From the beginning, the vision of Parkshore Wealth Management was to reach and exceed $1 million in revenue.
Incredibly, the firm opened its doors in October 2008 at the worst possible time.
“The effects of the recession were still unrealized, and our visions of the future were too optimistic,” says Daniel C. Andersen, a certified financial planner and vice president of the firm, which is based in Roseville, Calif. “We didn’t take into consideration the volatility that would overtake the market.”
Andersen credits having the right technology and the right people in place for the growth that the firm has made since.
Hiring somebody capable of managing back-office operations has been key to breakout growth.
It has allowed the firm to eliminate redundancies and let financial advisors be advisors, Andersen says.
“We look at all clients today as either $1 million clients or potential $1 million clients and take on the challenge of helping them achieve that,” he says.
Being able to transition away from smaller [money] clients is key to the growth of a firm, according to Kristen Luke, co-founder and chief innovation officer of Kaleido Inc., a San Diego-based management consulting firm.
Luke, who has helped many advisors climb to the $1 million mark in revenue and beyond, offers up her blueprint for reaching that goal.
In the beginning of a practice advisors usually focus on bringing aboard any type of client they can, she says.
“Usually, that means they’re going to every networking event they can,” Luke says. “We call that ‘the-1,000-cups-of-coffee marketing plan.’”
Later, when advisors reach about $300,000 in revenue, they should shift toward marketing their practice as a business, Luke says.
At that point, they should “refine their client profile” and start raising their minimum asset management fees, she says.
“They then need to shift their marketing to be more focused on client referrals and center-of-influence referrals, and if they continue networking focus on quality more than quantity,” Luke says.
“An advisor who might have taken an account of $50,000 is now increasing their minimum investable assets say, to $500,000,” she says. “The reason is they don’t have the capacity to service so many clients at such a low level.”
Upon reaching the holy grail of a $1 million minimum and working with wealthier clients, some advisors will begin working with smaller clients again, Luke says.
“The reason is they have the money to make the investment in ‘robo’ advisor technology to be able to service those smaller accounts profitably,” she says.
Are there pitfalls along the way?
Unfortunately, many advisors “get stuck in their comfort zone,” emulating their early successful days and don’t make the transition, Luke says.
“We always say, ‘what got you here won’t get you there,’” she says. “The difference between a $1 million producer and a $300,000 producer is a change of mindset.”
Bruce W. Fraser, a New York financial writer, is a contributor to Financial Advisor and On Wall Street.
This story is part of a 30-day series on how to prosper as an advisor.