The industry has moved upmarket. That isn’t news. There were 18.6 millionaires in the United States, according to a 2019 table from Credit Suisse. According to Business Insider, $ 4.4 million gets you into the top 1% in terms of assets. Years ago, several major firms raised minimum account size to $250,000. There was even an “all or nothing” mindset. “If you won’t give me the whole relationship, I’m not interested.” Let's look at an alternative approach.

When I started in the business decades ago, a friend (who later became best man at our wedding) gave some excellent advice. He explained prospecting in the financial services business is similar to reaching into box of balls. You are told the box contains red, silver and gold balls. The object is to keep reaching in and build a collection of gold balls. The missing piece of information is “there are no gold balls in the box.”

He explained the object is to find silver balls and turn them into gold balls over time. You should also find red balls and turn them into silver balls. Put another way, cultivation and proving yourself is necessary.

Here’s why this makes sense.
1. Other firms do it. You know the firms. The moment the big firms set the bar at $250,000, they told those people the big firms don’t want you. If you don’t have more than $250,000, you won’t have a personal advisor. We want you.”

2. Cash flow matters. The strategy of the $250,000 threshold assumes people already have a nest egg set aside. There are many young professionals who earn a great living, yet don’t have significant savings. Perhaps they were saving for a down payment on their first house. They can easily put aside a certain amount every month via auto debit, topping it up when they get their annual bonus. The insurance industry is well placed for this market.

3. Let’s see how it goes. Most prospects aren’t going to hand over big money until they get comfortable with you. One of my managers from the early years felt a client wasn’t a client until they made their second purchase. Back in the days when municipal bonds were ideal for opening accounts, my manager remarked: “That person isn’t a client (yet). They are a prospect who bought a bond.” Prospects might have the potential to become large clients, but you need to reach that point where they are confident you are true to your word concerning what the relationship will be.

4. Influencers. Your father-in-law is one. He tells his friends: “This is the guy you should be using as your advisor.” The friend asks: “Do you work with him?” His response is “No, but I think you should.” There are people who might not be big clients, yet are in a position to send prospects your way.

5. Householding. The firm might have rules about opening small accounts but if they are related to a current client or even a close friend, they might relax the rules under the logic this new client is part of another client’s extended family.

6. Investing for the future. One of Warren Buffett’s famous quotes is: “Someone’s sitting in the shade today because someone planted a tree a long time ago.” Your prospect is a newly minted doctor. They might still be completing their residency. Perhaps they are an associate at a law firm. Is it reasonable to expect they will earn geometrically more money in a few years? You should get in on the ground floor.

7. Other products count. Your firm might have another measurement system, like the IRS has alternative minimum tax. Your client doesn’t have a large amount of assets with the firm, but they are an options trader. That’s producing revenue. Your client might have bought insurance policies. The revenue from those products could be an alternative qualifier.

8. They’ll be an heir someday. This is a grim approach, but it puts you on the receiving end of another advisor’s worst nightmare. You’ve seen the statistics how a large percentage of a client’s assets leave the firm when heirs inherit. Why? Because those heirs already have a relationship with a financial advisor, just not the parent’s advisor. You can help a person who might not be wealthy, but will be someday.

9. Niche marketing. It’s tough to specialize in a niche if you turn people away. You might need to take on smaller clients and give them great service, so your reputation as the “woman who works with police officers” spreads through the ranks.

There are many reasons to work with smaller clients. You can rationalize it as “pay me now or pay me later.”

Bryce Sanders is president of Perceptive Business Solutions Inc. He provides HNW client acquisition training for the financial services industry. His book, Captivating the Wealthy Investor is available on Amazon.