Lance Cheung and Keiren Murphy ran a up-and-coming tiny advisory giant called Parinity (i.e. small in size but destined to be a giant among future advice firms) from Brisbane’s garden suburb of Ascot.
We spoke earlier this week about a common and constant struggle for every advice firm.
How do they best balance the demands of clients that still prefer the traditional financial planning offer (i.e. an investment plan, an insurance product, or combination thereof) when the firm’s desire is to attract, secure and manage clients that seek greater financial certainty and the achievement of their financial outcomes.
I refer to this struggle as managing the tug-of-war between their oldco (old way) and newco (new way) client bases.
It’s an on-going challenge that will always be present no matter how far firms like Parinity develop their proposition. The majority of clients attached to advice firms will always reflect their past propositions whilst the minority will reflect their current and future propositions.
My experience suggests that NewCo clients gravitate towards advisers who lead them towards their outcomes rather than sell them products or services. The fees NewCo clients pay are proportional to the breadth and depth of the advice relationship provided. The guts of the NewCo proposition is focussed on overcoming the specific financial complexities occurring in a NewCo client’s life year in, year out. These complexities generally have their origins in the behaviours of NewCo clients rather than in their financial statements.
However, OldCo clients and OldCo work is still OK.
In fact, OldCo work got all advice firms to where they are today.
In our developing marketplace, OldCo work is a tougher road forward if firm’s wish to achieve yet another higher level of success.
OldCo clients aren’t interested in buying or engaging in advice relationships, they just want their product or service and they value the money they pay on the performance of those products or the outcome of a specific service. That’s OK. It’s just OldCo.
A prospective client that Keiren and Lance presented to recently freaked out when he saw their first year fee. He just wanted the insurances he originally came in for. Whilst Keiren and Lance could see a lot of other complexities needing attention and work, if the client couldn’t see the value, that’s OK. He might ‘get it’ later, but he’s not ‘getting it’ today.
You certainly can’t build a business upon client’s like that coming back year every year. They might, but they are just as likely to move on when they perceive they don’t need the service any more or they can buy the product for better price elsewhere. Chances are good that clients like that will ‘opt-out’ when they see another product or service that THEY believe will better serve them.
I believe if you are in the business of building an advice firm, you will have a much easier and rewarding time building a NewCo clientele than trying to match the ‘big institutions’ who are aiming to serve as many as possible with OldCo propositions.
All advice firms are a pot-pourri of client types.
All these client types deserve equal respect, but not all clients deserve equal service as they aren’t all paying you the same amount of money.
I believe your aim is to continually stretch your firm’s NewCo ‘muscles’ and abilities.
Maintain a balance between your NewCo and OldCo clients, but be wary of slipping back into the comfort zone of OldCo work (particularly in these tough times) and then getting caught as the ‘majors’ and ‘legislation’ and other uncontrollable factors (e.g. consumer trends, world economies) leave you little alternatives to ensure your own growth and prosperity.
What do you think?