs: Serving their clients and building their business. You cannot serve your clients or grow your business without knowing who you are as an advisor and who the client is that you should serve. The “Advisor Authority” profiles can help advisors better understand themselves, their key differentiator and which type of clients they serve best. Advisors can use both the advisors and investor profiles to improve their competitive advantage and create more value for clients and more profit for their business. It’s a process of understanding who you are best-serving and what you need to do to stay on top of serving them well.
It may be time for your firm to do an internal audit and look at what areas need improvement in order to reach new types of clients. If you need to fine-tune your firm’s strategy and make changes, consider two things: How does this change benefit my clients? And how does this, in turn, benefit my business? Success comes down to determining both your strengths and weaknesses and using that knowledge to make meaningful changes within yourself and within your business in the ever-evolving channel of financial services.
To view more “Advisor Authority findings”, check out the full data book: www.jeffnat.com/aa-profilesdata/
Larry Greenberg is the president of Jefferson National.