When Less Is More

By: Philip Palaveev

As originally published by Financial Advisor magazine.

The website featured a big picture of a happy family—including a youthful and energetic grandma and a grandpa looking with pride at each other. Next to them were another couple, younger and in their 40s and perhaps representing a grown son and his spouse. Those two also shared a smile but with a hint of jealousy—perhaps wishing to be in the same position of financial security someday. Finally, two little kids stood next to mom and dad, smiling too, but it really looks like they only did it because someone told them to say “Cheese!”

The picture occupied almost the entire home page of a very good advisory firm just unveiling its new website design. Out of curiosity, I downloaded the picture file, named “happy-multi-generational-family-1240x500.jpg,” and fed it to Google.

The search engine found two other advisory firms also apparently in love with the same family. A Canadian law firm was in their service, too.

Time and again, even the largest and best run advisory firms refuse to declare any specialty or client profile and instead go in search of a generic investor of wealth. They pursue that investor with the same exact (and very bland) message of “We listen, we care, and we help you achieve your financial goals.” The firms are often frustrated with their next-generation advisors (G2) and discouraged about whether these younger professionals can develop new business. It’s like raising a kid on plain pasta with butter and wondering why they don’t want to be a chef.

If advisory firms want to help their G2 advisors become better business developers and accelerate their own growth, they will need a more differentiated approach focusing on specific target markets with clients whose unique needs they can serve. These firms will then need to use their marketing to engage more proactively with that smaller but much more intimate group of prospective clients.

Markets Favor Specialization

When the pandemic arrived in March 2020, there were no face masks to buy. If you had any to sell, you could name your price. I bought 12 disposable ones for $50 on Amazon. Today, a year later, there are specialized masks for sports and for fashion, masks with faces and logos, masks for girls and masks for biking. The generic ones are given away for free at the entrance of most grocery stores in Seattle.

Whenever there’s a new market for a service or product, availability is important and the service tends to be generic, catering to the broadest possible definition of a consumer. As the market develops and becomes more competitive, more specific offerings emerge and take over.

Yet most advisory firms still rely on generic marketing ideas. These approaches are good enough to produce just some growth—enough to prevent a more drastic revision of a strategy—but not enough to fuel the ambitions and career pressure of the next generation.

I also wonder if the advisory industry is stuck in the generic mode because most CEOs and other leaders built their businesses and experience at a time when being independent or fee-based was innovative enough, and at a time when custodians were generously sprinkling their referrals to many, if not most, of the RIAs they serviced.

Generic may be enough for the founders of firms. But it’s not for young G2 professionals, who want to engage with clients who are usually wealthier and older than they are, and who must be able to speak more directly to the challenges experienced by those prospective clients.

What Keeps Them Awake

If you want someone to be your client, you need to know what keeps them awake at night and ideally be able to help them enjoy a night of good sleep. That is simply impossible, though, when you are trying to generally answer that question on behalf of “all families and individuals.”

Firms focusing on niches see outstanding results. For example, Geometric Wealth Advisors works only with the partners of the largest consulting firms. RAA works only with airlines (both pilots and staff). These are some of the fastest growing firms we’ve encountered in our work.

“Niche” does not have to mean small. In fact, Moss Adams, where I started my career, is the largest accounting firm on the West Coast. The firm generates more than 80% of its $600 million in revenue from the niches that it focuses on, rather than from generic client work.

When clients choose an advisor, they’re mixing two “ingredients”—the professional they will work with (for example, Philip) and the firm he or she is part of (The Ensemble Practice LLC). It’s a lot like a cocktail. If one ingredient is very strong, you don’t need much of the other. If both are weak, you will not be happy with the bartender.

It helps young professionals if their advisory firms have great reputations. But many firms haven’t developed their brand well enough, and then they become frustrated when they find out that their young professionals can’t “make a martini without the vodka” (no one likes vermouth).

Again, niche markets lend themselves particularly well to younger professionals and accelerate the development of young careers. A narrow focus gives you a much better chance of being an expert at something important to the client, and the path to expertise is shorter.

Consider chess. There are more moves possible on the chessboard from the starting position than there are molecules in the universe. But if you open by moving a white pawn to e4 (what Bobby Fischer called a “best by test” move) you have already eliminated trillions of possibilities. If you pick a usual path through the opening (using “repertoire,”) you quickly start seeing familiar positions you know how to handle. On the other hand, if you roam through all the opening possibilities, you will lose again and again as you confront traps and surprises.

Niche markets, in a similar fashion, grow expertise and turn you into an expert faster.

Relationships Have to Start Somewhere

Advisory firms tend to be so preoccupied with creating relationships that they forget about the things that bring people to their doors. Every relationship has to start somewhere.

We first meet our doctor when we get sick. We meet our mechanic when our car breaks. We meet our CPA when we need to file a tax return. Every relationship starts with a service, and the successful completion of that service allows us to seek another one. Eventually, those services turn into relationships. You are not going to make a lot of friends if you stand in a bar and tell people, “Hi! I am looking for a lifelong close friendship that will transform our lives.” You will more likely meet the security team.

In writing this article, I made it a point to go through more than a dozen advisory websites from large and capable firms that I think highly of. None of them spoke about the specific client problems that spark contact—instead, they spoke about “developing coordinated strategies to provide maximum financial advantage to you.” I have spent my career in our industry, and I have no idea what that means.

Think again about the things that keep people (in other words, your potential clients) awake at night. Mostly, those are things requiring difficult decisions. “Can I help my parents financially without hurting my own finances?” “Should I pay for my son’s graduate school?” “What do I do with the restricted stock I am getting paid once it’s vested?” “My business needs more capital; should I invest it or seek investors?” “My daughter wants to go to a very expensive liberal arts college in Vermont. Really?”

You won’t see any of these questions on an advisor’s website. Instead, you will see: “personal CFO,” “investment management,” “tax planning,” “philanthropic strategies” and so on. As Harvard professor Theodore Levitt said, “No one needs a quarter inch drill. What people need is a quarter inch hole.”

Helping Consumers Realize They Need an Advisor

We all hope people will at some point reach the conclusion that they need a financial advisor. But people very rarely do. According to research from the CFA Institute, about 75% of individuals with more than $1 million in investable assets already have an advisor and only 10% are open to hiring one. Another research paper by the firm Qualtrics states that only 1.2% of customers are considering changing advisors. In other words, unless advisory firms spend some energy on creating demand, they are playing with only a small part of the deck.

Other industries enjoy print articles listing “10 Reasons to Hire a Personal Trainer” or “10 Signs You Need a Haircut.” The few articles like that for financial advisors are very unconvincing and don’t really speak to the experience of either the consumer or the advisory firms. The first Google hits on the subject say you should hire an advisor when: 1) you inherit a lot of money, or 2) when you are worried you don’t have enough for retirement. Not exactly a call for action.

Good marketing doesn’t just respond to demand but actually creates it—by increasing awareness and pointing at issues people have overlooked.

Go Beyond the Rich and Happy

We need to know what keeps someone awake at night, but too often our industry targets “good sleepers.” Rich people tend to sleep well, at least when it comes to money. Or, as a popular quote (attributed to a few different authors) goes: “Happy people don’t write poetry.” Our industry is doing its G2 advisors a disservice by insisting on only working with the ever-growing minimum of $1 million to $2 million to $3 million in assets under management.

I had a chance to interview the founder of a very successful line of food products. He’d made hundreds of millions on the sale of his business. He told me that “no one gave me any attention before I sold the business, except for the bankers who were lending the business money. When I sold the business, I got a call from everyone, and they all told me how much they wanted a long-lasting relationship with me.”

Firms that want to attract the future millionaires and billionaires need to take the risk to find them when they are still starting their businesses … and help them in that process. In Bulgaria, they say: “You count your friends when you need them.” Swearing undying loyalty to a $100 million portfolio is actually not creating much loyalty on either side of the transaction.

Unless you have some insight into picking “future stars,” you may be left with too many subpar clients who are not worth the amount of time invested in their service. To be successful in that process, you need to know your client. When you know your market, you can pick the winners.

Given all these thoughts, if I had a cadre of G2 advisors I wanted to train to develop more business, I would do these things:

  1. Ask them to specialize in a growing, successful area where people are having to make complex decisions.
  2. Ask them to spend years learning that business and immersing themselves in the community.
  3. Learn what keeps future clients in that specialty area awake at night.
  4. Write and speak about the difficult decisions their clients need to make.
  5. Find the future stars in that field and go into their service before everyone else knows about them.

The happy, cheery, wealthy multi-generational family is out there. It has 15 advisors and 25 accountants and is wondering when those people will stop mailing them Napa cabernets and smoked salmon for every birthday. At the same time, somewhere there is a young family of Tableau executives who are still trying to figure out what to do with their Salesforce stock. If I wanted to grow, I know whom I would call on.