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“Go after your natural market.” The insurance industry is famous for teaching this approach to new agents. The logic is obvious. Everyone needs insurance. Your friends and family know you, so it’s a warm lead. Here is one more observation: Insurance premiums are often funded through cash flow. Approaching friends for business makes sense.
The world of investing and wealth management is different. Financial advisors are looking for people who have already grown a substantial nest egg. Over the years the minimum account size has grown. Today, many advisors might not take on a client with under $250,000 of investable assets. This influences their decision who to approach for business. They take many of their family and friends off the list.
Why remove names of people who believe in you and want you to succeed? There are many reasons. If they already have a financial advisor, moving a large amount of assets to you means someone is going to get fired. They are effectively firing the other advisor if the move the bulk of their assets over to your firm. Even the minimum is a big number. If they have $5,000,000 and you are asking for $500,000, they can free up enough assets without much of a problem. If you want $500,000 and they have $525,000, you are asking for almost all of their life savings. As they say in sales, “that’s a big ask.” The assumption people will turn you down takes their names off your prospect list.
A New York advisor made a great case for asking friends to do business. She pointed out; “Regardless if you ask for their business or not, they are going to be investing anyway.” They are not thinking, “Because my cousin didn’t ask, I think I will stay out of the stock market.” They will invest with another financial advisor or become a self directed investor.
Her story continued: “Now imagine something goes wrong. Their chosen financial advisor blows them up or they blow up their own portfolio. They have now suffered 70% losses. Their next phone call is to you! They know you are a financial advisor. They know you work for a good firm. They trust you. They hand over statements for their account, down 70% from inception and ask “Please make me whole again.” As a close friend, you take them on as a client.
Here is the New York advisor’s point: “If you know you are going to be called in to solve the problem if things don’t work out, doesn’t it make sense to get involved from the beginning?” Let your friend benefit from your advice when they start investing.
She made one more point: “Give them the same service you provide to your best clients. If you feel you must discount, then discount only slightly.”
This is a compelling case to ask everyone in your family and social circle to become clients. Even if they don’t have enough money, they might know another family member who does.