Most advisors recognize the growth potential in their current client base and ask their clients for referrals to people they know. After all, adding new clients to their practice is the lifeblood of their business.
Advisors, however, are sometimes slow to see the additional opportunities within their existing client base. While they should always be checking to see if clients have received any new assets from bonuses, inheritance, or real estate sales, there’s another opportunity here: to ask clients to consolidate assets with you.
What percent of your clients’ assets do you think you currently have? Think carefully before you rush to say 100 percent. A recent study from Bank of America Private Bank found that two-thirds (67 percent) of the country’s wealthiest individuals work with multiple advisors. You might have the majority of the assets you know about, but that may or may not be the client’s complete financial picture.
I recently had a conversation with an advisor about a $4 million dollar client he worked with. The advisor called initially looking for ideas to prospect for more $4 million dollar clients, but during our consultation, he mentioned that the client was worth more than $50 million. Wait – what? The client worked with several financial advisors as well as other professionals like CPAs and attorneys. But rather than developing a plan to try and manage more of this current client’s assets, the advisor wanted to prospect and cold call to try and get new ones. Hopefully, you can see why we hit pause on that plan and instead set up time to work on ideas and ways to develop trust and bring over additional assets.
Your goal should be to manage all of your client’s assets. To help you get the consolidation discussions started, here are a few ways to approach the conversation with clients.
Simplification. When it comes to tracking and handling paperwork and multiple accounts, less truly is more. Who has time to stay on top of all the forms, prospectuses, and tax reporting? This is a great time of year to discuss consolidation; most people had to scramble to gather lots of documents and paperwork for tax time and might welcome the idea of simplification.
Retirement planning and required minimum distributions (RMDs). Advisors know how important it is to handle retirement assets and distributions properly, as the tax consequences can be severe. If you are only advising on the assets you manage, your clients can run into issues if their overall RMDs are miscalculated. They might not be aware of this risk, and they will appreciate an advisor trying to save them from paying taxes they could have avoided.
Tax planning. In addition to RMDs and retirement issues, an advisor can be restricted when it comes to tax planning and strategies without managing all of the assets. How can taxes be mitigated or planned for? If one advisor is holding a concentrated position in a company’s stock, and the other advisor isn’t aware of that when creating a charitable giving strategy, the outcome for both the client and the charity can be greatly diminished.
Estate planning and settling. One of the many reasons clients hire an advisor is because they want to ensure the health and security of their family if something should happen to them. An advisor can indeed offer assistance in the event of a death in the family and make the financial details and estate settling much easier for the spouse and other family members. But that may not be the case if the money is split between multiple advisors! In most cases, the situation will be more complicated and time-consuming, with many advisors responsible for assets held in different places—not to mention the risk of an estate plan going awry.
If you introduce the concept of asset consolidation with all of your clients, you might be surprised at the additional assets you’ve earned the right to manage. It’s a great way to kick-start your growth goals and strategically boost your business throughout the year!
Kristine McManus serves as chief advisor growth officer at Commonwealth Financial Network.
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