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Hosted by Financial Advisor Coach, Ray Sclafani, "Building The Billion Dollar Business" is the ultimate podcast for financial advisors seeking to elevate their practice. Each episode features deep dives into actionable advice and exclusive interviews with top professionals in the financial services industry. Tune in to unlock your potential and build a successful, enduring financial advisory practice.
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Welcome to Building the Billion Dollar Business, the podcast where we dive deep into the strategies, insights, and stories behind the world's most successful financial advisors and introduce content and actionable ideas to fuel your growth. Together, we'll unlock the methods, tactics, and mindset shifts that set the top 1 % apart from the rest. I'm Ray Schlaffani, and I'll be your host.
Well, the best defense is really a good offense. In this week's short bonus episode, I want to focus on the volatility we've all experienced this week and how it can actually help propel your business forward. So imagine this, your client opens their quarterly statement and it's all green arrows. The 401k is humming, their investment accounts, well, they look like they've been on a rocket ship. Then your client sends you this very quick email and it says, thanks again, great work.
Well, it feels terrific to help clients achieve their goals. But here's some radical candor. During a bull market, it's not exactly the most difficult time to look like a genius. As the old saying goes, never confuse brains at a bull market. Even average performance can feel exceptional in your client's eyes when everything just goes one way up. Now fast forward, that same client logs into their accounts this week, and everything's dipped.
Even if their portfolio is holding up better than most, say down 10 % while the market is only off 20, well, they're not calling a thank you. They're calling because they're nervous, they're frustrated, or maybe both, or maybe at all, they're not calling. Here's the truth. Clients compare returns when the market's up, but when the market's down, regardless of how well you've navigated the storm, many clients focus on absolute losses. In moments like these, how you present yourself and how your team members
frame the story makes all the difference in the world. With the S &P 500 currently down more than 17 % from its peak reached just a month and a half ago, combined with growing whispers of recession, well now is the time for your firm to prove its worth by reinforcing the value of planning while attracting new clients to grow your business. I understand this may not seem like the most ideal moment to prospect for new clients and assets, but that's
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precisely what it is. It's only when the tide goes out that clients can truly appreciate all the capabilities and efforts that go on beneath the surface of your business. After more than 30 years of working with financial advisors, I've observed that the best in the business consistently attract new relationships when the future becomes uncertain. Just look at the growth rates of the top ranked advisors following every market downturn. The 18 months after often see an expansion of growth in new clients.
Matt Barthel, who's the executive editor at Dow Jones Wealth and Asset Management Group and Barron's Magazine. He shared some insightful data with me recently. In the months and years after COVID, he said, the nation's top wealth management teams grew at an astonishing pace. As of December 31st, 2019, the top 50 private wealth teams, all FINRA registered, focused on individuals and families, not institutionals. They had a total of 328.8
billion in AUM. That's an average of 6.6 billion per team. Five years later, on December 31, 2023, that same cohort had grown AUM by just under 150 % to a whopping 817.9 billion or 16.4 billion per team. The teams also added staff aggressively, growing from an average of 14 team members to 31. So
Let's explore a few ways to not only strengthen existing relationships, but also create an effective game plan to attract new clients. Okay, let's tackle existing clients first. Begin by evaluating which clients are genuinely at risk, either because they don't recognize the value of planning services, maybe they lack confidence in their plan, or they struggle to understand what exactly you and your team do for them. A brief five minute client attitude assessment.
that your team can conduct can serve as a useful starting point. So I'm going to give you five very specific questions here. And then I want you to evaluate each client on the following metrics, scale of one to five, one, not at all, five, very much. Start with your 20 to 25 top high revenue per client clients, and then work your way down a list. Here are the questions. First question, does this client understand and value the financial plan that you've co-created with them?
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Do they feel confident about it? And do they view financial planning as a dynamic, evolving approach rather than just a static document? Second question, if someone asked them what makes your firm different, would they be able to confidently and accurately describe your unique value and approach, scale of one to five? Third question, have they ever proactively shared a personal story, life transition, some aspiration that goes beyond the numbers?
And do you feel they trust your team to help guide them through those transitions? Scale of one to five. Number four, does the client see you and your team as partners in shaping their family's legacy, not just as an investment manager, but as a real guide, helping them prepare their next generation and heirs to carry forward their values, wealth and intentions with clarity and purpose. Scale of one to five. Number five, in the past year,
Have they introduced your team to someone in their circle, in their network, or expressed that they would feel proud or comfortable doing so? Again, scale of one to five. Any client who scores 15 or lower should be considered questionable or at risk. Develop a strategy to enhance their understanding of what you and your team does and how it benefits their lives. Take time to reflect on each client and household relationship.
Identify the best outcomes you hope to achieve moving forward, specify the actions needed to reach those outcomes, and then designate the team member or members responsible for each action. I would not be afraid to open up a Pandora's box here. Most advisors are like, well, during volatile times, you know, let's not focus in on a portfolio performance or client emotions. Let's just sort of be like troglodytes and hide under the desk.
That's most advisors, the best in the business, especially during volatile times, pay closer attention to managing client emotions and some cognitive biases, factors that not only impair the client's ability to remain emotionally detached from their money and investments, but it can also derail even the most carefully crafted financial plans. I know you've all received those phone calls from the client that you didn't expect to react the way they might have, but
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Sometimes people get really concerned and this is your opportunity to step up and embrace them with empathy, care and deep commitment, making sure all team members understand this approach and process will help elevate your entire team and deepen client relationships. In September 2008, which seems like forever ago, but as the market was collapsing back then, we developed at ClientWise this tool called the At-Risk Client Assessment Worksheet that was designed to help our clients
describe and segment their clients into four distinct archetypes. They are the at-risk client and the questionable client. I just shared those two with you a moment ago, a scale of 15 or below on those five questions I gave you. Well, those are the at-risk and questionable clients. Then you've got the engaged clients and then the client advocates. Now, these four segments might seem really obvious, but let me give you a little deeper definition for each of these. The at-risk clients, these are the ones who are clearly upset.
They might have even voiced their disappointment, expressed dissatisfaction, mentioned even the possibility of moving their relationship to another advisor. They might be unhappy with their investment portfolio, their financial plan, or the performance of some life insurance product. It's possible that you might have experienced some turnover on your team and that left them frustrated by the constant change in staff. And they've had to deal with all of that. They might feel like they've been shuffled around or viewed themselves as an orphan account.
Okay. That's the at risk. The questionable clients. These are the ones who are suddenly less responsive than they might've been in the past. There might've been a wrinkle or a bump in the relationship where someone on the team dropped the ball. Even if the issue was ultimately resolved, there's still kind of that wrinkle in the relationship. Maybe the questionable client is somebody you haven't really had the deep conversation with about their future in a while or.
Perhaps if you suggest involving their spouse or their kids, they balk at the request. In all likelihood, you're renting the relationship until you receive that ACAT transfer and the client may have lacked the courage to vocalize their dissatisfaction and chose to simply move the account instead. I once had an advisor describe to me one of their very best relationships, one of their best advocates in fact, had actually gone silent.
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And they thought it was just kind of, well, they were going through a period of time. And then all of a sudden out of the blue, six months later, there was an ACAT transfer, which by the way, subsequently was followed by a whole lot more ACAT transfers. So these questionable clients you want to pay close attention to. The third is the engaged client. Hopefully this is the lion's share of your clients. You know, these are the ones that attend meetings regularly, filled with enthusiasm, lots of questions. They've been with you for a while.
They've been working with your team. They're excited to work with your team. In fact, they're likely to stay for generations to family engagement and connection with your team members. Perhaps they make a referral occasionally, maybe not as often as your advocates might, but they're stable, they're dependable, they're profitable, and you and your team enjoy working with them. Your ideal firm would love to have a hundred more just like them. These are the engaged clients. The fourth is the client advocate. We know who these are. It's a small subset of clients.
They consistently make three or four or more introductions each year. They and their families are fully engaged with your team. They actively advocate for you within the community whenever the opportunities arise. These clients are easy to identify. So my encouragement would be you and your team take an actionable step, use this at-risk client assessment. We'll put the link in the show notes. Take those five questions I shared with you, give a score, scale of one to five.
score them up and determine which of the clients are more on the questionable or at risk side. And then which of the clients are the more engaged and advocate side. And you'll find that this exercise really refocuses and brings into sharp focus which clients maybe you probably want to spend a little extra time with during this heightened volatility period of time. Reassurance actually does drive more referrals. While
It is true that when the going gets tough, some advisors focus only on the potential pitfalls and then withdraw into their protective shells. And then others view this uncertainty as an incredible new business opportunity. Prospects who are currently self-directed, well, they may be reconsidering their need for guidance right about here. They don't want to go it alone. Others who are working with your competitors might become increasingly frustrated by the lack of communication from their advisors.
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The truth is the best in the business always generate more new client referrals and attract new client accounts during the most volatile times. Instead of hiding under their desks, they increase their communication and outreach. Phone, Zoom meetings, webinars, all to help re-insure and boost the confidence of every client by highlighting the progress and success of their long-term financial plan. By the way, when you're doing the at-risk assessment,
Pay close attention to those that are the most engaged and the most advocate for you and your team, and let them know you're open for business. That if they bump into somebody at church or synagogue or on the soccer field or in the grocery store or at work that who might be feeling this sense of uncertainty about the future, let your client know now's a good time to make an introduction. Let them know that you're confident about your plan and you'll find that more and more
those clients will get engaged in making those introductions. So regardless of where the market moves from here, I would suggest now is the time to lead. Encourage your team to remain future focused, connect with clients in a very purposeful way, implement thoughtful updates that reinforce client confidence. Remember to explore ways to expand your impact and grow your client roster right about here. As you care for others, remember to care for yourself.
I always joke when you board an aircraft, hear from the speaker when the oxygen mask comes down, you know, put it on yourself first before assisting the person next to you. I would encourage you right about here, revisit your own financial plan, reflect on your confidence about the future and engage in meaningful conversations with your family and heirs. Strong leadership starts with you. With each episode, there are a series of coaching questions that you can use with your team and your leadership to reflect.
on what you've just heard. Today, there are four questions. First, what strategic actions can you take to engage the at-riskers and the questionable clients more proactively and develop them into reassured referring clients who are engaged in advocates for you and your team? Second, when conversing with clients, how much time do you spend discussing the services you provide instead of the challenges you can help the client overcome? What steps can you take to shift the conversation
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toward adding more value. Third, how will you invite your most engaged clients and advocates to partner with your team in introducing their networks that may feel anxious or concerned about the markets? And fourth, what is your client acquisition strategy to grow your roster of new clients and impact during these uncertain times? Well, thanks for tuning in and that's a wrap. Until next time, this is Ray Sclafani. Keep building, growing and striving for greatness.
Together, we'll redefine what's possible in the world of wealth management. Be sure to check back for our latest episode and article.