The Department of Labor’s fiduciary rule has poured kerosene on a long-smoldering campfire that we in the advisory industry have encircled for quite some time—a campfire that represents how we define the meaning of a “true fiduciary.” This is an important debate, and in my opinion, it is absolutely imperative that financial advisors work in the best interest of their clients. There are many ways to ensure that this standard is being met. But, one can get so caught up in this concept that you then fail to take into account a very important consideration: As fiduciaries, you deserve clients and service providers who understand what you pour into your business every day, and at minimum reciprocate by working with you in accordance with your service model.
Now, there are some who prefer the stoic, humble, Navy SEAL-esque approach: “I am a fiduciary advisor for my clients; I do whatever it takes for them and I expect nothing in return.” That’s understandable, and noble. But what does a doctor do when a patient with emphysema refuses to stop smoking? What does an attorney do when their client can’t hold their tongue during a jury trial? It is fair to expect a certain modicum of respect for your expertise and the sheer amount of hard work and professionalism you put forth into your craft each and every day. Although it may be challenging, it is absolutely imperative that you, as advisors and potentially as business owners, assess your clients and proactively work to assemble those who fit the way you, the advisor, do business.
I encourage you to take a step back. Survey your client base for a moment, and ask some seemingly simple, yet vital questions:
- Is working with all of my current clients in the best interest of my firm?
- Do they fit my service model and the way we work most effectively with our ideal clients?
- How does each client fit with the rest of my client base? How would my clients react to finding themselves in the same room together, knowing that I am the common thread?
- Are the valuable resources I am allocating to meet my clients’ needs generating the profitability needed to run a successful firm and manage the financial lives of my best clients?
Identifying your ideal clients is essential in identifying key areas of your company that need to be refocused or modified.
Examining Your DNA
To establish who your ideal client is, assemble your teams for a candid discussion on which of your clients are not only vital for the growth and life of the business, but also to identify which you see the most potential in, and which your team loves working with the most. Do they tend to prefer open and frequent communication with their advisor? Are they more technically knowledgeable about investing and require a deeper dive into performance reporting? Advisors should not separate clients by assets alone—although this can be a bucket—but rather by attributes you perceive as valuable to your business.
Whatever the characteristics may be, by writing down the commonalities of your best clients, you are putting a microscope to the very DNA of your business—what makes it great, what drives you forward, what gets you up in the morning. And once the parts are identified, you can then find the whole. Those who embody most, or all, of the attributes are your ideal clients.
The Focus Group
It is also important to hear from clients themselves to learn about where the challenges and opportunities lie within your organization. Before meeting with clients, there are a few things to keep in mind:
- The purpose of this meeting is not a love fest. Be prepared to discuss the strengths, weaknesses, opportunities and threats of your organization.
- It is important to facilitate interaction between your clients rather than doing all of the talking.
One of the most important takeaways from a focus group is to learn what it is that matters most to the participants. Which initiatives are most impactful? Which areas could really use improvement?
I tested this process by hosting focus groups around the country with CLS Investments’ advisor partners. Going into the process, I expected to walk away with revolutionary ideas about how to drive our company forward. The truth is, with the exception of a few good, actionable ideas, we really walked away knowing that we are, in fact, fairly aligned with our ideal clients. Was it a waste of time? No, that in itself was value added, knowing that the small adjustments and improvements we can make will go a long way with clients who now feel that their voice is heard, and that we have a deeper understanding of their needs.
The Follow-Up
The last step of the process is the simplest, but one that cannot go undone: the follow-up. I found that personal phone calls to each of the participants boded very well, as a way to show my appreciation for the time they spent with us, but also to address any additional questions or feedback that may have been missed in the initial meeting.
It’s easy for businesses to get bogged down with attracting new clients, so much so that they fail to take into consideration the important question: Are they the right clients? By identifying what this person looks like, and uncovering some of the opportunities and weaknesses that your firm can address, you’ll be able to confidently move your business forward in an intentional and resourceful way. You will come away with, at minimum, a diagram of your firm’s unique DNA. This knowledge is empowering.
True fiduciaries? I salute you. Now make sure that you are optimizing your businesses to put the power of that concept to work most effectively for your clients and yourself. You most certainly deserve it.
Todd Clarke is the CEO of CLS Investments, an ETF strategist working with more than 2,500 financial advisors and 1,300 qualified plan sponsors.
