Who are young accumulation clients?
The accumulators are in the phase before pre-retirement, typically aged in their 30s and 40s and with all the commitments that go with that:
I am going to narrow the field further, and suggest that the accumulators most firms are trying to work with, are those with significantly higher incomes than the average person or family.
The X Factor Filter
If you are a business that works exclusively with this group (because you are a younger business) then you can use the following suggestions as a starting point, but you will need to do more work to create and refine your business model.
If you are, more typically, a business that is predominantly working with pre-retirement and retired clients with lump sums to invest, I’m going to suggest this extra filter:
The accumulators you meet have to knock your socks off with their dreams, vision and energy. They have to have the x factor. You’ll know it when you see it.
There are plenty of high earning types you will meet in your career, but only a few have what it takes to be great in the next ten years. These are the ones you want as accumulator clients.
By applying this extra filter two things will happen:
You will work with only a few accumulators (less than 10% of your client base) but they will be on a massive upward trajectory and will be exciting and energising to work with. Also, these people will pay to get access to something great, because they value themselves.
You’ll avoid the time-wasting-high-earning duds!
This is a market advisers could work with, yet few do it well because they don’t take the time to identify the top 5 issues or concerns the accumulators face. When an adviser meets a high earning accumulator they apply the old-world model of trying to sell them a mortgage or insurance, assuming the primary issue is their protection need. Sadly, the client often doesn’t see it the same way.
The biggest challenge
A big challenge when working with the accumulators is that, although they may well earn a big income in the future, they’ve got no money now. This often comes as a shock to the adviser, but it makes perfect sense.
Let’s say I’m a high earning professional in London. My income is £250,000 pa, but…
I pay 45% tax.
I live in a good part of town and property is expensive. My mortgage is high and paid from after tax money.
If I have children, they go to good schools. School fees are paid from after tax money.
When I have children, my partner or I may decide to stop working. Otherwise, we’ll employ a nanny. That’s either the loss of a wage, or a full or part-time wage paid from after tax money.
I have a social life (because I can afford one) and when I go out with my high flying friends it’s to somewhere ritzy.
We have a couple of expensive annual holidays that compensate me and my family for the pressures of my job.
After all of that there won’t be much left, I can assure you.
So how do you charge?
You can still follow the charging-in-three-places formula, but with some provisos:
Charge a planning fee if you do a strong first meeting, and find accumulators who are prepared to commit to a long term journey. That won’t be all of them.
If you charge too much for the initial work you might scare them off. Between £750 to £2,000 is a good range.
This is where you will need to get paid something, assuming there is implementation work to do. Your typical lump sum implementation fees are fine.
If you do any insurance work and it generates a commission, keep it.
This is the one that can make it all worthwhile, if you offer the right service package.
In my experience, successful accumulators see themselves on a steep upward trajectory, and consider themselves good clients for you in the future.
Even if they only make it into your ‘C’ client category for now, it’s a huge mistake to put them there. They need to be treated better than that, and offered an aspirational package that resembles what you do for ‘B’ or in some cases ‘A’ class clients. Offering a top-quality service package now allows you to secure them for the future.
Invite the accumulators along whenever you run events for your ‘A’ and ‘B’ class clients. [click to tweet]
The cost to you is marginal (because you’re running the event anyway), and the accumulators will not only feel loved, but will get to meet your top quality clients.For access to this service package you can charge a reasonable fee, not what you charge your existing ‘A’ and ‘B’ clients, but a significant fee nonetheless. I would suggest the higher of 1% of AUM or a flat fee that is around 1% of their gross annual income.If they have enough assets, 1% of AUM is no different to your other clients, and if they don’t have much in the way of investable assets, quoting them a figure of around 1% of their gross income works. You’ll need this level of income if you are going to give them a top service package and it also suggests a premium service, that these clients will buy into.
Next week I’ll be looking at the challenging technical advice jobs that can confuse your normal charging structure.
by Brett Davidson
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