Why You Should Focus on Who Your Ideal Clients Are

Why You Should Focus on Who Your Ideal Clients Are

The decision to open the new account is yours as much as it is the client’s. Define your ideal client. Be selective and choose your clients with care.

Elite Advisors have the ability to identify and target a demographic that works best for them.  They differentiate themselves from the competition by making their skills stand out as a perfect match for prospective clients. The best way to do this is to focus, laser-like, on specific ideal client types.

What’s the ideal client?

The ideal client is akin to what marketers term their target market – just taken to the next extreme of detail. It defines a profile of a specific client niche. It should include the behaviors, challenges, problems, and goals of specific groups of people.

What should you know about your ideal client?

Drill down to the details when it comes to identifying your ideal client. Include their stage of life – e.g.  working or retired, their profession, marital status, and level of education. Do they tend to live in a certain neighborhood? What are their likely assets? Interests and hobbies?

What are their financial challenges – is it having enough money for retirement? Increasing their tax efficiency? Ask yourself if you can provide your ideal client with real value in terms of your service and products. What solutions can you offer to match their needs and concerns?

Base your ideal client on your best existing clients.

A good starting point for pinpointing your ideal client is to consider your favorite current clients and why they are your favorites. Think about the clients you really enjoy working with – do they have any characteristics in common? Do they work at the same company, live in the same area, attend the same church, etc.? Clients who exhibit the same values and goals, and are clients you enjoy working with, are your potential ideal client types.

Once you’ve identified your ideal client you can focus your marketing materials on their needs.

Related: Why Teach Your Clients Not to Watch The Evening News

What do you do once you’ve identified your ideal client?

Ask yourself – how are you going to meet new clients that fit the profile? Via referrals from existing ideal clients, by running seminars or other methods? Once you’ve identified a group worth targeting write out your ‘ideal client’ profile. Try to be as detailed as possible but keep to one page so you can easily reference it and pull it out to give to prospects that fit the bill.

You will find this is an excellent icebreaker. It also makes you look professional, and prospects will be impressed that you’ve obviously done your homework. By handing out your ideal client profiles you are aligning yourself with your potential clients’ values and showing them that you understand their goals.

Aim to only work with clients who fit the profile

Taking the time to pin down who your ideal client is will ensure that you only work with the right clients and the right number of clients. Make it your aim to only accept new clients who fit your profile. Only if you enjoy working with clients will you be able to build a close personal relationship with them and deliver them truly first class service they deserve.

And it’s OK to let clients go if they are the wrong fit for you. At the end of the day you are running a for-profit business, and you can’t work for clients who take up an unreasonable amount of time and attention or who fill you with dread. Your time is precious and you have lots of clients to look after so by losing a bad client you are preserving your business growth and ensuring you enjoy your work. So focus on keeping a healthy book of clients going forward.

While you may not have the ideal client base right now work towards this and focus on only seeing investors who are right for you. Both you and your business will be better off in the longer term.

Don Connelly
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Don Connelly is perhaps the financial industry’s most successful speaker, story teller, motivator and mentor to Advisors. His career on Wall Street spans more than 45 years ... Click for full bio

Multi-Factor or Not Multi-Factor? That Is the Question

Multi-Factor or Not Multi-Factor? That Is the Question

Written by: Chris Shuba, Helios Quantitative Research, LLC

Let’s pretend you are a US investor that wants to deploy some of your money overseas.  You think international developed market stocks are attractive relative to US stocks, and you also think the US dollar will decline over the period you intend to hold your investment.  Your investment decision is logical to you. But you have choices:  You could a) simply invest in a traditional index like the MSCI EAFE, b) invest in a fund that systematically emphasizes a single factor (like a value fund) that only buys specific stocks related to that factor, or c) invest in a developed fund that blends several factors together, like the JPMorgan Diversified Return International Equity ETF (JPIN).  What is the best choice? 

Investing in a traditional international market capitalization index like the MSCI EAFE is not a bad choice. It has delivered nice returns for a US investor, especially uncorrelated outperformance in the 1970s and 1980s, and helped to diversify a US-only portfolio.

Your second choice is to invest in one particular factor because it makes sense to you.  Sticking with the example of a value strategy, you might believe a fund or index that chooses the cheapest or most attractively valued stocks based on metrics like Price to Earnings (PE) is best.  

You could go find a discretionary portfolio manager who only buys stocks he deems to be cheap.  Typically the concept of “cheap” is based on some absolute metric that the manager has in mind, such as never buying a stock with a PE greater than 15.  If there are not enough stocks that are attractive, he will hold his money in cash until he finds the prudent bargains he seeks.  This prudence also obviously risks possible underperformance from being absent from the market.

The alternative is to buy a value index or fund that systematically only buys the cheapest stocks in a particular investment universe.  So if there are 1000 investable stocks available, the index ONLY buys the cheapest decile of 100 stocks and is always fully invested in the 100 securities that are relatively cheapest.  This is an investment approach that a discretionary manger may disdain.  The discretionary value manager may look at those same 100 stocks and think they are pricey.  But nevertheless, academic research has shown that always being fully invested in the relatively cheapest percentiles of stocks in the US has produced superior returns over many decades. 

Such a portfolio is called a “factor” portfolio.  Why the name?   In the early 1960s, academics introduced the concept of beta and demonstrated that individual US stocks had sensitivities to, and were driven by, movements in the broad market.  In the early 1990s, academic research began to show that other “factors” such as value and size also drove US stock returns.  Since then, several factors have been identified as driving individual stock outperformance: value, size, volatility, momentum and quality.  Stocks that are cheaper, smaller, less volatile, have more positive annual returns and higher profitability have historically outperformed their peers.  It turns out these factors also work internationally.

Related: Who Gets Sick When the U.S. Sneezes?

Of all the factors, value is the factor that has been the best known the longest (even before it was academically identified as a “factor”), thanks to the books of Warren Buffet’s teacher Ben Graham.   And if you look abroad at an array of developed global markets and create a value index and compare it to its simple market capitalization weighted brother, the historic outperformance of value has been stunning.  Until recently.  

While there was some variability by country, on average from the mid-1970s up until 2005 a value factor portfolio in a developed market outperformed its market cap weighted index by about 2% a year.  That’s a lot. By contrast, since 2005, the average developed country value portfolio has underperformed a market cap indexes by about -40 basis points.  Which is the danger of investing in one factor.  It may not always work at every point in time.

So if investing in one factor like value runs the risk of underperforming, how about a multi-factor international developed equity portfolio?

Below is a breakdown of individual factor portfolios’ performance in international developed equity markets since 2005, an equal weighted factor portfolio as well the performance of the MSCI EAFE as our performance reference.  Note that, for the last 13 years, value has been the poorest factor by far, while the others have handily beaten the EAFE.  An equal weighted portfolio of all 5 factors, while not as optimal as some of the individual factor results, beats the EAFE by 1.6% and has an information ratio, or risk adjusted returns that are superior by 37%.  The equal weighted factor portfolio also has the advantage of not having to predict which factor will work when, so even when a factor like value does not beat the market, the other factors can pick up the slack.

SOURCE: MSCI, Data as of January 31, 2018. Past performance is no guarantee of future results. Shown for illustrative purposes only.

The equal weighted factor portfolio has one other advantage over the market cap weighted alternative. Note in the chart below how well the portfolio outperformed in the 2008 crisis, so it tends to do relatively well in highly volatile sell offs.

SOURCE: MSCI, Data as of January 31, 2018. Past performance is no guarantee of future results. Shown for illustrative purposes only.

While it’s not inconceivable that one or two of these factors could erode, or underperform for a stretch, the fact that you have exposure to multiple factors in a portfolio that seems to do especially well in crises suggest the multi-factor blended portfolio remains the most attractive way to invest in developed markets.

So, when asked the question: Multi-factor or not multi-factor?  The data speaks for itself.

Learn more about alternative beta and our ETF capabilities here.

DEFINITIONS: Price to earnings (P/E) ratio:  The price-earnings ratio (P/E ratio) is the ratio for valuing a company that measures its current share price relative to its per-share earnings.

DISCLOSURES: MSCI EAFE Investable Market Index (IMI): The MSCI EAFE Investable Market Index (IMI), is an equity index which captures large, mid and small cap representation across Developed Markets countries* around the world, excluding the US and Canada. The index is based on the MSCI Global Investable Market Indexes (GIMI) Methodology—a comprehensive and consistent approach to index construction that allows for meaningful global views and cross regional comparisons across all market capitalization size, sector and style segments and combinations. This methodology aims to provide exhaustive coverage of the relevant investment opportunity set with a strong emphasis on index liquidity, investability and replicability. The index is reviewed quarterly—in February, May, August and November—with the objective of reflecting change in the underlying equity markets in a timely manner, while limiting undue index turnover. During the May and November semi-annual index reviews, the index is rebalanced and the large, mid and small capitalization cutoff points are recalculated.

Investors should carefully consider the investment objectives and risks as well as charges and expenses of the ETF before investing. The summary and full  prospectuses contain this and other information about the ETF. Read the prospectus carefully before investing. Call 1-844-4JPM-ETF or visit ww.jpmorganetfs.com to obtain a prospectus.
J.P. Morgan Asset Management
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See how ETFs differ from other investment vehicles, learn how to evaluate them, and discover how ETFs can be used effectively to achieve a diversity of investment strategies. ... Click for full bio