Research from iCapital Network has identified the principal business strategies shared by the top 5 percent of advisors—those consistently earning $1 million or more in annual income. More than 800 registered investment advisors participated in a study that evaluated more than 40 business activities and strategies and their potential for differentiation in today’s competitive landscape. These six are how top-earning advisors set themselves apart:
1. Focus on High-Net-Worth Clients
95 percent of top earners focus exclusively on affluent and ultra-affluent client segments
Top-earners know that expanding their assets under management is a driver of revenue and the easiest way to accomplish it is by focusing on fewer, larger relationships. Additionally, having a more uniform customer base enables more successful advisors to get some economies of scale that they may not achieve with a more diverse set of clients.
2. Grow Business Through Centers-of-Influence
95 percent of top earners say influencers are their primary source of referrals
Working with influencers is the single most effective way to source new high-net-worth business, and the most financially successful advisors target their business development efforts accordingly. Rather than trying to cultivate new client relationships one at a time, top earners work through the professionals, such as private client attorneys and tax specialists, who can influence and refer hundreds of new relationships over time.
3. Offer Robust Platform of Investment Capabilities
100 percent of top earners offer hedge funds and 77 percent offer private equity
The large majority of advisors build their practices around a core offering of investment expertise. Elite advisors have differentiated themselves by broadening their scope of capabilities beyond traditional public equities and fixed income to include alternatives, private funds and other sophisticated offerings that have the potential to diversify portfolios, minimize risk, enhance returns and mitigate taxes. As a point of comparison, just 20 percent of all advisors surveyed offer hedge funds and just 11 percent offer private equity, creating a significant point of distinction for those advisors that do.
4. Develop Broad Outsourcing Network of Specialists
100 percent of top earners source advanced planning and private security, 95 percent source concierge healthcare
To deliver a holistic, bespoke wealth management experience to their wealthy clients, top earners have carefully developed their professional networks to include a broad range of complementary services to address the estate and tax planning, asset protection, charitable giving, security, medical and other challenges faced by today’s wealth holders.
5. Adopt State-of-the-Art Technology
93 percent of top earners see technology as essential to business success
While there’s general agreement that technology can play a critical role in the modern advisory practice, advisors at the top end of the income spectrum actively embrace new technologies and think strategically about how to use them to deliver better service, improve operational effectiveness and gain a competitive edge—and follow-through to adapt and implement new advancements.
6. Embrace Thought Leadership Positioning
61 percent of top earners are actively working to become opinion leaders
To drive new business and maintain a position of authority among clients and referral sources, top earning advisors are taking a proactive approach to developing their reputations as thought leaders within their fields. By contrast, just 13 percent of all advisors surveyed are pursuing a thought leadership strategy for themselves and their practices, indicating that there’s room for insightful advisors to emerge as innovators.
The Architecture of an Elite Practice
Each one of these strategies can stand alone, but in elite advisory practices they are frequently interconnected, helping to cement and enhance their collective value to overall success. For instance, having high-net-worth clients is an important precursor to some of the other strategies—it would be difficult for advisors to maximize results from business development efforts spent with centers-of-influence if they couldn’t already adequately support the needs of new wealthy clients. Similarly, expanding an investment platform to include hedge funds and private equity without having qualified clients simply wouldn’t make sense. And, of course, having a network of high-end product and service providers is only useful if there’s interest and demand for those types of capabilities.
Moving Toward Outperformance
Focus on upgrading your client base first, as having wealthy clients is an essential element for many of the other areas. Once you have a quorum of wealthy clients and are nurturing a pipeline of potential new business, expand your focus to the other strategies in the order discussed herein. Specify the steps and time frame required to bring each strategy to fruition; some will be faster and easier to implement than others based on your individual strengths and experience.
It’s also worth noting that these practice characteristics are not the only thing that differentiate top earners from their less successful counterparts; it’s also how they see and respond to opportunities and challenges. Elite advisors are often the most competitive professionals and are continually looking for an edge to propel their practices to the next level. With similar focus and effort, you’ll note positive changes in your practice that will provide a foundation for continuing success.
Hannah Shaw Grove is chief marketing officer at iCapital Network, an alternative investments platform for high-net-worth advisors.