Who wants a millionaire? Every advisor, it seems. But bigger isn’t necessarily better.
In an industry long focused on attracting moneyed baby boomers, some have followed different paths. Here are three effective alternatives.
Approach 1: Go one generation down
Turner Tomenson Wealth Management Group, Toronto
Potential practice gain: $100 million
Current book size: $300 million
Garth Turner, a Toronto Raymond James advisor, is in his 60s, but he and partner Scott Tomenson grew their book by more than $100 million over the past year in large part by tapping a younger generation: the 30- to 40-somethings. “We moved to Raymond James in August 2012, and our book was $170 million, and it’s now over $300 million,” Turner says.
Many Generation Xers may not be millionaires, but with help, some can get there. “They have a lot more potential to grow with us over a number of years,” he says.
At 42 years old, Turner’s average client comes from the first segment of Gen X and has about $480,000 in investable assets. He primarily reaches this tech-savvy cohort by writing a blog on economics, real estate and money, greaterfool.ca, which receives 6.5 million visits annually. The former MP and journalist is also active on Twitter and Facebook. “The majority of business we’ve brought in was introduced to me through social media,” Turner says.
He and Tomenson also run live events, which are only promoted to prospects online. Their last Toronto and Vancouver engagements attracted 1,600 and 1,200 people, respectively. “The conversion process can be two years long,” he says. “But it’s worth our while from a business standpoint to do it.”
He uses an all-ETFs approach, which appeals to his younger clients because of the lower fees compared to mutual funds. But they’re reasonable when it comes to returns.
“Young people need lots of growth because the world is getting more expensive, [but] they’re insanely conservative,” Turner says. “Way more than boomers like me. I don’t find they’re looking for 10% or 20% returns at all. They just want growth and safety. So our approach of balanced, diversified ETFs-based portfolios works well for them.” He also gives clients online access to account statements and conducts weekly conference calls on major economic developments to explain how they affect portfolios.
He also reviews each client account every 100 days. To do this, Turner calls clients and then uses a computer program that allows them to see his desktop. “We run through the portfolio line by line, give performance data, review holdings, answer questions and talk about the world.
“A good 15-to-20-minute desktop sharing is a powerful way for people to get fully up-to-date on their portfolios. Sure, they can look at it themselves online all the time, but [reviews] allow us to give texture and explanation.”
Turner does between six and 10 of these reviews daily.
Approach 2: Get professionals while they’re young
Bluteau DeVenney Caseley Wealth Management Group, Halifax
Potential asset gain: about 10% yearly
Current book size: 185 families
Some advisors cater to an even younger crowd: medical interns in their mid-twenties to early 30s who are still paying student loans.
David Bluteau, an advisor at National Bank Financial in Halifax, says compared to lawyers, whose salaries range widely—because associates don’t graduate to billable hours for several years—doctors’ starting salaries are higher and more standardized.
New specialists make an average $350,000, compared to young lawyers who sometimes make less than $100,000, depending on practice size and area.
Bluteau says it’s better to catch them before they have their own lawyers and accountants. A physician in her 50s, for instance, probably has a solid relationship with an advisor, and she’ll only move if something market- or service-related breaks that relationship.
With young people, “you’re saying, ‘I’m investing in you because I believe it’s a mutually beneficial relationship, that you’re going to be successful and I’d rather help you get there,’ ” says Bluteau.
To look for potential clients, Bluteau and his team bring chartered accountants to conduct free seminars in hospitals on how to incorporate a practice. He partners with those same accountants to give financial planning and investment seminars.
Finally, he scours Nova Scotia’s provincial list of doctors and asks current clients to introduce him, whenever possible, so he doesn’t run afoul of do-not-call rules.
Relationships with these young clients only become profitable after about five years. The initial stage is spent getting them set up with DI, CI and life insurance, building up an RRSP, and using a cash-flow management plan to pay off student loans.
“If they’re incorporated, we can consider taking out extra dividends to pay down the debt,” he says.