How do you become a trusted advisor?

The following is based on one of The Covenant Group’s clients. All of the names and telling details have been changed.

Nathan Pomer had a number of extremely wealthy clients, but he’d never been able to get enough of their business to have much impact on his revenue.

In another case study, we profiled Nathan Pomer and explored a client segmentation strategy he used as a way to increase the profit in his business. At the time, we advised Nathan to select his AAA, AA, and A clients based on their value potential and their propensity to buy. After carefully choosing his segments, Nathan hired a junior advisor to service the AA and A clients, while he focused on the Tope 20 Client Relationships and AAA ones. Doing this resulted in a 30% lift in revenue within six months. Nathan had expected the trend to continue for the rest of the year, but it didn’t.

“I was thrilled to see the initial boost in revenue,” Nathan said, “but I’m feeling like my segmentation strategy is both a blessing and a curse. After selecting my AAA clients and analyzing their profiles, I see how much potential they have. Some of my clients have net worths upwards of ten million. One guy sold his business last year for twenty-three million. I have some business with them, but I’m leaving a lot on the table. And furthermore, if I can’t get their business, I know I’m leaving myself open to competition.”

We asked Nathan to give me a bit more background on his wealthy clients.

“Most of them are in the entertainment business - TV producers, directors, agents. My brother-in-law is in the business, and through him, I’ve met a lot these people. They make a ton of money and a lot of them neglect their personal financial issues. I started doing business with a few of them years ago, setting up investment plans, that kind of thing. But that’s only the tip of the iceberg. They all need a lot more advice, especially around risk management and estate and tax planning. I just find it’s hard to get their attention.”

“Nathan,” our coachsaid, “when you originally segmented your clientele, you did so according to their potential. And that’s the first step in a segmentation strategy, but it’s the easy step. In fact, the operative word here is ‘potential’, because potential doesn’t mean much if you can’t realize it. You have an enviable list of A clients, but you’re not working with them at an A level. The next step in segmenting your clientele is to figure out how you are going to raise your service level according to each segment. A good framework is to consider the four levels an advisor can work at with his clients.

“The first is product. Here the relationship is transactional. This is the lowest level an advisor can work at. In some cases, you may have sold only one product to a client. The next level is planning, where the focus is the completion of a plan, such as an investment plan or retirement plan. The next level is ongoing implementation where you are working with your clients over time to help them achieve financial security and independence. At the fourth level you become a trusted advisor, and this takes the relationship beyond a financial focus. When you are a trusted advisor your clients turn to you to discuss a myriad of issues in their lives.

“With your entertainment-business clients you are probably not even at the ongoing implementation stage. So, while you have them in your A list, you’re treating them like B or C clients.”

Nathan agreed.

“Let me ask you, Nathan, how many fourth-level clients do you have? In other words, how many clients come to you for more than just their financial needs?”

“Realistically, probably about twenty-five.”

“I usually hear a figure somewhere between five and forty, so at least you’re at the higher end of the range. But you’re nowhere near your potential. A typical advisor is capable of having trusted-advisor relationships with about 100 clients. If you’re at level four with twenty-five clients that means you’re at twenty-five percent of your profit potential, which gives you the potential to quadruple your revenue.”

Nathan liked the sound of that, but asked, “So how do I get to a trusted-advisor relationship with my wealthy clients?”

“How involved are you in the entertainment business?”

Nathan laughed. “Well, I go to the occasional movie or theatre show, if that’s what you mean.”

“That’s your problem, Nathan. You can’t get to a trusted-advisor level with your wealthy clients without immersing yourself in their world. You need to understand the issues they deal with on a daily basis. You need to be intimately acquainted with the challenges they face around funding, regulations, cross-border co-production, distribution, copyright, licensing etc. When that happens, your clients will see that you understand their world and can add value.”

“How do I do that?”

“You get involved in the industry any way you can. Sit on the board of a theatre company, join a grants committee, get involved in the film festival, develop relationships with the collateral professionals your clients deal with or should be dealing with, such as entertainment lawyers, financiers, film agents, marketers. There are an endless number of ways to get involved.

“In Mega-Selling: Secrets of a master salesman, a mentor of mine, David Cowper, wrote about how he came to work with the city’s wealthiest developers by immersing himself in their world. He knew access to wealthy developers would be a challenge, so he started by getting to know the people they depended on, such as politicians. David understood that developments had to pass through zoning meetings, planning boards, various government levels and departments, so he got involved in politics and later asked for, and received, a position on the city planning board, where, in his own words, he would have a ‘ringside seat to all the development activity.’ After staying on the board for three years, he felt he knew their world enough and the people they dealt with to add value. He left the board and began his foray into the development market. His knowledge of their issues and the network he’d developed made him the trusted advisor of choice for the city’s developers. Few advisors could compete with him.”

“I can’t imagine many advisors making the effort David did.”

“Exactly. It’s a long-term strategy, but it will give you a nearly unmatchable competitive edge. If you really want to work with wealthy entertainment-business folk, you don’t have a choice. It’s not a quick-fix solution, but if you make the effort, you will see results, maybe not in the next few months, but give it a year or two, and your business will be at a place you can only imagine right now.”

We have ever seen Nathan so energized about his business. Nathan spent the next few months getting involved in the entertainment industry. He joined a film association, attended all their meetings, went to premieres and festivals. One immediate benefit was that he started running into many of his clients and reconnecting with them. He also started networking with lawyers who worked in the field. A couple of months ago he organized a concept lunch, invited all his film clients and arranged for three experts, an intellectual property lawyer, a licensing lawyer and a tax specialist, to present. The strategy has already begun to pay off. A couple of his clients are now working with some of the specialists Nathan introduced to them. He’s already done more work with two of his big clients. He knows it’s just the tip of the iceberg, but he’s never had so much fun in the business or been so optimistic about his future.

Lessons Learned

Nathan learned four valuable lessons about segmenting his clientele:

• Most advisors segment their clientele based on the potential of each client for growth, but the real challenge is developing strategies for realizing that potential.
•  An advisor can work at four levels with their clients: product, planning, ongoing implementation and trusted advisor.
• You should be working at the level of trusted advisor with your AAA clients. Unfortunately, many advisors are working only at the planning or ongoing implementation level with their so-called A clients.
•  To truly become a trusted advisor, you must immerse yourself in your client’s world. You need to have a deep understanding of the issues they face, and you need to develop relationships with people who can help solve their problems.

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The Covenant Group is referred to by many as the place entrepreneurs go to become Business Builders. They are considered to be thought leaders and have authored the best-selling books, The 8 Best Practices of High- Performing Salespeople, The Entrepreneurial Journey, and The Business Builder.