My sixteen year-old son has begun to roll his eyes at my taste in music. My predilection for bands like the Red Hot Chili Peppers and Foo Fighters is met with a somewhat dismissive head shake and a barely audible sigh, signaling my clearly misguided musical appreciation. Come to think of it, I’ve seen that expression before, about 30 years ago, as I looked in the mirror while the sounds of Tony Bennett and Mel Torme drifted up from the basement where my father was relaxing.

Let’s face it; it’s a generational rite of passage to rebel against your parent’s taste in music. So, why would their taste in financial advisors be any different?

Over the years, I’ve written countless white papers, advisor presentations and brochures about the “impending intergenerational wealth transfer” citing numerous studies that point to the magnitude of the opportunity, and what advisors need to do to position their practices to take advantage of the coming deluge. Not once, however, did I ever sit back and think about the visceral behavioral impetus for change associated with wealth transfer, and the monumental challenge advisors will face holding on to assets as the next generation takes possession of them.

80% of heirs switch advisors once they take possession of their inheritance.¹

In the November 7^th issue of InvestmentNews, Lavonne Kuykendall addresses this challenge and offers insights into tactics many advisors are implementing to try and establish a connection and a rapport with their clients’ heirs and beneficiaries.

While I applaud the effort to bring the topic to the forefront of the practice management dialogue, I can’t help but question the tactical solutions proposed by many advisors. In my considered opinion, more often than not, no amount of face-to-face interaction between you and your clients’ children is going to offset or overcome their innate desire to fire you and chart their own course.

Think back to the rock and roll analogy. Do you honestly believe that simply by sitting you down to repeatedly listen to “his music” and explaining to you the quality of it, that your father could have somehow quelled your desire to forge your own path musically? Would you have ditched The Who and instead be listening to Petula Clark singing “Downtown?” I didn’t think so!

There’s just no getting around the fact that the deck is profoundly stacked against you. So what do you do?

While alluded to in the InvestmentNews article, the fundamental key to generational asset retention isn’t identified as such. At FWG, we’ve coined the phrases “inter-practice client migration” and “intra-practice client migration” to describe what we believe to be the only two viable strategies. Simply put, your best opportunity for holding on to the next generation is to introduce them to “a new music” in the form of an advisor they can call their own.

This individual will likely be a junior advisor in your firm, someone not only close in age to your clients’ heirs, but ideally with an approach and style that’s different from your own. The goal is to create maximum separation between you and your clients’ offspring in an effort to foster a sense of independent decision-making.

 For sole practitioners, you may want to contemplate forming an alliance with a young emerging practice where you can receive ongoing compensation on the clients and assets you refer. While obviously it’s not an optimal solution for your firm’s revenues, given the aforementioned 86% statistic, it just may be your best available option. What’s more, it’s an approach that establishes a beneficial working relationship with a partner firm – one that may offer an ideal succession plan for realizing the maximum value of your business when you ultimately decide to transition.

Granted, the tidal wave of generational wealth transfer hasn’t materialized as quickly as most pundits anticipated. But it IS occurring and will continue to gain momentum for years to come. Understanding and addressing the behavioral issues associated with this phenomenon will be paramount to the long-term viability of your business.

¹Source: CEG Worldwide, Survey of 334 Inheritors

For those familiar with the film The Usual Suspects, the name Keyser Soze will no doubt be immediately recognizable – and wholly unforgettable. Yet, while the illusive Soze is indeed the driving force of the film, he remains an invisible phantasm throughout. As the character Verbal Kint explains it, “nobody ever saw him or knew anybody that ever worked directly for him, but…anybody could have worked for Soze. You never knew. That was his power.”

In fact, the power of Keyser Soze is something that every advisor can replicate – a power so strong that it has raised certain individuals in this business to almost mythic status – it’s the power of reputation.

Have you ever asked yourself how it is that principals of certain smaller firms garner such high visibility and attention, while others with billions under management barely register a blip on the radar screen? The primary difference is simply that those individuals and firms have achieved two critical success factors – they’ve been able to carefully craft a highly-focused niche, and they’ve mastered the art of effectively communicating their attendant value proposition.

Armed with those two weapons, every one of you has the ability to build a mystique around both yourself and your firm – a mystique that can go a long way towards generating a steady stream of qualified referrals from both existing clients and affiliated professionals. Based on studies conducted by HNW, Spectrem Group, Cerulli Associates and others, there’s little disagreement when it comes to the basic understanding that client and professional referrals are clearly the principal drivers of asset and revenue growth for the vast majority of advisors.

So, where do you begin?

Having worked with hundreds of advisors on a wide array of strategic marketing challenges, I can’t tell you how many times I’ve listened to an advisor, when asked to define his or her firm’s niche, state something to the effect “We cater to retirees and pre-retirees” or “We provide holistic planning services to high-net-worth individuals”.

While noble efforts, I would argue that statements such as these are the financial planning equivalent of a Miss America contestant exuberantly voicing her desire for world peace!

For a niche to gain traction, by its nature, it needs to be “exclusionary”. Yes, it may seem a bit counter-intuitive…that to gain clients you need to appeal to fewer of them…but in most cases, that’s precisely how it works.

Steve Moore, Vice President of Practice Management at Frank Russell, talks about an effective niche being more along the lines of the following: “Our firm specializes in catering to the complex financial needs of senior law firm partners in the downtown Seattle area who are concerned with managing the short and long-term tax consequences of their equity positions.” Is that a narrowly focused niche? You bet! But assuming that you can deliver superior service, it will strongly position you as the go-to firm for senior partners at local law practices.

Furthermore, an ancillary benefit of a highly focused niche is the quickness with which you can develop a deeper understanding of the challenges and issues your target clients are facing, and the corresponding corrective courses of action. Rather than trying to be all things to all people, you’ll find that you have more time to dig deeper into the nuances and complexities of your target clients, building a solid base of expertise.

Once you’ve effectively identified and articulated your niche, the next thing you need to do is to arm your existing clients and influencers with the appropriate language to refer you – the “sound bite”.

Everyone struggles with the concept of soliciting referrals. When to ask…how to ask…where do you cross the line from proactive to pushy? The most effective advisors I’ve witnessed are those who rarely, if ever, directly “ask” for a referral. Instead, in every piece of client communication and in every personal client interaction, they will continually insert the sound bite that they want to come out of their client’s mouth when asked for a referral by a friend or co-worker.

Again, Steve Moore points to his own personal experience. One day, he had just finished facilitating a strategic planning meeting with a number of department heads over at Microsoft. On his way out, one of the participants asked him where he was headed, and he explained that he was on his way to work with a financial advisory client. “I need to find a good financial person”, the individual replied, “who would you recommend?”

Before Moore could even think, the following words came out of his mouth – “Of the twenty largest wealth managers in the U.S. only one is right here in Seattle and they happen to be friends of mine.” Where did those words come from? He had heard them over and over and over again from his client, so much so, that they were ingrained in his memory. He didn’t have to think. He didn’t even pause. They just came out!

Finally, as you continue to deepen your expertise look for every opportunity to demonstrate it. If you encounter an interesting challenge, write and disseminate a white paper on the subject. Solicit speaking opportunities with pertinent trade and/or industry organizations. And make every effort to identify and reach out to other professionals who may be focused on providing services to the same niche.

By thinking narrow and deep, you’ll be well on your way to building a reputation for effectively and profitably catering to a niche of “unusual” suspects.

A few years ago, I was spending the afternoon with a South Florida RIA, helping the firm work through an exercise to more effectively segment their client base. As I delved into their ACT database, it struck me that amidst all the client data that this firm had accumulated over the years (and I’m talking minutia here…to the point of tracking the name of their clients’ family pet) there were two pivotal questions that shockingly had never been asked of any client. What is the name of the attorney you work with? And who is your CPA?

When I pointed out this omission to the principal of the firm, his head tilted a bit to the side and he looked at me with that same vacant expression that eerily reminded me of my dog watching TV.After a more detailed conversation, I came to understand that while about two-thirds of this firm’s new business came through referrals, all of it was generated purely from client referrals…they had never thought to put a strategy in place to also generate referrals from Centers of Influence. It’s a suprisingly untapped opportunity that many advisory firms either overlook entirely, or assume requires extensive time and effort to cultivate. In reality, however, it’s an incredibly simple undertaking.

In the case of this firm, we added the two aforementioned data points into their database and over the course of three months made a concerted effort to identify both the attorney and CPA working with each of the firm’s advisory clients. With all the firm’s employees onboard with the goal, and using a combination of outbound calls from support staff in conjunction with a two-pronged email campaign, were able to gather the data on more than 75% of the firm’s 200+ clients.

To any of you who have gone through this process, it will come as no surprise that when analyzing the data there were a select handful of firms (4 CPAs and 3 Attorneys) that repeatedly showed up multiple times. Why is that important? Because THOSE are the firms who are your key COI targets. Think about it…what better possible conversation starter could there be than picking up the phone, calling one of these individuals and saying, “I’ve noticed that you and I serve many of the same clients and thought that it would be a great idea to sit down and learn a little bit more about each others business.”

It’s a simple and compelling reason to get together, and the initial building block of what can potentially become a lucrative referral partnership that runs both ways.

When you eventually meet, bring along a one-pager about your firm – on one side, a brief summary of your niche, value proposition, investment philosophy and services; and on the reverse, an overview of your client engagement process/service delivery model. Ask similar questions of the individual and most importantly, look for similarities in style, approach and temperment between the two of you. Generally speaking, a client who is comfortable with you will most likely be comfortable with similar personality types when dealing with other professional service providers.

Don’t try to establish a referral relationship too quickly; give it time. If there seems to be an initial comfort level, suggest keeping the lines of communication open and getting together once a month to compare notes as business owners. In all likelihood, within a few meetings you are both going to know whether this is the basis for a strong referral relationship or not. If it is, formalize it. You’ll be amazed at the level of business that COIs can drive to your firm! But don’t forget to make an effort to reciprocate. A simple offhanded remark of “Oh, I was meeting with an attorney friend who works with a number of my clients, and he said _____” is often all it takes to generate interest among a number of your clients

Just remember, however, it all starts with effective data capture. So fire up that ACT/Goldmine/Excel/Outlook/Salesforce database and take a look at what information you’re capturing – not just is it enough information, but more importantly, is it the right information?