Another Wednesday, another Wednesday wisdom. Thank you for listening everyone. I had such great feedback. I received such great feedback on the prospecting hurdles video from last week that I decided to stick to some sales coaching content again this week. So I’m going to be speaking about net new asset growth in our business and why it’s so difficult for advisors to bring on the amount of assets that they probably imagined bringing on year after year in their business. So I’m speaking to three specific profiles of listener. I’m speaking to the independent advisor who is still committed to organic growth and maybe has hit a plateau and is thinking about the next 10 years and how they’re going to continue to grow at the rate in which they know they need to. I’m speaking to any lead advisors or senior lead advisors in an organization whose responsibility it is to bring on assets and generate revenue.
And finally, I’m speaking to advisors who are building wealth management practices within perhaps an insurance broker-dealer. So they started out transactionally have transitioned to a wealth management business that’s generating a million dollars or more in revenue, but they’re still not bringing on the number of assets that they want to be bringing on. The reality of our industry is that for many advisors who are saying and boasting that the business is growing year after year and that the business is healthy, the reality is is that a lot of that growth has come from the current book of business. We’ve been in a bull market for the past 10 years. And so it’s been really easy to feel as if the business is growing and thriving when really we haven’t done a whole lot to continue to net new grow the business. And so the opportunity is there. By 2030, there were going to be 64 trillion in investible assets in the United States, which leaves conceivably 200 billion in fees up for grabs by financial advisors in the marketplace.
We’ve heard all the numbers around assets transitioning and assets that have moved to robo-advisors. So I will say with conviction that the opportunity does exist. It’s just, I think, been really challenging for the solopreneur advisors to gather those assets successfully. And by the way, there are many advisors who are thriving at this. I’m speaking to the advisors who maybe need a little coaching around this topic. And so I’m going to assume that you are doing all the things that theoretically you’re supposed to be doing. You have an annual business plan that has very specific AUM goals for the year. You have quarterly marketing plans that drive activity and marketing efforts that should help you achieve the number of net new households you need each quarter to get to that AUM number. I’m going to assume you’re doing all the prospecting things I talked about on the last video. I’m instead going to talk about five things that behind the scenes make it difficult sometimes for business to bring on the assets that it wants to bring on.
So the first thing is something I talk about quite a bit. It’s scale. And so the first thing I’ll say is, my precursor to the first thing, which I always have a precursor, my precursor to the first thing is acknowledging the growth numbers. I speak to a lot of advisors who, like I said, say the business is healthy and are happy with the numbers year over year, but fail to acknowledge the reality that they are in fact struggling to bring on new clients. And when the market enters a downturn, when clients enter the distribution phase, which is inevitable, or when some of my younger advisors who have only ever built a business in a bull market face the reality of building a business in another market cycle, it’s going to be very difficult to not only keep your confidence up, but really keep the business sustaining.
So acknowledgment of where the growth is coming from is number one. But the first real thing is make room for the assets. And I speak about this on all of my videos in some way, but scaling the business is critical. Many advisors can’t actually bring on the assets in the households that they want to bring on because they literally don’t have time to manage and service those clients. So number one, figure out the margins on your business. Start at the $250,000 account size and under, calculate an hourly rate, a fair market hourly rate for you times the number of time you see clients who have 150,000 in assets with you, and then compare that to the amount of revenue being generated by those clients. If you are at a negative margin at that client segment, if you are breaking even, if you are close to breaking even we need to figure out something else to do with those clients.
I would much rather advisors, even if you’re charging 1%, by the way, if you’re charging 1% on $150,000 account and you’re doing nothing but maybe having a review meeting once a year, my message to advisors in the industry is you’re going to lose those accounts to a robo at some point in the future anyway. I’d much rather see advisors tier off those clients to somebody else, partner with another firm, partner with another advisor, bring on a junior partner, pay them a small salary and incentive comp based on management of those assets than continue to deal with those lower-tier clients. So actually making room to be able to continue to build your book of business is critical. The second thing is be in front of people who can generate recurring revenue to the business. So I’ll ask you, as you think about those prospecting efforts I talked about in my last video, are you in front of the people that can write the check? I work with and speak to a lot of advisors who say I work with business owners and business owners have 90% of their net worth tied up in the business.
And so maybe they’ll place an insurance policy or an annuity policy with the business owner, but there’s really nothing else to do with them according to the advisor. And so I always want you to think about being able to generate recurring revenue off of a client. So if it’s a business owner client, we want to think about offering a different service structure to them, perhaps they’re paying a fee for ongoing advice and planning, perhaps the sophistication of their case requires an annual assessment and valuation fee that you charge them in partnership with a business valuation specialist that’s affiliated with your business. But we need a unique offering to the clients that maybe don’t have the assets, but are revenue generators to the business and really good clients to have. We need an offering that generates recurring revenue off those clients if we’re not going to get the assets off of them, because ultimately that’s what this is about.
It’s about serving people, of course, but it’s about bringing in business to the organization that has a real multiple on it that drives enterprise value. So that’s the second thing. So first thing is make room for the asset. Second thing is make sure you’re generating recurring revenue off of every client that comes in. The third thing, and this is specifically to that third profile of listener I spoke to, make sure your initial meeting and onboarding process is conducive to a financial planning and investment management relationship. What do I mean by that? If you are positioning a product to them, even if it’s an investment product or investment strategy to them in the first meeting, then you have not created a, I’ll call it, referable wealth management experience for them. You have positioned yourself as every other advisor in every other broker-dealer in every other firm that is simply positioning a product with the client and you’ve made yourself a commodity.
And so ensure that you’re languaging and the actual process that you’re having a client go through, helps them to understand that the engagement with your business is comprehensive. It’s worth paying a premium for, it goes above and beyond asset allocation, it goes above and beyond risk management, and educating clients in that initial phase about the difference between wealth management and risk management or investment management and why we pay a fee for it is important. But it’s also critical if you’re trying to collect the assets to talk about that link between planning and ultimately managing the investments in house to help you really comprehensively run the plan. So that’s the third thing. The fourth thing is you have to earn the assets from another advisor. These assets are not just up for grabs, although some of them are sitting in cash and accounts, but you have to earn the assets from the other advisors in our industry who are a commodity, who aren’t doing anything differently, who have websites that talk about the same comprehensive investment management processes every other advisor. They are your assets to take.
So talk about the fact that everybody looks alike in our industry and your firm was built to be different, which leads me to my final point. And I speak about this a lot as well, speak directly to the wealth holder. If you want to target gen X wealth holders, then talk about the fact that you’ve built a firm or you’ve repositioned your firm to work directly with gen Xers, because everybody’s talking about baby boomers and millennials, and nobody’s talking about the unique needs of gen Xers in today’s marketplace. So make room for the assets, figure out your margins, be in front of people that generate recurring revenue, make sure your initial meeting is conducive to the process you want to undertake, earn the assets from another advisor, and speak directly to the client. Thank you for listening. I’ll see you next week. Same place, same time. Take care.