I started in this industry as a financial advisor with what is now known as a Mutual Fund Dealers Association of Canada firm. During my first year, I worked in an office in which the branch manager routinely criticized me for reading too much and not selling enough.
Anyone who spends 10 seconds speaking to me knows that sales and prospecting are not my strengths. And yet, I’m about to tell you about a unique prospecting idea that could become a surprisingly good source of business for you — the do-it-yourself investor.
DIY investors are not the typical group you’d think of as a source of business for an advisory practice. But think about these investors for a moment. DIY investors tend to be intelligent and well read on financial matters. They’re resistant to fees and are guilty of being a bit controlling. While these characteristics are unlikely to be found in your ideal client profile, there is more to the DIY investor’s story.
There is one particular DIY investor — Doug (not his real name) — with whom I’ve had many exchanges over the years. He initially contacted me almost 10 years ago, inquiring about money-management services.
When I saw his portfolio — a well-structured mix of low-cost, exchange-traded funds — I figured he was a tire-kicker. Our initial conversation was brief, but Doug kept in touch through several conversations over the years. He continued to show interest in having me manage his money, yet was repelled by the cost of doing so. But the conversation took a turn when I asked if his wife shared his interest and investing acumen.
She did not. Then, I asked what would happen to their seven-figure portfolio if he predeceased her. He didn’t know, and had no plan. I warned that not making the proper arrangements early might leave his wife and family at risk. And if any other family member tried to replicate Doug’s strategy, the results could be disastrous.
This concept resonated with him. And it got me thinking about the many DIY investors with whom I’ve had contact. Many of them are well into their senior years. And most that I’ve talked to have spouses with zero interest in learning about money management.
While this opportunity may interest some advisors, it presents two main challenges.
First, this is clearly not a quick way to grow your book of business. But it does fill the pipeline of potential business down the road. Plus, by fostering a relationship with and getting the blessing from this type of DIY investor, you position yourself to be the family advisor for a long time. As well, while the DIYer remains among the living, there is a good chance of getting a referral or two.
The second challenge is that not all advisors will be able to attract DIY investors, even for their heirs. We’ve all met the DIY investor that knows just enough to be a wealth-destruction expert. But there is a small army of DIYers like Doug. These people are very sophisticated, intelligent — many of them are scientists — and know more about portfolio theory than many advisors. They also tend to be cost-sensitive and skeptical. And wealthy.
I never promised it would be the best business-building idea you’ve ever heard. But if this appeals to you and you have good technical knowledge, its revenue potential might surprise you. IE
Dan Hallett, CFA, CFP, is director, asset management, for Oakville-based HighView Financial Group, which designs portfolio solutions for advisors, affluent families and institutions.