It’s called “pipeline management.” Oil producers, manufacturers, even farmers do it.
Financial advisors should do it, too. But most don’t, or at least not well.

We are talking about having a consistent stream of raw materials or work in progress to keep production flowing without interruption. In the financial advisor’s world, that means
having systems in place that continuously produce new business opportunities.

Consider a couple of subtleties in this description. First, I used the word “pipeline,” not “funnel.” My early sales training admonished me to “fill the funnel” with prospects in the hopes enough would eventually filter through to become clients. In today’s world, that kind of inefficiency cannot be tolerated. The only people who should be in your prospecting system are those who meet your preferred client profile and with whom you fully expect to do business.

Second, although the intent is to develop new business, it does not have to come from new people. Your pipeline should also include qualified clients from whom you expect additional business. Critical to growing your business will be your effectiveness in leveraging the client capital you have already created. Let’s look at how that leverage can work.

Most advisors have 15 to 40 names in their pipeline and expect to clear them in anywhere from two weeks to three months. A better idea is 200 to 300 people in the pipeline with a 24- to 36-month time horizon.

Whoa, you say, doesn’t that mean keeping a lot of deadwood in the system for a long time? No. What it does mean is having two effective systems at work: a series of promotional activities to identify and attract a sufficient number of the right people, and an effective strategy for cultivating them into clients or culling them from the pipeline.
As getting people into the pipeline is a prerequisite to managing them, I’ll narrow my comments to that part.

Research highlights the payoff — out of every 100 qualified people in your pipeline, about one-third will do business in the coming 12 months, one-third in the next 12 to 36 months, and one-third will never do business with you (they need to be culled from the system). Three criteria need to be met to achieve these results:

> only people who meet your preferred client profile go into the pipeline;

> you have a relationship management system that progressively moves people toward
wanting to do business with you;

> you have a sound planning and sales process that motivates people to take action.

Given the ratios, having 200 to 300 qualified people in the pipeline should translate to 60 to 100 new sales a year. Multiply that by the average revenue from new sales to your preferred-profile clients and my guess is it will add up to significant income.
So how do we go from, say, 30 people in the pipeline to 300? The starting point is always going to be your existing client base.

> Your client base. The opportunities are threefold: completing implementation of previously developed plans, cross-selling additional products and services, and obtaining introductions and referrals.

Note the emphasis is on having “qualified” or “preferred-profile clients” in the pipeline.
You should focus on clients who are of high value, both for potential revenue and their willingness to introduce you to people like themselves. Segmenting your existing client base is an obvious precondition to identifying these people and establishing a development program directed at them. Expect Parado’s Principle — the 80/20 rule, whereby 80% of our revenue comes from 20% of our clients — to apply. In fact, it may be even more pronounced: the top 20 clients of leading advisors typically represent at least 80% of revenue, regardless of whether the advisor has 200 clients or 1,000. So, focus on your 20 best clients. They

become the first 20 names to go into your pipeline.

If the ratios hold true, six or seven of them will do additional business in the next 12 months, and another six or seven within the next two to three years, assuming you manage the relationship well.

> Referrals. The next 20 to 40 names should come from introductions and referrals from these top 20 clients. Is it unreasonable to expect your best clients to introduce you to at least one other person like themselves once a year? Research clearly indicates that most high net-worth clients are more than willing to provide referrals — but say their advisors haven’t asked them! Conduct a face-to-face annual review with each top client. Use a prepared agenda that includes asking for at least two introductions. Even if you succeed only half the time, it would add 20 high-quality names to your pipeline.

@page_break@Take each of your top 20 clients to lunch on their birthdays and invite two of their business associates or good friends, who are not your clients, along as a surprise. (Get the names from the clients’ spouses or administrative assistants.) That should add another 30 to 40 names. Hire the pro at your golf club to conduct a “pitch ’n’ putt” clinic for a six to eight of your best clients and ask each one to invite a friend or business associate. Do it two or three times a summer and add another 20 to 30 names. Organize “client appreciation” occasions such as wine-tasting, sporting or cultural events, and tell clients to bring friends. A few of these events a year should yield 20 introductions.

> Other professionals. Look for opportunities to team with other professionals such as accountants or lawyers by co-sponsoring seminars on estate planning or taxation. Or conduct workshops yourself on those topics for lawyers and accountants who need continuing education credits. Demonstrate your expertise to five or six of them twice a year and it is almost assured you will be asked to work jointly with at least one client of each them, adding eight to 10 names to your list.

Let’s see where we stand after one year: from your top 20 clients, 20; from annual review introductions, 30; birthday lunches, 30; pitch ’n’ putt clinics, 20; client appreciation events, 20; and collateral professionals, 10. That’s 130 in the first year.

Out of the 130, you should gain 30 to 35 new “preferred clients” in the first year. Repeat the process the following year and add the 30 to 35 new clients from Year 1 as additional sources of introductions/referrals. Year 2, then, should yield about 160 new names that can be added to the pipeline. You can do similar projections for the third year, building your pipeline to 200 to 300 people. IE