The first goal of any advisor is to help our clients – help them pursue their goals, avoid unnecessary risk and develop a comprehensive financial plan. Simultaneously, you want to grow your business and provide value to your clients.
Many advisors focus on growth through finding and converting prospects to clients, whether through marketing, referrals or centers of influence. However, you can provide more comprehensive advice to your current clients and drive growth simultaneously – by increasing your wallet share.
What is Wallet Share?
Advisors may only manage a portion of a client’s investable assets – this portion is called wallet share. It’s not uncommon for clients to hold back some, whether that’s discretionary accounts with another advisor, retirement savings through an employer, real estate holdings or self-managed assets.
Other times, clients may not realize they have additional assets with which they could be getting professional assistance. You increase your wallet share when you take on more of these assets. But in order for clients to want to give you more of their net worth to manage, they must trust you and see the value that it will provide.
Increasing Wallet Share Can Help Your Clients
Obviously, you want to know your client’s full financial picture before developing a financial plan. But that doesn’t mean a client will disclose all their assets – either because you need to first provide a comfort level and convey your value proposition, or they simply don’t realize what goes into a financial plan.
This doesn’t mean you will advise on all the assets – you just want to create a more comprehensive plan. Say a client has a portfolio of rental properties. They may not consider this real estate worth mentioning because it’s not part of their investable assets. But such commonly overlooked assets could impact how other money should be invested.
Without insight into these other assets, it’s difficult to manage the overall portfolio in line with the client’s risk tolerance and goals. Further, these properties could turn into investable assets at some point in the future if the client chooses to sell them.
There is also risk tolerance to consider. If you are working with a client who is using a second advisor or managing their 401(k) on their own, they may think they are diversifying and that can help them. But they could end up in similar models that actually create less diversification in the overall portfolio.
Over time, the more value you deliver, the better the chances the client will want to move those assets to your firm.
Build Strong Relationships and Wallet Share will Follow
As fiduciaries, advisors must understand that growing wallet share isn’t a short-term proposition. As with many successful financial advisor strategies, it’s based on trust over many years, with holistic financial planning at its core.
We once worked with an advisor whose young client never made more than $40,000 a year. Although the client didn’t meet the advisor’s minimum, he enjoyed working with her. About two years into the relationship, the woman’s aunt passed away and she inherited $2.5 million, which she transferred to the advisor to manage, quickly becoming one of his top clients.
The transfer would never have happened if the advisor hadn’t already earned the client’s trust by providing her with excellent service.
Maximizing Your Value Through Planning
Consider also that as clients change jobs, expand their families, receive promotions or retire, they have additional planning needs. They may need to roll held-away retirement accounts over, take advantage of a Roth conversions, set up 529 plans or increase contributions due to career growth. Wallet share is earned through comprehensive advice and deepening relationships with your clients.
Take, for example, the issue of inheritance. Yes, this could be a source of additional wallet share. But receiving an inheritance often also means having to settle an estate, an emotional and time-consuming process. Short- and long-term tax implications also need to be addressed in their financial plan. By working hand-in-hand with their attorneys and tax professionals, you are proving your value.
Remember also that you’re always serving your client. Perhaps a client has a small amount squirreled away in a brokerage account that they enjoy researching and trading. There is nothing wrong with them continuing to manage this money on their own. Just be sure it’s addressed appropriately in their financial plan.
Make Client Meetings Special
Client meetings are an excellent opportunity to get to know clients in a more meaningful way and find out how you can better serve them. Only by understanding as much as you can about what’s going on in their lives can you start putting together all the pieces of their financial plan.
Are your clients concerned about caring for elderly relatives? You might need to help them consider long-term care and plan for additional health care costs. Do they have executive benefits through an employer that may impact their future income? Are they taking full advantage of workplace benefits?
By focusing on comprehensive planning, you’re providing more value and setting yourself up for potential additional wallet share in the future. Clients should walk away from these meetings feeling that you have relieved them of the burdens of a complicated financial life.
Where are the Assets?
As the client-advisor relationship progresses, you can identify additional areas where your guidance can help.
One way to find potential assets is to pore over clients’ tax returns. The 1040 may contain information about accounts and sources of income you may not know about, such as a Roth IRA. It can point out tax-exempt income from municipal bonds and royalty payments. This can be the springboard for understanding your clients’ full financial picture and identifying ways to relieve the pain points of keeping track of all the moving parts.
Another strategy is to show clients how they can create room in their budget for additional saving and investing. For example, changing life circumstances such as when young children transition from daycare to public school can free up assets for college savings, given that the typical childcare center costs more than $1,000 a month. Alternatively, clients may be in a position to put more money toward their retirement when their children graduate from college and leave home.
Your Tech Stack Can Help
It can be a daunting task to identify all the potential ways to increase wallet share. Technology makes the job easier as you work out how to grow your financial advisor business.
To start, use a robust digital onboarding solution that makes inputting all client data as easy as possible. Avoid static, fillable PDFs that may not contain the appropriate cells to capture the fullness of clients’ lives.
Another powerful tool is account aggregation software, such as Carson’s Client Experience, Yodlee or Plaid, which brings all of a client’s accounts into a single view, no matter where they’re held. By seeing the entirety of a client’s assets, you can see any overlaps or gaps, helping you make better holistic recommendations. Better yet, using account aggregation software has been shown to help advisors increase wallet share, according to a study by Aite Novarica.
One note of caution: Account aggregation is only as powerful as the information it contains. Help clients provide you with the most accurate information by automating as much of it as possible.
For helping clients with their retirement investing, there is Pontera, which gives advisors a view of all the investment options in a client’s 401(k) plan so they can advise on or manage it.
Finally, tax analysis software like Holistiplan, can scour tax returns to identify planning opportunities. This can alert you to additional accounts and sources of income that clients forget to mention.
Increasing wallet share is an excellent growth opportunity for advisors, but only if it’s in pursuit of clients’ life and financial goals. Thankfully, growing wallet share also enables you to provide meaningful advice and fulfill your fiduciary duty to do what is in the client’s best interest.
Want to know what’s driving the success of today’s fastest-growing advisors? Subscribe to Carson’s newsletter, The Trend Line.