In this Q&A, Erin Botsford, Founder and CEO of The Advisor Authority and a Barron’s Top 100 advisor and author, shares her insight and expertise on how advisors can best allocate to alts.
What’s the best way to introduce alts to clients?
“The first thing is to identify who your ideal clients are and whether they’re good candidates for alts. We all know alts aren’t for everyone. In most cases, you need to make sure you’ve moved upmarket enough to work with clients that have a high-net-worth (HNW), margins, and the capital to explore alternatives. The best way to do that is to first study the issues facing those HNW clients and learn how to address them — and 90% of these issues are on the non-investment side of the balance sheet. That’s what we train on here at The Advisor Authority.”
Who are the ideal clients for alts?
“To provide the most value to clients that can recognize it, and want to take the risk, they need to have a high enough net worth to afford it. This means, they not only need to be interested in exploring alts, but they also need the capital to cover it without hounding you or worrying that the investment is suddenly too risky. If you are primarily working with accumulators as clients, in most cases alts are not a good option. When you move upmarket and work with HNW individuals, it affords you the opportunity to create alts portfolios and vehicles with confidence and calmness from the client.”
How do I close prospects with less effort and chasing?
“The simple answer is to elevate and differentiate yourself from your competition. If you enter the relationship with your Callan charts, performance metrics, and lead with investments, you look and sound like every other mediocre advisor your prospects have probably met. Instead, lead with risk management, estate questions, lifestyle planning, and areas where the prospects are vulnerable on the other side of the balance sheet. Show them you’re different by speaking the language of risk management, not investment philosophy. If you can leave the prospect understanding the consequence of inaction in their financial situation, you will make an impression they’ll remember and will be rewarded with their business and their referrals.”
Where do I find those ideal high-net-worth prospects?
“They’re everywhere, all over the country, often in towns and neighborhoods you wouldn’t expect. However, the first question I ask advisors that want to know this answer is, “If I put you in a room full of your ideal $20MM clients, would you know what to say to close them?” In most cases, the answer is no. The first thing you want to explore is understanding the issues your ideal HNW prospects are facing so you know exactly what to say when you get in front of one. Then, you’ll find that changing your language invites bigger and better referrals, and suddenly those HNW prospects find you!”
Do I need a team of my own to achieve the next-level success you talk about?
“Not necessarily. It’s very difficult for a completely solo advisor to build a next-level business without losing balance and dropping the ball with clients, so we recommend you have at least a qualified and competent assistant to manage the paper and requests. Beyond that, you can certainly build with a Relationship Manager, a Planner, or even marketing personnel. The overarching idea is to have a business with the right people and systems in place, so it has enterprise value in the marketplace. Do you have a succession plan? Do you want to eventually sell your book for a healthy multiple? If the entire business depends on you and your involvement, it’s not going to have much value because the risk is too high. Draft a plan to delegate and elevate, and make sure you have some style of succession plan in place. Even if you build a team slowly, you want more than just yourself taking care of everything in your business.”
Learn more about Erin Botsford and The Advisor Authority.
