Market volatility, economic concerns, and rising inflation are just a few of the current issues causing advisors to take a deeper look at their business offerings. When the climate is uncertain, business owners are smart to diversify their options and avoid keeping all their eggs in one basket.
Client service is a top priority for financial advisors. Could your clients and your practice benefit from additional services? Let’s look at how to diversify revenue sources in 2023 to protect your business, benefit your clients, and increase your client base.
When you are helping a client choose a portfolio, you probably encourage diversification to reduce risk and improve investment stability. The same should be true for your business; diversification of revenue allows you to proactively spread out your focus, so you aren’t relying too heavily on a singular service or niche audience.
Many advisors work within a business model that focuses on a specific income stream. You might make money through transaction fees (for commission products), charging as a percent of assets under management (AUM), charging a flat fee for a specific service, or charging an hourly rate. You might be focused on a specific kind of service (like financial planning or real estate investment management) that targets a very specific customer base.
Diversifying your offering and adding additional income streams can increase cash flow and protect your practice during market downturns. Offering more services allows you to attract new clients as well.
Many of today’s clients are looking for holistic advice beyond investments or wealth management. A 2020 survey found that clients are willing to pay their financial advisors to help them achieve total wellness. This is especially true among Millennials (Gen Y) and Gen Z clients, who said they are likely to pay financial advisors to expand their role beyond financial planning and investment management for additional services that target:
As you consider additional sources of income, digital products, and services you could offer, it’s important to understand your clients and where they would benefit most. You can create partnerships to support services that don’t align with your expertise or interests.
Clients are looking for professionals who can multi-task and address more than one area of their lives. There are many services you can provide that will support your clients and bring in extra income. Options include:
As you think about where you can expand your offerings to bring in multiple streams of income, explore beyond your comfort zone. There may be downsides to learning new services and startup challenges, but there are many benefits as well. Not only will a diverse offering make your work more interesting, but you will also have the chance to earn more money and help more people build wealth.
You may need additional licensing and education if you want to act as a direct contributor for these new services, but it will be time and money well spent in the long term. If you are not sure about a specific area, take an online course or sign up for a class at a local college; making a small investment upfront can help you determine if the service is right for your practice.
Here are three quick ways you can get ideas for how to expand your offerings.
Tap into your existing customer base for ideas on where you could better support their needs. Your existing clients are already familiar with you and the quality work you offer. Ask them what other types of services they are looking for – and don’t limit the possibilities to finance-related options. To do this, you can send out a quick survey where your clients choose from a select set of options to express where they have the most interest.
Your clients are interested in holistic life planning support. Why not be the professional who provides it—or partner with someone who does? For added impact, once you’ve established the services your existing clients are interested in, leverage your client segmentation resources to target your outreach.
How many people are interacting with your brand and not necessarily using your services? Ask your social media followers to express their interest in specific offerings. As you get feedback, keep in mind that not every social media follower is an ideal client for your firm.
Remember not to make these posts self-serving; think about what is important and relevant to your audience. Post an interesting story on a particular service and gauge the feedback you receive.
You may have people in your staff or family who would be part of a great target audience for your firm. Poll your staff members, particularly Gen X-ers and Millennials, to get a better sense of their age group’s expectations. Talk to your adult children, nieces, nephews, or cousins who might be part of a demographic you want to target.
Talking to people in your existing circle is likely to lead to honest conversations and helpful insights. You might also get some feedback on what to avoid as you expand your services.
Here are seven specific examples of how you can expand your practice.
The rise of subscription services—where consumers pay a set amount for access to a product or service—has proven to be both popular and profitable in many industries. Clients want ongoing support and access to their financial advisors. Digital portals and virtual tools make it possible to be “always on” for your clients. Offering access to various services, guidance, and information (think tax guidance, securities-based lending, or college planning, for example) gives clients peace of mind and gives financial advisors a recurring source of revenue.
Being “on retainer” for a pre-determined set of services throughout the year is another source of steady income. Importantly, it offers both clients and financial advisors additional flexibility: fees can be charged hourly, monthly, quarterly, or annually—whatever arrangement works best for everyone. Additionally, the services can cover a wide range of areas beyond asset management, such as providing economic/market insights or data privacy/protection guidance.
A flat fee option removes the link between AUM and fees. Financial advisors charge one flat fee for financial planning and/or investment management services, no matter the client’s assets. Charging a flat fee for investment management might be more appropriate for smaller AUM clients who still need some of your services. One straightforward fee is agreed upon, and a contract is signed. This removes ambiguity for either party. Not only do clients appreciate the transparency, but this pricing method also gives financial advisors an opportunity to put a price on the value they provide.
High-net-worth (HNW) clients, in particular, expect a wide array of certain offerings from their advisors that address their specific needs, such as securities-based lending, estate planning, values-based investing, and charitable giving guidance. Offering these new services can expand your client base to attract more HNW clients.
Put yourself out there as the financial expert you are and create a new revenue stream in the process. Not only does a podcast up your profile, but it also builds credibility and brand recognition. Income can be derived from advertisers, affiliate marketing, or even tiered membership levels (where listeners pay a fee to access premium content). As your podcast gains traction, you’ll become an in-demand speaker at investment-related events, for which you can charge a fee.
People love to learn about investing, and you’ve got a lot of information to share. You already know how to speak to clients, so your “voice” is already established. Why not share your knowledge with a broader audience? With the growth of the self-publishing market, the cost is reasonable, and there are many options to consider. As the author of a book, you might be asked to be a guest speaker on podcasts or a guest contributor for an investment-related blog.
Local colleges are always looking for professionals to teach both credit and non-credit courses in the evening. Students will value the front-line expertise you bring to the classroom. In addition to earning a supplemental income for your teaching services, you may come away with some new clients or the next generation of advisors to help grow your practice.
“Is it working?” Don’t assume your new offerings are bringing in value—prove it!
Once you’ve added new services to your practice, take the time to assess their productivity. Are your clients more satisfied? Has your income been positively impacted, either in terms of amount or consistency? Is it worth it to continue to offer your new services, or should you consider something different?
Your business is an evolving entity. Don’t continue on a path that doesn’t benefit you or your clients.
Opening yourself up to a wider range of possibilities can strengthen your value proposition, expand your revenue streams, build your brand, and help you to better serve your clients. AssetMark consultants can help you assess what’s working and where you would benefit from end-to-end asset management solutions. To learn more about how we can help you diversify your offerings, request a free consultation with our team today.
AssetMark, Inc. ("AssetMark") is a leading provider of extensive wealth management and technology solutions that help financial advisors meet the ever-changing needs of their clients and businesses. The information on this website is for informational purposes only and is intended as an overview of the services offered to financial advisors, not a solicitation for investment. Information has been drawn from sources believed to be reliable, but its accuracy is not guaranteed and is subject to change.
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