With the election behind us and taxes sure to rise, and with the financial base of the U.S.—by some interpretations—a slowly collapsing house of cards, quite a number of professionals have asked me what’s precisely going to happen next and what to do. First, let’s be clear: If I truly knew what was going to happen next I wouldn’t be writing this column, or running conferences and workshops or consulting. I would use my prognostic abilities to make a fortune and, very likely, not share my predictions. However, it’s easy to delineate what professionals focusing on the wealthy need to do next year.
We know that the economy will not disintegrate in 2013. But there are many scenarios that would make it difficult for people in the financial advisory, legal, accounting and related service fields to make a good living. Let’s assume the economy will slowly melt, with the following consequences:
• Investment performance will generally flounder or fall, resulting in a limited ability to differentiate one’s services based on money management expertise.
• Higher taxes will force the high-beta wealthy to deleverage and disengage from many of the types of professionals we’re talking about.
• Affluent clients will increasingly question and push back against fees, adversely impacting many professionals who have pricing discretion.
• The wealthy will be somewhat psychologically beat down and targeted, and thus less inclined to act on their finances.
• The wealthy will tend to put up more and stronger barriers to unfamiliar professionals, making it much, much harder for these professionals to access new high-net-worth clients.
There is good news in this scenario: The greater majority of professionals will see their incomes decline, if not be thrashed. A number of these professionals will end up leaving their businesses.
Yes, this is good news, and here’s why:
Fewer players will not moderate the competition for wealthy clients, but just as the wealthy are bifurcating between the super-rich and the rest, a scenario like this will result in a greater bifurcation among professionals. We’ll see a relatively small but very business-wise, talented cohort of professionals thriving by capitalizing on the chaos. Moreover, it’s not magic or happenstance to be part of this elite cohort. A lot of the success of these professionals will be a function of their adroit implementation of the most efficacious business development strategies. Some examples of these strategies include:
• Maximizing affluent client relationships. This entails identifying and actualizing the opportunities to expand services and products for wealthier clients. Because of existing relationships, these opportunities are low-hanging fruit. This is the most effective and quickest way to meaningfully boost revenues.
• Sourcing new wealthy clients through systematic client referrals. Most professionals get the greater majority of their new clients from their current clients. However, it’s rare that they have implemented processes that result in a steady flow of new clients. To get a steady flow, they’ll need to institute methodologies that target the type of client they want and make the referrals easy to happen.
• Creating a meaningful professional dual-impact brand. To cut through the competitive clutter, professionals should focus on becoming top-of-mind with wealthy prospects as well as with centers of influence. By fostering a dual-impact brand, they’re able to position themselves as more capable and more attuned than their competitors. In a world of me-too professionals, this is becoming essential to compete for the business of the wealthy.
• Coordinating appropriate value-added services. The affluent habitually want more from the professionals they work with than just their specific expertise. Very often, the wealthy are looking for help in other areas. A professional’s ability to direct them to these other types of expertise and even coordinate them on their behalf is becoming expected.
• Sourcing new wealthy clients through centers of influence. Unquestionably, the most powerful way to create a pipeline of new wealthy clients is by building strategic relationships with centers of influence. While most professionals recognize the business value of these strategic relationships, relatively few of them are adept at creating them. The key is finding centers of influence that are amenable to the incentives and support a particular professional can provide.
The application of these business development strategies will prove to be essential in differentiating between professionals who will be more successful in 2013 and those who will not. Even where the focus isn’t on the very wealthy, these business development strategies are likely to be instrumental for a professional to be more successful this year than last.
