KEY TAKEAWAYS

• A select group of advisors are earning more than $1 million annually.
• Position yourself to capture additional assets from existing clients.
• Focus on moving upmarket through partnerships.

FACE THE FACTS

CEG Insights surveyed nearly 1,100 financial advisors. Roughly half of them (49.3%) earn less than $500,000 annually, while 37% earn between $500,000 and $1 million a year. A select few—13.8%—earn more than $1 million a year.

Here’s what we learned about these top advisors in a few key areas:

• 46.9% of the $1 million-plus advisors manage more than $1 billion in AUM—versus less than 10% of advisors earning less. Interestingly, however, nearly one-quarter of the highest-earning advisors generate their sizable incomes managing between $101 million and $500 million in AUM—proof that success isn’t determined simply by AUM levels.
• Number of clients. Not surprisingly, the highest earners tend to serve the most number of client households (see the chart). But note that there’s differentiation even among the top advisors. Approximately 15% of them earn more than $1 million serving just 51 to 150 client households.

INSIGHTS INTO ACTION

Based on our research and our experience coaching financial advisors, we believe there are five key action steps that advisors who want to generate higher incomes should seriously consider implementing in their practices:

1. Manage more of your clients’ wealth. Top advisors enjoy more “wallet share.” Example: A solid majority—61.5%—of $1 million-plus advisors report managing between 76% and 100% of their clients’ total investable assets. In contrast, those advisors earning less than $500,000 tend to manage just 25% to 50% of their clients assets.

To attract more assets from existing clients, take these steps:

• Engage in re-discovery. Every few years, have a deep and detailed conversation with your current clients about what’s changed in their lives. These discussions often help advisors identify new or additional assets—from an inheritance or windfall, say, or the sale of a home—that they can ask to manage.
• Position yourself as lead advisor. Many clients have multiple advisors. Your job is to act as the leader of that group by reporting on the big-picture, comprehensive status of that wealth. When you’re able to report to clients how their entire financial situation—including accounts with other advisors you don’t manage—is looking in relation to their goals, you position yourself to win more of those outside assets over time.
• Implement account aggregation technology. Aggregation tools enable you to see clients’ entire financial picture, including those assets held at other institutions, and give clients a full view of their financial lives.

2. Target HNW clients. It’s not rocket science: Wealthier clients tend to mean more income for advisors who serve them. Among the $1 million-plus advisors, more than 75% of their clients on average have at least $5 million in net worth. That percentage falls to just 35% for advisors making less than $500,000 annually.

Three strategies that can help you move upmarket and attract clients with greater affluence are:

• Leverage strategic partnerships. Centers of influence such as accountants and attorneys who work with wealthy clients can be excellent referral sources—particularly at those moments of transition when their clients may need help with wealth management. Building strong relationships with these COIs can lead to more wealthy clients.
• Position your practice to be a virtual family office. The VFO business model is designed to emulate the traditional single-family office model that serves extremely affluent families. This model incorporates a wide array of financial and nonfinancial services and solutions that the affluent and ultra-affluent find extremely attractive.
• Offer workshops tailored to address affluent clients’ key concerns. Mass-market workshops often don’t lead to new business. But workshops and presentations that are designed to speak to the big concerns facing wealth investors and families can be a strong way to build new business. Some of those concerns these days include how to leave a legacy for children, and tax mitigation strategies. A smart approach: Hold workshops in partnership with accountants and attorneys with whom you have strong relationships.

Next time, we’ll explore the remaining three action steps that are helping top advisors climb the hierarchy of advisor success.

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