Times are changing — quickly. The rise of the robo-adviser with little to no account minimum has every financial adviser taking a hard look at how they are issuing fees — my partner, Ron Carson, included. And for every adviser out there thinking about getting rid of their account minimum to compete with these online one-size-fits-all business models, I would say: Know your worth.
Recently, I invited four financial advisers to join me on stage at a top adviser meeting in Omaha, Neb., to discuss the topic of account minimums. Two advisers currently had account minimums implemented and two did not. It became very clear early in the discussion there were vast differences in the way they ran their businesses and the types of relationships they had with their clients.
KNOW YOUR WORTH
What is your break-even point? If you even have to think about it, you don't really know. Advisers taking on less-than-than-ideal clients often end up expanding their service offering “just this once” or because “it really won't take much time to service them.” And that's true. Until it does.
One of the most candid comments of the panel came from Wade Chessman, president of Chessman Wealth Strategies, “If you try to be everything to everyone you become nothing and diminish the value you add.”
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For those advisers who take on less than ideal clients simply to boost their assets under management, I would say: Quit being so selfish. When you have clients with a different issue and different asset range, it becomes very hard to serve everyone.
Another member of the panel found that without account minimums, his days quickly filled up with “to-do” from the smaller clients he was attempting to serve. Nick Callesen, president of Callesen Wealth Management, took over his parents' firm in 1996. His parents had never implemented account minimums and at the time he took over, the firm serviced 800-plus households.
Mr. Callesen shared with the crowd: “My mission statement use to be 'For God's sake, don't forget if a client tells you to do something.'”
When push came to shove, Mr. Callesen knew that he and his secretary simply could not serve all 800 clients. And let's be honest. He really wasn't serving anyone at that point either. A few years after Mr. Callesen took over, he implemented account minimums and is now down to serving 52 households that are quality, long-term clients.
DON'T CATER TO YOUR CLIENTS, CONNECT WITH THEM
I can't tell you how many stories I have heard about advisers adding new services or lowering fees to win new business. I often ask them why. What is the adviser really getting out of it besides more work? My advice to those advisers is simple — think about how you are going to serve that particular client. Will it require you to take something away from your existing clients with whom you already have an established relationship? If you answer yes, you might want to think twice about taking on that business.
Once Mr. Callesen was able to implement an account minimum, he was able to focus more of his energy on the relationship he had with his clients.
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“I have always felt that this is a relationship business, and for a decade I couldn't really develop that with my clients,” he said. “And in the last couple of years, we started to pay attention to the relationship, and it has started to pay off in dividends.”
Communication is key to connecting with your clients. At Carson Wealth Management Group, where I am on the executive board, we often say to our clients we don't work
for you, we work
with you to achieve your financial vision. That small distinction creates a very different relationship.
Mr. Chessman also began to see the differences in his relationships and communication once his firm implemented an account minimum.
“When you are dealing with a $10 million dollar client and $100,000 client they have totally different issues,” he said. “However, when you have a more similar client base you see the same types of issues and you get to become more of an expert on those issues.”
When you have that kind of relationship and you are able to go above and beyond – clients will go above and beyond for your firm. Focusing on the relationship aspect leads to more qualified and quality referrals.
Paul West is the managing director for Peak Advisor Alliance.
