World CI conference update: Culling clients seen as key to a successful practice

“Advisors need to strive for that balance between having a business you like where you’re running it and it’s not running you, where you’re making money to have the time to have a good life,” he says, adding that culling clients to a range of 75 to 125 is optimal to achieve recurring revenue.

He notes an inverse correlation between an advisor’s revenue and the number of clients. Citing research from CEG Worldwide, Bachrach says advisors with a personal income of more than a $1 million have an average of 43 clients, while advisors earning less than $150,000 annually have 300 or more clients. “What it basically tells you is there are a lot of people out there working really hard, to make not especially great money, and to take care of too many people.”

Bachrach cautions advisors against measuring success based on the performance of peers, i.e. Joe Advisor’s a Million Dollar Round Table member, therefore I should be also. “That’s not what you’re supposed to do. The question is how can you take some ideas from [different advisors] and be the best that you can be.”

Many advisors are prone to becoming workaholics, he says, gauging success on the number of policies produced, rather than focusing on clients. “It’s more about having the right number of clients, who really trust you and follow your advice, than it is about selling some amount of products or services, or writing a certain number of apps.”

Successful advisors will also communicate with conviction and tackle awkward situations head on, Bachrach notes. For example, when a client says a certain insurance product is too expensive, advisors can remind the client about the trust created between the parties and reinforce the value being provided.

“You can’t tell your financial advisor who just looked at the whole picture, I can’t afford it. I would know if you couldn’t afford it,” says Bachrach. “That’s why some things are staged over time — this is what you can afford now; this is what we’re going to do over the next few months; this is what we’re going to do in the second year. It might take time to implement all of it, and yes, it’s expensive to be financially responsible, to own all this insurance, but the good news is it’s worth it.”

Charging clients more is another winning tactic that Bachrach says separates successful advisors from the mediocre. There’s a gap between the value advisors deliver versus the prices they charge, he says, adding that charging a higher fee makes particular sense with fewer clients in the mix, based on the greater service the client will ultimately be receiving. “Double your fee. Don’t provide any rationale for it, from now on just charge twice as much,” he asserts.

And although discussing fees might be uncomfortable, since money is always front and centre, Bachrach says not to waver when it comes to disclosing commissions. “Answer the client’s question and bring it to a conclusion,” he says. “Don’t pull out the fee schedule with the 1,700 ways they could get paid depending on the situation, the answer to the question is, ‘We get paid some combination of fees and commissions, depending on what’s right for you, which I’ll fully explain at our next meeting when we implement.’ It’s simple.”

Filed by Heidi Staseson, Advisor’s Edge, heidi.staseson@advisor.rogers.com