When it comes to winning new clients, historically most advisors have tried to persuade prospects of the need to replace their existing advisors.

But new research from the United States shows that today an easier course of action is to persuade those prospects that they should supplement the advisor they are currently using. This is especially the case if you’re working at the top of the market, with high net worth investors with millions of dollars.

The trend to multiple advisors

  An August report from Boston based Cerulli Associates showed that about a quarter of American households who seek financial advice use multiple advisors. For households with assets of $2 to $5 million, the percentage with multiple advisors is 33%. And of investors with assets over $5 million, 58% have multiple advisors.

One Cerulli analyst said: “Investors are taking the idea of diversification one step further and diversifying across firms and across advisors.”

The drive for multiple sources of advice has been fuelled by the financial crisis of the past three years. As Cerulli ‘s analyst put it: “Today, fear is outweighing convenience.”   With that trend  to multiple advisors, there is an increased push for quantitative measures of performance as well as a greater interest in understanding an advisor’s credentials, qualifications and knowledge level.

As a result of this shift, many advisors overestimate the extent to which they are a client’s primary advisor. When Cerulli surveyed advisors about a cross section of their clients, advisors indicated that they were the primary advisor 73% of the time; when those same clients were asked the question, only 34% said that advisor filled this roll

Action items for advisors

There are some immediate implications from this trend – as well as some down the road.

When it comes to existing top clients, don’t assume you’re the primary or only advisor. Open a dialogue about how things are going – and also about whether they may have begun working with another advisor you’re not aware of.

With prospective clients, some advisors have historically had an “all or nothing” stance when it came to a client’s investments – a position that you might want to reconsider, for the moment at least. You also need to restructure your conversations with prospects, positioning yourself as a supplement rather than a replacement. Finally, you should relax your account minimums – one advisor tells prospective clients that his normal minimum is $1 million, but that he’s willing to drop this to $250,000 for the first 12 months that he works with new clients, so they get to know him before making that big a commitment.

Finally, position yourself for the point in time when the pendulum shifts and convenience becomes more important than fear, leading to consolidation of advisors.  Suggest to clients with multiple advisors that you’ll do a monthly or quarterly summary of all their investments – what you manage as well as what they hold elsewhere. The opportunity to identify inefficient and overlapping holdings will help position you to be the winner when that reconsolidation occurs. Note that if you don’t make this offer, there’s a risk that another of your client’s advisors will.

In today’s environment, these are essential steps for any anyone looking to maximize new clients. The financial crisis of the past three years has fundamentally changed the world in lots of ways – not the least of these is the thinking required to bring new clients on board.