Financial Advisor Edition: The 80-20 Analysis for Targeting Your Ultimate Clients

Rob Brown Snippet (00:00):

Less can mean more. Because when you understand by doing that 8020 analysis who those ultimate clients are, you can add fewer clients and grow more quickly because you’re not just taking anybody who comes your way

Phil Calandra Snippet (00:18):

happy clients refer you. If they’re not happy for whatever reason, they’re never going to refer you, they’re never going to introduce you to others. And that’s why I think it’s important, you need to qualify them just as much as they’re qualifying you. And if it’s not a fit, then you begin to recognize that sooner and sooner in the process in prospecting, and bringing OD or onboarding clients

Rob Brown (00:43):

Welcome to the Truest Fan Blueprint, a podcast for financial advisors, and other professionals looking to get the most out of yourself and your business. I’m Rob Brown, and my partner, Phil Calandra. 

And I promise to walk you through a journey that will allow you to take action in your business and your life, so that you can be the best that you can possibly be. Thanks for listening. Welcome back to the truest fan blueprint. I’m Rob Brown, along with my co host, Phil Calandra. Phil, welcome back to the podcast.

Phil Calandra (01:28):

Hey, Rob. Great to be back. Great.

Rob Brown (01:30):

So yeah, absolutely. I love these conversations, because I know that we share a lot of really good practical information that financial advisors can use in their business to immediate effect. In the last podcast, we talked about the Aum acceleration process, the idea that most advisors, whether you’re Telenet, bringing in new business, or you’re struggling, are always looking to figure out, how can I more effectively bring in new business, new AUM, from the type of clients that I really enjoy working with, we call them your ultimate clients, some people might call them your most ideal clients. 

And to get that process started, in our practice, when we’re coaching advisors, we actually start by looking at your existing clients, because you can learn a lot by studying where your business is really coming from. In many ways, this comes down to at least first doing an 8020 analysis. Most advisors get 20 80% of their business from 20% of their clients where they have 80% of their assets under management with 20% of their clients. 

Sometimes it might be 15%, sometimes it might be 12%. But it’s, you know, almost always around that 20% number. So we really want to understand who that 20% is and what they look like, before we go about attracting new ultimate clients. Build on that a little bit. Phillips, I know that you that you understand and agree with that. Now philosophy.

Phil Calandra (03:19):

Yeah, so if you think it through the 8020 rule shows up in many areas of life shows up in many areas of our business. And if you’re trying to generate new assets under management, which is essential, I think if a practice isn’t growing, it’s dying, by default. 

And the reason that the 8020 rule works in building assets or in revenue, is that you’re constantly bringing into the practice, the ultimate client, as we call it, or your avatar client or ideal client. 

And I coach advisors and talk about this frequently, and that when you’re interviewing a prospect, we often are trained or taught that they’re qualifying you as the advice giver, the advisor professional and I argue that that’s only half the truth. You’re qualifying them just as much as they are qualifying you. 

And you want to build in your practice the ultimate client and that comes from you being confident, articulate and explaining what it is you do how you do it. And you’re always kind of searching for your ultimate client. And if it doesn’t work out that way, then the 8020 rule isn’t gonna matter anyway.

Rob Brown (04:39):

Right. That’s That’s absolutely right. You know, I think when I first discovered this goes back probably 1020 years or in thinking about it, is you have to make the shift from doing business, under the auspices of more means More, and move to the, the idea that less can mean more. 

Because when you understand by doing that 8020 analysis who those ultimate clients are, you can add fewer clients and grow more quickly because you’re not just taking anybody who comes your way. But until you know, if they’re really going to fit in to that 20% of your business that’s responsible for 80% of your assets or your revenues, you may just completely missed the point and continue to attract clients that are never going to be that ultimate client.

Phil Calandra (05:41):

Yeah, that’s a good point. Because I think in, in, in a lot of practices, we hear or you’re always trained that you want to move up market, you want to have a million dollar minimum, and I’ve worked with advisors that have $2 million minimums, and that’s fantastic, obviously, fewer clients to drive larger assets under management, that wouldn’t fit my practice, my practice is more mass affluent I don’t have above and beyond the holistic, comprehensive planning that I do with clients and that I have done with clients.

 I don’t get into a lot of complex, heavy lifting, maybe business planning or estate planning, we do do that. But my ideal client may be very different than yours, Rob or some other advisor. So don’t think what we’re talking about is the ultimate client is some number of assets, because I can very effectively manage a book of business. 

That is, you know, 500 to a million million and a half, I’d say that’s kind of my sweet spot. But that might be entirely too low for other firms or other advisors. But it’s in the way that you structure it, we’ll talk more about this, the client experience how you craft your communication style, how you develop your ongoing cadence of communication. 

So what we’re really talking about is really understanding who works for you, who is your ultimate client, irregardless of size, because I think when people hear this, Rob, they think, Well, you know, I don’t want to, I want to set my minimum higher and higher and higher. 

And that may be the right strategy for some, I never did that. And I think I have a book of business, that the clients really get me, they really understand the type of coaching and, and planning advice that I provide. And they refer me like minded people. And that’s the whole point of the ultimate client.

Rob Brown (07:40):

But But I would also say unknowing, your business feel that one of the things that’s also true is, even though you include as your definition of an ultimate client, the mass affluent or the or that can be part of the definition, that the average size of the relationships you worked with, over the years, has gotten bigger as you build your business. 

And not necessarily, because you said I will only take clients with X number of dollars and assets. But because of the other things that are important to you, when you’re defining that ultimate client, they’re naturally going to have a higher level of assets than maybe the clients that you first started working with when you built your Ria.

Phil Calandra (08:35):

Yeah, oh, very much so. And that just becomes becomes a natural progression with the quality of work that you’re able to provide for clients. You know, we’ll we’ll talk in depth about the client experience and ultimately, referrals, the ultimate referral based business, happy clients refer you, if they’re not happy, for whatever reason, they’re never going to refer you. 

They’re never going to introduce you to others. And that’s why I think it’s important. Going back to what I said before, is that you need to identify or qualify them just as much as they’re qualifying you. And if it’s not a fit, then you begin to recognize that sooner and sooner in the, in the process in prospecting and bringing OD or onboarding clients.

Rob Brown (09:22):

Yeah, you know, as you were talking, Phil, I was reminded of a client that I worked with, I guess it’s probably been a dozen years ago now. And he was doing over $2 million and fee based business as a pure fee based business practice. 

He only had 80 relationships. And when I suggested to him that we do an 8020 analysis to figure out who his ideal client was, he said, that’s crazy. I only have 80 clients. What is it? matter if I’m working with some non ultimate clients, but he stopped pushing back, he had agreed to do the ad 20 on his business. 

And what he realized was that for him, when he really looked at that 20% of his clients, who were generating about 85%, of his revenues, they were all very complicated clients, executives with with stock options and complicated financial plans, then they were a challenge to him. 

And in the end, he decided to give up, not 80% of his clients, but he gave up 20 of his clients that represented a quarter of the number of clients he was working with in total, and over $200,000 in revenues, because he knew that if he could find somebody else who could serve those clients better, he gets some time back in his business, and for himself, to serve more of his ultimate clients. 

And that if he just added a couple of more of those ultimate clients, he would blow past the revenues that he was giving up. So doing that analysis, and really taking the time to understand who your ultimate client is. 

And starting with this 8020 review is really important. Because it’s not just about as you said, Phil, it’s not just about the numbers, it’s about what do those numbers mean, in reality, as you begin to decide, who am I going to invite into my practice? 

Because that should be something that every advisor holds precious over time as who do they want. It’s like, it’s like playing golf, you know, who wants to go out and play a sport that takes four hours at a clip with three other people that you don’t like? If you wouldn’t do it for four hours playing golf? You know, why would you do it for four years or 40 years? As an advisor taking care of clients that you really don’t have an affinity for?

Phil Calandra (12:20):

Yeah, that’s a good analogy. But I real quickly, the only thing that came to my mind when you were talking about that scenario, with your client, Rob was a lot of advisors struggle with, when do they add the associated advisor? 

When do they bring in another team member, and we could talk for hours on how to build teams, I’m sure we will talk about that. But that’s a great example of when you are ready to then move or splinter off transition pieces of your book to an associate advisor. 

And it might be somebody that’s a junior to you, someone younger, you know, I think this happens to be the golden age for younger advisors, and we’re all getting older and older. But the younger crowd of advisors is just coming up. And that’s a great way to think about how to build build out your team. On the advisory side, you know, not necessarily then the the heartbeat of the practice, which is operations.

Rob Brown (13:17):

Yeah, yeah. And that’s a that’s a great point. And it’s a it’s really is a topic for another day. But in this particular case, this also helped the adviser make the decision not to add to his team, because he didn’t want other people on his team to serve non ultimate clients. 

And so it was better for him to find an advisor outside of his organization that could do a good job for them. He was he was very careful with them. And he was passing along a quarter of a million dollars worth of business. 

So it wasn’t chump change, it will be a good business for somebody to buy, but he found a new home for that business is opposed to using it to build a team. But it’s also another example of why it’s important to know who your ultimate client is. Phil, any last parting thoughts on the importance of this ultimate client decision and the 8020 analysis you’d like to add to the conversation?

Phil Calandra (14:20):

Ah, yeah, you know, I think, make your life easier. Hey, we’re in this. We’re in this to help people we’re in this to do well by helping people. And I think if you go through the exercise that we’re speaking of, if you need help, if you need resources, let us know. But it’ll sure make your life more enjoyable. And I know that did mind over the years as I’ve gone through this, so go for it.

Rob Brown (14:47):

Yeah, that’s a that’s a great piece of advice. Because, you know, that is kind of part of our premise. And the work that we do in our coaching is to help our clients make their businesses simpler, and this is one a specific way that you can do that. 

So let’s let’s sign off for now. Phil, thanks for another great episode of the truest fan blueprint podcast. I would invite you all if you’d like to learn more about what we’re doing with our clients to go to his fan coaching.com Take care. Remember that we’re always rooting for your success. 

Thanks for joining us for this episode of the truest fan blueprint. If you want to learn more, head over to our website truest fan.com on the site to learn more about becoming a truest fan. You’ll also find today’s show notes and links to the other gifts and resources we talked about during this episode. Again, thanks for listening and remember, we’re rooting for your success.