Lower the barriers for clients

Your business model may be getting in the way of bringing in new clients.

Dave had a target market of physicians and had built a successful business but was having difficulty attracting new clients. We organized a client advisory board composed entirely of doctors to ask them a few questions about what they valued and how we might attract more.

The consensus was to connect with them as they left residency and began their careers. They needed guidance and had no relationship with advisors. Helping to give them a good start would form the basis of a long and productive relationship. It was Wayne Gretzky’s advice about being where the puck is going.

But I can’t do that, replied Dave. I get paid on assets under management and have $1 million minimum.

Joe Duran wrote a column recently in Investment News about what we can learn about attracting clients from the demise of iTunes. One of his recommendations was to have a “low commitment entry point.”

Dave had a business model that kept many promising future clients locked out. Rather than help clients become successful and win their loyalty, he required that they first be successful. At that point, he would need to win over those clients from the relationships they would have established in the meantime. He’s not alone. Many advisors require a significant (if not total) commitment as a prerequisite to begin working together. That is a high barrier to entry.

It may be more effective to have a mechanism that enables clients to experience what it is like to work with you before making a total commitment. Offer people a taste and many will want the whole pie.

Here are a few ways you can make it easier to experience the benefits of working with you.

Charge planning fees. A few, like Dave, only get compensated by charging an asset-based fee (and especially if you have an account minimum) and you’re putting up a barrier. Offer your clients a way to pay you to do planning. The portfolio, and how it can be improved, will be part of the conversation. Impress clients with your excellent service and the thoroughness of your process and you will find it easier to add the assets to the relationship.

Offer services separately. Can you divide up your process into several modules? Tax preparation is one example. Offer some way of establishing a relationship on a limited basis. It may be a one-time offer. Provide the service once with some follow up recommendations and then let the client decide – do they want to move up to the comprehensive service or simply pay you for the work you did and part company?

Offer a limited analysis. If you have a particular expertise addressing a special need the client has, you might offer an introductory engagement on that limited topic. In this and the prior example you can be explicit about accommodating a need as a prelude to a more comprehensive relationship. You might say you do comprehensive planning and you are willing to do some limited work that enables them to experience how great a relationship with you could be. A modest commitment up front makes it easy and shows confidence.

Use get acquainted meetings. Some advisors have a complementary initial meeting where the client can indicate what they are looking for and the advisor introduces the firm and its capabilities. Try running through a short list of standard questions about issues common among your clients. I recommend against doing any personalized work without compensation, but if you can create a list of questions that identify some of your target clients’ most common mistakes and planning needs, you can make some general statements about what you would do for them and some strategies you recommend to clients if they move forward with you.

Many advisors set a high bar for prospective clients. Starting with a small commitment and working your way up may be a more comfortable and easier way to bring new people on.

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