Would you rather make $400,000 from 140 clients or $1.8 million in recurring revenue from 50 clients you enjoy working with?
The latter is possible — and without working harder. The difference comes from working with your ideal clients, said Bill Bachrach, an author and coach to financial advisors. He gives this case study of Scott, a U.S. financial advisor he works with.
Identifying ideal clients
Scott started working in the financial services business when he was 22 years old. As is often the case when you’re trying to just keep afloat, in his first few years, Scott gratefully took any client he could. In five years, he had about 140 clients.
The cost for this was, however, that he spent much of his time working. As hard as he worked, many of those clients actually brought in very little money. So while Scott made it as a financial advisor, it became a success trap for him: He worked too much for too little compensation, Bachrach said. He was stuck in the mediocre middle.
Watch Bill Bachrach talk about how you can increase your income.
Breaking out of the mediocre middle “starts with your ideal client profile and how many people meet that profile,” Bachrach said. This requires making client acquisition a priority and replicating your best clients.
To have the practice Scott wanted, under a fee-based model, he would need 50 ideal clients who each paid $36,000 annually. Unfortunately, none of his clients was even close to that. At the most, Scott’s top 15 clients brought in $9,000 to $18,000 each in fees.
He had to rethink the cost of being in business as a financial advisor. To run a business, you must get compensated adequately on several different levels. “Every client is a liability, meaning they could sue you or file a complaint,” Bachrach said. “You need to be paid enough for the risk of being in business and for your time.” In addition, you also must get adequately compensated to cover your operating expenses.
Finding ideal clients
To work toward having 50 ideal clients, Scott contacted each of his 15 best clients and let them know his business model was changing. He was only going to work with 50 clients and upgrade the “value promise” of his financial services. Scott answered his clients’ questions and explained how he was moving to a more holistic financial services planning model that would give them more value. Of the 15 clients he approached, 13 of them took Scott up on his offer.
Scott sold the rest of his non-ideal clients to another financial advisor. After he paid taxes, Scott had about $400,000 to put into his retirement plan. At this point, Scott was 30 years old. He was also making $576,000 a year with 16 clients.
Scott’s on pace to have 50 ideal clients by the age of 32, which will give him $1.8 million recurring revenue, Bachrach said.
Scott could be any financial advisor. He’s nice, caring and smart, Bachrach said. The only thing he did differently from most other advisors is “he took action and implemented,” he said.
By Antoinette Tuscano, MDRT Content Specialist
Watch these videos about how to make fee-based planning work for you
- Financial coach and author Bill Bachrach shares his method of “How to make more money with fewer clients.”
- MDRT Top of the Table qualifiers discuss how fee-based planning successfully works for them.
- Learn a strategy for showing value and attracting clients with fee-based planning used by two Top of the Table qualifiers.
In the below resources, find ideas about finding clients you want to work with
- Read about locating niche markets in “How to stand out from the crowd.”
- Watch “Selecting clients you want through seminars.”
- Watch “Are you making the most of your referrals?”
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