In a great many cases, all financial advisors need is five wealthy clients to quite possibly boost their income 50% or more in a year. Of course, they need the right five affluent clients. In pegging the number at five, I readily admit exercising some level of poetic license. However, doesn’t the Five-Client Solution sound so much better than …
• The 5.2 client solution where there is a 71.2% probability of increasing your income by 50% or more in a year, provided you have been in the investment advisory business eight or more years and have an income ranging between $200,000 and $370,000. It is also essential that you have fewer than 130 clients (not accounts; clients).
• The 8.1 client solution, where there is a 64.3% probability of increasing your income by 50% or more in a year provided you have 29 or more clients giving you $500,000 or more to invest.
• The 3.9 client solution, where there is a 78.1% probability of increasing your income by 50% or more in a year provided you have 17 or more clients giving you $2 million or more to invest.
To derive these client solution numbers, my associates and I created a structural model predicated on 12 databases representing thousands of investment advisors and wealthy investors. The analytic findings, as noted, are probabilistic.
In the structural model, we worked under the premise that you are getting half the revenue and that your incremental costs of generating these additional dollars approaches zero. If you work in a brokerage firm or similar operation, we are assuming your firm has all the internal expertise and you are on the grid at 50%. If you are independent, we are concluding that you’re outsourcing all aspects of wealth planning, from the planning itself to the financial products experts, and you are splitting the revenue 50-50 with the product experts.
We are dealing with a lot of variables, and the answers are all probabilities. Without question, this analysis has severe limitations. The vast variations in practice models among investment advisors, coupled with the idiosyncrasies of the wealthy, only allow us to come up with a ballpark assessment—and it turned out to be a very big ballpark.
What you should take away from this analytic exercise is that, if you have been in business for some time, if you’re making a good living today and if you have a solid book of clients that includes some with $500,000 or more in assets, then there is a good chance—a very good chance—you have some hidden treasures waiting to be discovered.
By hidden treasures, I mean you probably have a handful or more of wealthy clients who can benefit from various wealth management strategies. By delivering this expertise to them—considering the compensation tied to the financial products required to actualize many of the strategies—you can meaningfully boost your income.
Russ Alan Prince, president of R.A. Prince & Associates, is a consultant to family offices, the ultra-wealthy and select professionals.
