Different people deserve different things.

How many clients have you? 200, 500 or 2,000? Often as your client base grows, it results in your number of staff growing. But the chances are that even with your increased staff numbers, you are unable (and unwilling) to provide a top-drawer service to every one of these clients…

Really the question is – why should you? After all, you derive hugely varying levels of income from each of those clients so surely the clients that are driving very high levels of income to your business deserve a higher level of service?

Of course this is not at all a novel concept! Every time you step on a long haul flight, it’s immediately obvious. Turn right for the cheap seats in Economy or turn left to be pampered in Business Class or 1st Class. And then when you book a hotel, you can pay less for a standard room or pay more for a suite with all of the bells and whistles that come with that.

Now let’s take this concept into the financial advice space where for many of you, your remuneration model is built around trail commission. If I’m fortunate enough as an investor to come to you with €1 million to invest, your trail commission might be €5,000 p.a. (assuming you charge 0.5% of assets). That’s fine if your proposition stacks up.

But what happens if I decide to place just €200,000 of my money with you? Now your trail commission falls to €1,000 p.a. Still very attractive, but obviously not as nice. However the question that’s in my head is, “What extra am I getting from you by placing the full amount with you, that’s giving you the benefit of an additional €4,000 p.a. of my money?”

If there is no difference between the services offered in each of these situations, I suggest you’ve got a challenge on your hands… Simply adding trail commission to policies without thinking through your client proposition is fraught with danger.

Not completing a robust segmentation of your clients is also very dangerous. Even without doing a segmentation exercise, I’ve no doubt that a small number of your high value clients get your best service at all times. But inevitably what happens is that there are other high value clients that slip off your radar. Either you don’t realise that they are high value or they just aren’t demanding. This is aside from some low value clients who are constantly on the phone end up getting a huge amount of attention. That’s hardly fair, is it?

So what do you do?

 

Segment your clients

For starters, do a proper segmentation exercise. Know who is valuable to your business and who is not. Don’t be put off from doing this work with the excuse of “it doesn’t capture the full picture”. Yes, there will always be exceptions within your segmentation – for example a client with very little business with you, but who constantly refers other clients to you is actually a high value client to you and should be treated as such. But don’t start with the exceptions; work out how to deal with them later on a case-by-case basis.

I’m definitely not suggesting that client segmentation be based on asset values alone – that is only one factor to be considered and used. However it is usually one of the more heavily weighted factors used by advisers in segmenting their clients.

 

Develop your service packages

Develop service packages for your business that reward clients depending on their value to your business. Make your high value clients feel really special, reward them for trusting you with their money by giving them a truly rewarding client experience. Build a moat around them and pull up the drawbridge from your competitors by providing a second to none service.

Let your mid-tier clients feel valued by your business, while making them aware that there is lots more you can do for them (if they are willing to pay for it).

And of course your no/low value clients will begin to realise that it’s a business you are running and that they don’t have 24/7 access to you. If they want access to superior service (ongoing advice from you), they pay more for it. The same as when they book a flight or a hotel room.

 

Don’t be afraid to say no

Yes, your lower value clients may want a better service possibly than you are offering and might try to demand it from you, without paying for it. Don’t be afraid to say no. You’ll only be doing this with your no/low value clients… And they are of little or no value to your business. Put your time into those clients that are of value to you – this is what your clients deserve and what your capacity allows.

The days of a “one size fits all” approach are over. Give your clients a service that they want and deserve.

 

Cough, cough – I need to talk to you about our fees…

One of the areas of greatest challenge for financial planners in Ireland today is increasing the level of your fees / trail commission from the levels that you are currently charging. But time marches along, and often when you actually turn to really examining the issue, many advisers find that their charges haven’t increased at all in the last 10 years! There are very few other professions where this would be the case.

The comments that I hear are,

“It’s all well and good that UK & US advisers charge 1%, as their asset management fees are so low” 

and “You can’t charge more than 0.25% / 0.5% p.a. (or fees of €1,500 / €2,000 p.a.) and justify it”.

However, there are growing numbers of Irish advisers that do charge more and their clients happily pay more. So how do they do it?

 

Their proposition stacks up

Please note, this article is not about the merit of trail v fees, that’s a whole other conversation! For the purpose of this article, I’m simply going to call them both fees.

Advisers that attract higher levels of fees tend to have superior propositions. They have put a lot of time and energy into really thinking through their client proposition and the value that clients experience from working with their firm. There’s no grey in the proposition – they are crystal clear about all of the value areas.

When this work is done properly, very quickly all of the new areas of value that you provide become apparent, and you see where your proposition has grown and how you provide more value today than you did when your fees were set. All of this added value at no extra cost (currently)…

Once you start to clearly identify these areas of additional value, you’ve taken the first step to increasing your fees.

 

They actively communicate their value

This is often the area of biggest challenge, particularly with existing clients. Actually having that conversation with a client about the value being added. It’s always easier just to talk to the client about their financial plan, their cashflows and their policies – it all feels a bit “American” to have a chat about the value being added!

But if you don’t have this conversation, all you can do is cross your fingers and hope your clients see the value they are getting…

This conversation has to be highly structured (by you) and very well practiced. You need to be able to clearly demonstrate that you’re not just “winging it”, hoping to increase your fees on a case by case basis. Instead by clearly articulating the services that you provide, the value derived from them and the cost of them, clients can see what they are getting for their fees.

From experience, this tends to work best when advisers offer multiple (2 or 3 usually) service packages. The higher value packages show the increased services being offered for the higher fee levels. Also if a client is not willing to pay a higher fee level, they clearly see the services that they won’t be getting.

 

They justify their fees

The communication is critical, but a slick sales pitch is not enough. Advisers who charge higher fees clearly justify those higher fees. This is achieved through providing a range of evidence,

  1. A statement of financial improvement is where you demonstrate to your client the actual € value of your advice – this might be in a net worth statement, portfolio increase, tax saved, costs saved or other such metrics
  2. A client calendar of all the interactions that you carried out with / for them over the last 6 or 12 months such as the meetings you had, the phone conversations, the newsletters you sent them and the events you invited them to etc. Not forgetting of course the updates to their plan and cashflows, the portfolio rebalancing and ad-hoc service requests.
  3. Timesheets are provided by some advisers to demonstrate the level of work carried out on the client’s behalf and providing a justification of fees in the process.

When you start pulling all of these strands together, it can seem like a lot of work to be undertaking. However the prize is huge. You will quickly realise the value you’re adding and this will give you increased confidence to have that conversation about higher fees with your clients. They see the fantastic value they are getting from working with you, while you earn more in the process. A win-win situation.

Can you stand over your charges?

Lots of the conversations that we’re having with financial advisers are in relation to the ongoing value you are providing, and the cost being charged for delivery of that value. However if we are to be completely truthful, it doesn’t always start out from that point….

 

Quite a number of the conversations start out from the point of, “I’m charging 25bps / 50bps and I’m not comfortable that I can really stand over it and justify it if pushed”. Advisers are looking over the horizon and seeing potentially greater levels of scrutiny from clients and the Central Bank in relation to trail commission. You recognise that you must be able to comfortably justify your trail commission if you want to grow the levels of it, or even to maintain it. This unfortunately often results in advisers remaining in the supposed easier place of a low trail commission rate, in order to avoid any pushback around price.

 

After all, trail commission has been extremely good to many advisers, who have seen recurring income rise substantially for relatively little effort in some cases, while also building long-term value in your business. Investment markets have delivered excellent returns over the last decade, and your trail commission has increased accordingly. You don’t want to lose this growth, hence the pressure to justify it. However you’re now looking at investment markets today and recognising the significant fall in your income that will happen, should there be a biggish correction in the market. Also if your income is very tied to the investment of your client’s assets, any under-performance against benchmarks also raises a question over the validity of your fees.  These issues arise when the only determinant of your trail income is asset levels. The problem is that when you’re only thinking about asset values and your costs, you’re starting from the wrong place.

 

The only place that this whole conversation can start is with the value that you are providing. Otherwise, it is a serious case of the cart before the horse… When you work out in detail the different levels of value that you are providing to your different clients, it is only then that you can start to price your services in a structured and robust way. Your income is now tied to the services that you are providing, giving you certainty and control over your income stream. Many advisers who do this properly continue to collect their income via trail commission, however now they have minimum charges for each of their service levels. These minimums protect them against falls in the market, and indeed enable them to meet the demands of clients for high service levels where their asset levels alone do not justify them.

 

When you get crystal clear about your service levels and can easily articulate and communicate the value that you are adding, that nervousness around your trail levels subside. Instead it goes the other way – it gives you the confidence to maintain and increase your trail levels, when you know that your services warrant these higher levels.

 

Now you can be firm and brave in relation to pricing. When you are clear about your services on offer, you can stand over your pricing as a premium advice provider to relevant clients. With clients who demand premium service levels from you, you can demonstrate the breadth and value of your services, and then justify that you are more expensive. Yes you can have lower cost packages, but within these packages the clients should be left in no doubt about what is included and more importantly what is not.

 

Clarity around your value gives you a strong position when negotiating your price. Without it, you’re forced to keep watching your competitors and make sure you are undercutting them. A race to the bottom… However if you want to charge higher prices than your competitor, you have to able to deliver more. So it is very important that you can actually deliver what you promise. The last place you want to end up in is the dreaded “over-promising and under-delivering” experience for clients. This is the certain road to losing clients.

 

Spend your time now looking at the value that you add. Do this piece well, and the cost side will fall easily into place, giving you confidence to stand over your charges all day long.

Turbo charge your business in 2022

What am I doing, talking about 2022 already? Well I’m not asking you to wish your life away, but quite a number of financial advisers have observed that August and early September are quieter times for them. And this quiet time offers an opportunity to do some planning for your business.

You should always be thinking short-term about your activity planning and how you are strengthening your relationships with every existing and potential clients, particularly as you are back out now re-engaging with clients after Covid. However now you also have an opportunity to do some longer-term thinking and more strategic thinking about broader areas that will stand your business in good stead over the next few years. While it’s not an exhaustive list, here are a few areas to think about now.

 

Make sure your team are with you

When’s the last time that you gave structured thought to the development needs and engagement of your team? Now might be the time to consider their coaching needs that will help them improve, grow and ultimately benefit your business. And how well are you managing the return to the office? Good people are in very short supply at the moment, so make sure you are bringing your team with you.

 

Make sure you are fit for purpose yourself!

How are your own skills as a business leader, mentor, manager, business generator, client executive and everything else that you do? Now is also a good time to give some thought to gaps that you might have in your own toolbox and to look at how you might close the gaps. Have you trusted people, either staff members or other business contacts who will candidly help you to identify any areas that it might be useful for you to work on? Getting help and coaching shows a desire for improvement rather than an admission of shortcomings!

 

Make sure your clients are with you

When did you last review your Client Value Proposition? It’s important to ensure that you continue to deliver the appropriate levels of service to different groups of clients at the right price. And this is an ever-moving target. So even if you previously segmented your clients, are clear about who you are targeting and have your positioning identified, this needs to be regularly reviewed. The world of financial advice is constantly changing. Your business needs to change with it, particularly in this post-Covid world.

 

Review your communications

How good are your communications to your clients? Now is a good time to stand back and look at the quality of what you produce, your client meeting inputs and outputs, your other individual communications to clients and also your (hopefully) regular marketing communications. Are your messages getting a bit tired, or are they really engaging your clients? Seek feedback – both from any analytics that are available to you, and also from people who are on the receiving end of what you send and say.

 

Review your processes

Give some time to picking apart everything that you do within your business. Could you be easier to do business with, is there an opportunity to really wow your clients? At this stage, look to identify the gaps in your processes. Then put a plan in place with your team to overhaul the processes and set your business up to deliver a much better client experience in the future.

 

There are many other areas that you can think about during these quiet months – the key is to make sure that August & September don’t just slip by without much work being done. If you can make a start on some of the areas identified here, you’ll thank yourself when 2022 eventually comes around.

Time to sharpen the saw again

I’m speaking to financial advisers every day, and at the moment a consistent theme is emerging in all of these conversations and that is a feeling of a “new beginning”. Advisers are talking really positively and excitedly about getting back out and meeting clients face-to-face again – just imagine in a few months’ time we might even be doing this without masks on!

It all feels a bit like a new era, and indeed for some it really is, as many lives have undergone huge upheaval in the last 15 months. This brings the need for insightful and valuable conversation with you, and a whole range of new avenues and opportunities to explore for both you and your clients. The question is, are you ready to embrace this new environment, or will you revert back to what you did before the pandemic hit?

The focus of this post is not on your client proposition, but instead it is about you and how you will work and interact with your clients in the months to come. There are a couple of areas to consider.

 

Be prepared

The chances are that you will be very busy in the months to come. While there’s no harm in clients seeing that you are busy and your expertise is in demand, you don’t want them to feel rushed and that the “next” client you’re going to see is more important. The key here is good preparation for your meetings and careful management of your diary. When a client comes to see you, they should feel at the centre of your universe and that your sole focus is on them and helping them achieve their financial goals.

 

Your approach to meetings

From the discussions I’ve had, so many of you have been re-evaluating your proposition and tweaking it for the future. You’re taking the good bits from working remotely over the last year or so and are building this in as part of a newly enhanced proposition. You will then deliver this, and clients will enjoy a greatly enhanced advice experience into the future. The key for you now is to engage clients in discussion about how you work and what you offer, and carefully walk them through the improvements you will be bringing to them. I strongly recommend that this deserves to be more than a chat, instead you should lay it out visually for your clients in the form of a presentation, short documents setting out your services or links to relevant sections on your website. Show off your proposition in the best light possible.

 

Keep your energy levels high

Everyone is emerging from a difficult period. We all want to be surrounded by people who are not gloomily reflecting on the last year, but instead by people who are positive and optimistic about the future. Be one of the “cup half full” people in your clients’ lives. Work hard at ensuring that clients feel better in themselves after meeting you, that you were the bright point in their day. This of course doesn’t mean just nattering on endlessly at meeting though. Of course you need to put as much of your energy into careful and active listening, and gentle but probing questioning of your clients in relation to their hopes, dreams and ambitions for the future.

 

What about the novice clients?

The lives of some people have been turned upside down by the pandemic. They may have suffered bereavement, serious illness, the loss of their job and/or their business and in some cases temporary but significant financial challenges. Many of these people may never have availed of the services of a financial adviser in the past, but now they need a lot of help in getting their financial lives back on track. They know they need help, they think they need it from a financial adviser. But they might be quite unsure whether the right adviser for them is you or someone else.

Think carefully about how you can build trust and rapport with these people. Your first meeting approach will be critical here, as will demonstrating your expertise through client testimonials, case studies and other endorsements of your skills. Your goal is to put these people at ease, help them to recognise that you have the skills and knowledge to help them with their affairs and hopefully start to build a valued relationship that will endure long into the future.

 

These are great days. The vaccination programme is starting to have a real impact and everyone is much more hopeful about the future. Now is the time to roll out your own A game.

Does running a niche business make sense?

This is a question that occupies a lot of thinking time of many advisers today, as they contemplate their future client acquisition strategies. While we are seeing some advisers setting minimum hurdle sizes with new clients (either in assets under management or agreed fee levels), let’s be honest, many advisers are generalists, welcoming any prospective clients into their business. So it’s a valid question – is a niche strategy a viable business model for advisers?

I believe that if carried out in a very structured way, it can be a very viable strategy.

Let’s start with a definition of niche. One I came across described it as, ‘denoting or relating to products, services, or interests that appeal to a small, specialised section of the population.’ The scary part in reading this is the piece about the “small, specialised section”, as this leads people to think that their base will be too narrow to make it sustainable.

 

Niche strategies can make life easier!

I tell this from personal experience. When I decided to strike out on my own almost 10 years ago now, this challenge was the one that gave me the most headaches. Would I concentrate my proposition and ultimately my sales & marketing efforts only on financial advisers? Or would I offer my services to any client that I could get?

I went for the niche strategy, focusing my efforts solely on financial advice firms. My target audience was immediately narrowed to only hundreds of firms, rather than tens of thousands of potential customers. That was scary.

But what was far easier was connecting with this group. Rather than trying to appeal to everyone, and probably not connecting with anyone, I could focus all of my efforts on a specific group of people. This made it easier in developing my sales propositions, writing website content, producing newsletter and blog articles. I can communicate with a clear target in mind, and my messages as a result are a little more personal to my audience. I also have much richer and relevant experiences to call upon when working with different advice firms. On the other hand, when you are trying not to exclude anyone from your sales and marketing efforts, it’s very difficult to connect with people.

Yes, a narrow niche strategy is hard at times, and when business goes a little quiet the temptation is always there to broaden my marketing into other markets. But doing that will dilute my presence in the narrower (financial adviser) market. And just because you target a niche only, it doesn’t stop you working in other markets. I’ve worked with a number of businesses in other sectors, who saw what I was doing with financial advisers, approached me and asked me to bring those skills to their industry. But staying focused on my niche in my sales and marketing efforts will generate the lion’s share of my work, and is the right strategy for me.

 

What are viable niche strategies for financial advisers?

Financial advisers who have gone down the niche route successfully have tended to do so by focusing on one (or sometimes more) of the following,

  • Demographics: Focusing on specific age categories, gender, social grades (e.g. ABC1’s)
  • Employment sectors: Focusing on the public service specifically, sectors within the private sector, specific occupations.
  • Geography: Focusing on clients within a certain geographic area only
  • Product lines: Focusing on developing expertise and leadership positions within specific product areas or dealing only with clients who require full financial planning relationships.

 

What are the main steps in building a niche strategy?

If you decide to go down the niche route, first of all you need to do some research about your target niche. You need to understand the numbers of target clients (is the niche large enough to sustain you?), think through how you will access them and consider what opportunities are available to you to market to them effectively. You need to also think deeply about the problems that you will be able to help them to overcome, and how you will communicate and demonstrate your capabilities to that segment of the population in an engaging way. Because at the end of the day, you will live or die by whether your target customers recognise that they are dealing with a specialist in the particular niche or not.

 

Niche strategies are certainly not right for every financial advice business. However for some, they just might be the best way to fully leverage a unique strength or opportunity of your business.