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Saturday, January 12, 2013

I Don't Have an Ideal Client

Source: Capital Pixel
Marketing gurus ask me about ideal clients.  They say I should be able to describe in a few sentences my ideal client.  I should be able to spit out "male, Physician (fill in the occupation), 41 years old, portfolio of $500,000, 2 children in middle school and a mortgage that has 15 years to run."

Other gurus say I should have a niche.  I should focus on doctors or teachers.  I should focus on teachers who are on the verge of retirement.  I should focus on divorcees.  Having an ideal client and a niche is, they say, a key to growing an advisory business.

 Ideal Client?

Well, I don't have an ideal client or a niche.  I'm an investment advisor.  Many people, young or old, whether they are teachers, doctors, or the Comcast gal who fixes your cable after a storm, have a need to go over their investment strategy whether they are looking for investment management or just a second opinion on their 401(k).

A one hour sit-down with statements spread around the table with an investment professional can do wonders for the investment program of many people.  Without belaboring the point, suffice it to say that getting in place a well thought-out investment strategy is the one legitimate shot many have at moving higher in the wealth spectrum.
Marketing gurus do suggest one thing that I agree with.  They say that advisors should differentiate themselves.  This goes beyond saying "I manage assets so that clients reach their goals" or "we build portfolios with the client's goals as the number 1 priority," etc.  Everyone puts out the similar tired phrases.  Differentiating is about doing something that others don't.

I differentiate my practice by offering to teach individuals how to invest.  As far as I know, no one else does this.

I'll admit that teaching individuals how to manage their own money isn't the world's greatest business model.  In essence, it keeps monies that would be going into an advisor's pockets within client portfolios.  Over long periods, taking compounding into account, it can amount to a significant impact.

As I said, I don't have an ideal client.  That's not to say that some aren't a challenge more than others.

An Easy Client

Let me give you an example of one who isn't a challenge.  Last week I met with a young man of 34, single, good job he likes, with a portfolio slightly below $300,000.  He has a young lady in the wings (sorry ladies) and plans to marry in a few years.  She has a good job as well, and they have discussed money and are on the same page philosophically when it comes to finances.

All of this is great, but I will tell you I've seen similar cases that were train wrecks on the verge of happening.

Not with this young man.  He had read Hallam's Millionaire Teacher and grasped its principles.  He understood the importance of investment costs over the long run.  He understood the value of low-cost, well-diversified index funds.  He lives within his means and has a strong saving program.  He is also in the habit of playing around with online retirement calculators, which I encourage.

Time is on his side.

The reason we were sitting at the table was that he saw me mentioned in the book and contacted me to help rearrange his investments in line with Hallam's principles.

There are no guarantees in life.  There are potholes.  Still, it is easy to see that this young man is on the path to achieving a stress-free financial program that will very likely result in a satisfying life 60 years and beyond.  Simply stated, he and his family will have very attractive choices 30 years from now. And, the beauty is that this will be achieved as he hardly notices it.  Most of the funding comes automatically out of his paycheck.

For me, he is an easy client.  He has done his homework.  He has spent a few hours absorbing the lessons of an important book.

On the other hand, I see potential clients who are afraid to invest.  Others are convinced that they can beat the market.  As clients, they are challenges.  It turns out that the idea that even the smartest people tend to underperform the market is counter-intuitive.  So counter-intuitive, I would say, that some people just can't get it.  They are like the baseball scouts in Moneyball who can't be convinced that a nerdy guy cranking out statistics can pick ball players better than they can by watching them play a few games.

So I don't have "ideal clients" but, admittedly, some are easier than others.

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