The most successful sales professionals in the financial services industry all understand and build their practices around the concept that the real leverage in their practices is the size of each client relationship rather than the number of client relationships.
It doesn't take any more time to invest or purchase a financial product that requires 10 times more investable assets or premium payment but the payoff is 10 times greater. The motivated sales professional, therefore, is much better off focusing his or her marketing efforts on fewer but wealthier individuals.
I am often asked by experienced sales professionals how they can double their business. My short answer is to double the wealth of the individuals that they bring into their practice. The challenge that the sales professional has in pursuing an ever-increasing affluent client base is that as the affluence goes up, so do the expectations. Affluent individuals are used to being taken care of and serviced at a very high level. If those service expectations are not met, they will find another sales professional that will meet their service needs.
These are the individuals who prefer to stay at the Ritz Carlton; they expect to have all their needs met and are willing to pay a premium for that. The difference between a Motel 6 and the Ritz Carlton is not the basic product -- which is a safe and clean bed -- but the amenities that define the overnight experience. The sales professional in a full-service financial services firm is essentially in the same business as the Ritz Carlton: To meet and exceed the high expectations that affluent people expect from their service provider.
Targeting the affluent
The reality is that because of the higher expectations, the sales professional is limited to a certain number of affluent clients he or she can effectively serve. The mistake that many sales professionals make is that they try to blend both models and work with as many clients as possible. This is a flawed system because all clients take some time, and the smaller relationships require time that is given at the expense of the best clients.
Pursuing an affluent prospect takes both courage and confidence. It takes courage because it takes the sales professional out of his or her comfort zone and requires a higher level of expertise due to the more complex needs of the affluent client. Because an affluent client expects more from an advisor, the sales professional must be willing to put him- or herself in a position where more is expected.
This requires a real commitment to professional development. The advisor who wants to succeed in working with the affluent must develop a higher level of expertise than his or her competitors in the specific needs affluent clients tend to have. With expertise comes confidence, which is also required to be successful with affluent individuals. The affluent expect leadership and conviction from their advisors and are attracted to the confidence and competence that a true professional exhibits.
One of the regrets the "Top Advisors" featured in my book, "The Million Dollar Financial Advisor," had was that they didn't pursue more affluent individuals earlier in their careers. Eventually all of these top advisors came to the same conclusion: In order to reach their ambitious goals, they had to pursue and develop business relationships with ever-increasing affluent individuals.
In fact, several of the top advisors admitted that they reinvented themselves throughout their careers. The "reinvention" was the process of developing marketing strategies that put them in front of more and more affluent individuals.
Increase the affluence level
Taylor Glover, who was one of the financial services industry's most successful producers, exemplified the "Leverage is Size" success principle. He started his career with a major financial services firm right out of college. When asked by the manager who hired him how many people he knew with money, Taylor responded, "Fifteen that have at least $1,000."
Thirty years into his career I asked him what the minimum size of an individual investor that he worked with directly was, and he calmly stated, "My minimum is $100 million of investable assets." When I asked him how many people he worked with met his minimum, he said, "About 15."
The power of this story is that Taylor started with 15 individuals with $1,000, and 30 years later worked with 15 individuals that had at least $100 million. Taylor was arguably the most successful financial advisor in the industry because he followed the "leverage is size" principle and never stopped increasing the affluence level of the individuals he strived to work with.
Those sales professionals who want to implement the "Leverage is Size" success principle should first segment their clients into three tiers (see sidebar on the right). The next step would be to establish a minimum amount of investable assets for the new relationships they bring into their practice.
My rule of thumb is to market to individuals who are at least as affluent as the average current Tier 1 client relationship. These minimums should be positioned with potential referral sources, and pre-screening should be done whenever possible when marketing to prospects.
Adopting the "leverage is size" success principle will contribute to taking the advisor's practice to a new and higher level. The first step the sales professional must take is to shift his or her marketing to focus on an increasingly affluent client base. The second step is to build a practice that will both attract and keep affluent individuals.
When the two steps come together, the successful implementation of this principle will result.
3 Tiers of Clients
Many experienced sales professionals who want to embrace the "leverage is size" principle struggle with what to do with the smaller relationships in their practice. My advice is to segment the practice into three tiers.
Tier 1: Clients that generate 80% of the advisor's business.
The 80/20 rule applies -- 20% of clients typically generate 80% of the business. The number of clients in Tier 1 is usually not very large, and they should be given the highest level of service possible.
Tier 2: Clients that have not generated as much business as a Tier 1 client, but have the potential to become a Tier 1 client.
These Tier 2 clients should be treated like Tier 1 clients and exposed to many ways to increase the amount of business they do and new assets that they could bring in. Tier 2 clients should be evaluated after 12 months. Those that respond to the opportunities should be moved up to Tier 1 status while those who don't should be moved down to Tier 3.
Tier 3: Clients that don't generate much business and don't have potential to grow with the advisor's ever-increasing affluent client base.
Typically they represent the lower half of the advisor's practice but generate less than 20% of the total business. These clients should be divested in a professional manner. Another professional that is willing to work with smaller relationships should be given these Tier 3 clients. The Tier 3 clients should be told they are being transferred to another professional that is capable of providing them with a higher level of service.
David J. Mullen Jr. is a 30-year industry veteran and former Managing Director at Merrill Lynch, where he trained more than 500 financial advisors. Englewood, Colo.-based Mullen is also the author of "The Million Dollar Financial Services Practice." He can be reached through his Web site at www.learntactix.com.
