Most of Your Clients Probably Hear Laurel, and That's a Problem


Which is it, Yanny or Laurel?

This short audio clip has taken the internet by storm, with listeners firmly planted on each side. Some hear a high-pitch, “Yanny”, while others a low-pitched “Laurel”.

So, which is it?

While there doesn’t seem to be a definitive answer, experts have provided one explanation to the dichotomy – age can play a role in whether you’re team Yanny or team Laurel.

We naturally lose our ability to hear higher-pitched frequencies as we age. In other words, older listeners are anatomically primed to hear Laurel.

How is this relevant to you?

Think about the age of your average client. Would most hear Laurel? If so, that could be problem – particularly when thinking about succession.

It’s natural to seek wealthier (typically older) investors since most advisors generate revenue from a percentage of total assets under management (AUM). Serving fewer investors with a higher average-net-worth translates to greater efficiency – more bang for your buck.

But like a poorly diversified portfolio, a client base comprised of a disproportionate number of older investors can negatively impact the value of your business.

As your clients transition into retirement, their focus will shift from portfolio growth to capital preservation and income. In general, their portfolios will contribute less to your total AUM as they begin to take distributions.

And therein lies your problem. Without a strong pipeline of younger investors with long-term growth potential, your book becomes less attractive to potential buyers.

By seeking ways to accommodate more Yannies you can increase the longevity and value of your business.

With better time management and a focus on connecting with younger investors, you can practically build a pipeline of future assets.

A few considerations to get you started:

1) Streamline as much as you can

It’s important to consider your daily workload when increasing your client volume. Your time is a hard constraint. Streamlining is a simple first step to help you accommodate more, less-profitable (for the time being) investors.

Start with back office functions. Automate where you can – billing, statement delivery, reporting, etc. Consider adopting electronic signature capabilities, if you haven’t already, and work to get your clients on the same page. Clearly communicate the practical benefits of digital workflows – like more accurate and timely service – to increase client acceptance and adoption.

2) Become social

Social media is becoming an increasingly important marketing channel for financial advisors. According to Pew Research, 88% of U.S. adults aged 18-29 and 78% aged 30-49 are active on at least one social media site.

Consider incorporating social media into your marketing and client communications strategy. In addition to giving you another avenue to distribute your message to prospects, social media is unique in that it facilitates bilateral engagement between you and your clients. Used correctly, it can set you apart as an advisor who understands the preferences and needs of next-generation investors.

3) Outsource day-to-day to day investment management

In the same vein as streamlining, outsourced investment management can help you more easily manage your book of business and better establish value with clients. Outsourcing shifts the daily demands of investment management to third-party strategists – reducing your overall workload. It also helps you focus on a wider range of services, such as tax management and financial planning.

Evaluate the outsourcing program available through your broker-dealer or turnkey asset management program (TAMP). Ensure the available strategists are vetted through a thorough due-diligence process.

In a month’s time no one will be talking about Yanny or Laurel. We’ll be on to the next internet fad – which will probably involve cats (the only topic that never goes out of style). However, what will remain is your business strategy. Are you prepared for succession? Time moves as fast as internet trends, and those that take the time to think about their long-term strategy will soon reap the benefits as they pass their legacy onto the next generation of financial advisors.