For financial advisors wanting to increase the assets they manage, a number of situations provide tremendous opportunities. These are situations where there is “money in motion,” investable assets now available to be managed.
These opportunities are all put in motion by a “trigger event.” One example is inheriting significant sums from an affluent parent. Another example is the monies provided to an ex-spouse as part of a divorce settlement.
For most financial advisors, the greatest opportunity to capture money in motion is when a successful business owner sells his or her company. Worldwide, the most significant creator of personal wealth is entrepreneurism. Moreover, most successful entrepreneurs are only rich on paper until they sell a portion or all of their companies.
When they monetize the value of their firms, they have investable assets that they often turn over to investment professionals to manage. This scenario is unquestionably one of the very best ways for financial advisors to bring in more assets to manage.
Most Entrepreneurs Want To Be Wealthier
In order to win the investment business of these entrepreneurs, it is useful for you to understand that becoming wealthy was (and is) a core motivation of their business building efforts. In a survey of 513 business owners, a little more than nine out of 10 of them want to become significantly wealthier than they are today (Exhibit 1). Moreover, all of them strongly recognize that their ability to become wealthier is a function of the success of their business.
There are often many reasons business owners want to be wealthier. Taking care of loved ones regularly tops the list (Exhibit 2). The success of the business and their ability to maximize personal wealth is usually instrumental in this regard.
At the same time, about seven out of 10 entrepreneurs said they are interested in doing more to support worthy charitable causes (Exhibit 3). Again, the success of their business and their ability to translate that success into personal wealth can be significant in enabling these business owners to be more philanthropic.
A core motivation for most entrepreneurs is personal wealth creation. This often carries over into how they want their monies invested once they sell all or part of their businesses. It is useful to note that the majority of business owners who monetize their companies are not walking away with hundreds of millions of dollars. Most businesses are small or midsize businesses, and there are often equity partners and possibly investors. This frequently means that the entrepreneurs are looking to have the monies that they entrust to investment professionals grow (Exhibit 4).
Skipping The ‘Fashion Show’
When entrepreneurs have considerable liquid assets after selling their companies, they regularly turn to financial advisors to manage all or a portion of these monies. This often results in a fashion show where a stream of investment professionals vies for the attention (and funds) of the former business owner.
About one in 10 considered a single investment professional. About three out of 10 deliberated between two financial advisors. More telling, about 60% looked at three or more investment professionals.
There are regularly a plethora of factors that go into winning a fashion show. Some of them are money-management-related, such as performance track record and investment philosophy. Sometimes, the deciding factor is chemistry or lack thereof between the financial advisors and the former entrepreneur. It is always preferable to be the singular financial advisor being considered to manage the money.
When only one financial advisor was considered, in every case there was a pre-existing relationship. This is the key to skipping having to compete once the entrepreneur has significant liquid assets to invest.
For financial advisors, the ability to avoid the fashion show as well as dramatically increase the probability of winning most, if not all, of the business owner’s asset management business is to be involved before the sale and endorsed by trusted professionals the entrepreneur is already working with.
It is important to recognize that nearly nine out of 10 successful business owners would like to, at some point in time, sell their companies (Exhibit 6). This provides professionals with meaningful opportunities to help them maximize their personal wealth from the sale. However, only about 15% of entrepreneurs are taking such action (Exhibit 7). This opens the door for many financial advisors to be involved with these successful business owners before the sale.
Getting directly involved can prove exceedingly beneficial for business owners. The most efficacious way to do this is by being recommended by their accountants. While successful business owners will usually rely on a variety of professionals, it is apparent that their accountants are regularly their primary “go to” resource. As so many critical business decisions are entwined with the financials of the company, these entrepreneurs depend on their accountants to help them navigate the possibilities and make wise choices.
Even where financial advisors are not involved before the sale, for most entrepreneurs the advice of the accountants proves to be a key determinant to whom to entrust new liquid assets. Still, the preferred approach is to—often through the entrepreneur’s accountant—have some effective interactions before the sale of the company.
Conclusions
Entrepreneurism is the greatest creator of private wealth. It also produces some of the most significant pools of investable assets. The ability to win investment management mandates from successful business owners who have sold all or part of their companies can dramatically increase a financial advisor’s practice.
Many times, there is a fashion show where investment professionals compete for the newly liquid assets of ex-entrepreneurs. A more effective approach is to build a relationship before the sale. What is often required is for the successful business owner’s accountant to be an advocate for the financial advisor.?Read more at:www.marieaustralia.com/long-formal-dresses | www.marieaustralia.com/formal-dresses
