Strategy 8 :
Leverage Economic Glue
In Strategy 7, you built the first part of your wealthy client pipeline. By establishing yourself as the expert the wealthy want to work with, you greatly smoothed the way for prospective clients to first find you and then to engage you.
In Strategy 8 and Strategy 9, you will create the other part of your wealthy client pipeline: mutually beneficial partnerships with other professional advisors. We break this into two strategies because two major elements are required to build profitable strategic partnerships.
The first element is the value you will bring to any partnership. This is the economic glue that binds partnerships together and consistently delivers economic results. The economic glue you will bring to your strategic partnerships is your high-value thought leadership content along with the guidance to use it effectively to help your partners position themselves as experts. We’ll discuss this economic glue in some detail here in Strategy 8.
The second element needed to build successful strategic partnerships is a process for identifying the right partners, structuring the partnership properly and making it work very effectively over time. Our systematic process for this will be the subject of Strategy 9.
When done well, helping your centers of influence become thought leaders deeply motivates them to proactively identify their qualified wealthy clients and introduce them to you, and then lobby those clients on your behalf. In fact, you may well find that your strategic partnerships are your most important driver for moving significantly upmarket and acquiring substantially more assets to manage. The reason is simple: Of all the ways to source affluent clients—including client referrals, social media outreach, presentations, referrals from friends and family members, networking events and referrals from centers of influence—referrals from COIs are consistently the best source of large clients.
Consider Exhibit 8.1. It shows that just over three-quarters of surveyed advisors report client referrals as the source of most of their new clients. Referrals from centers of influence are a distant second, at 18 percent. It’s clear that referrals from current clients produce the greatest number of new clients.
When it comes to the quality of referrals, however, it’s a much different story. The research shows that seven out of ten advisors cite referrals from centers of influence as the source of the best new clients. (See Exhibit 8.2.) “Best” usually means the clients with the largest investment portfolios.
Most centers of influence are looking for ways to increase their incomes, and most financial advisors—unlike you—do not have access to either high-quality thought leadership content or a proven process for building strategic partnerships. This gives you a significant competitive advantage when it comes to getting those prized referrals from centers of influence.
The Power of Thought Leadership for COIs
For centers of influence to refer their wealthy clients to you, there has to be substantial benefit for the wealthy clients. We take that as a given. You must be able to do a very good job for the wealthy. This includes not only the services and products you provide, but also your ability to work well with affluent clients.
In addition, there nearly always has to be substantial benefit for the centers of influence. Before the great majority of COIs will introduce you to their wealthy clients, you will have to show how you can help the COI become more successful. You will do so with thought leadership.
Exactly as with financial advisors, thought leadership has the potential to help attorneys and accountants overcome key barriers to success, including increasing commoditization and difficulty sourcing wealthy clients. And when these professionals distribute high-quality thought leadership content and adroitly follow up, it’s common for wealthy clients to use more of their services.
It is also common for thought leadership content to help the wealthy better understand the benefits they are receiving from their professional advisors and, as a result, be more inclined to use the services of their professionals more often. And the wealthy clients may share the thought leadership content they receive with friends and associates, leading to additional client referrals.
The potential of thought leadership to help them further build their practices and move up market is not lost on most attorneys and accountants. As Exhibit 8.3 shows, about three-quarters of the attorneys and 90 percent of the accountants believe becoming a thought leader is very useful for business development.
However, as Exhibit 8.4 demonstrates, only a quarter of the attorneys and nearly 60 percent of the accountants are actively working to become thought leaders.
It’s very clear that few of the attorneys and accountants actively working to become thought leaders are accomplishing this goal and getting the tremendous results that are possible. Simply put, while a great many attorneys and accountants are making efforts in this direction, their efforts are often falling short.
This scenario sets the stage for you. When you help your COIs implement a systematic thought leadership process and provide a steady supply of high-quality thought leadership content, you can be the reason your attorney and accountant partners become thought leaders. This will create substantial economic glue and make you an extremely valuable partner.
There are other forms of economic glue you can use with your partners, such as referring your wealthy clients to them. However, delivering an ongoing stream of high-caliber, skillfully positioned thought leadership content that partners can use to build their practices is one of the most powerful ways—if not the most powerful way—to establish and nurture profitable partnerships.
The Law of Reciprocity
It’s important to recognize the role of the law of reciprocity in creating economic glue. We’re all familiar with the law of reciprocity, even though we don’t usually call it by that name. You know the feeling when someone does you a favor and you feel you owe that person something—a favor—in return? That’s the law of reciprocity in action.
Simply put, the law of reciprocity states that when you receive gifts, favors, opportunities or the like, you feel obligated to respond in kind. While we call it a law, it’s not at all automatic. The law of reciprocity enhances the likelihood that other people will be more cooperative and that you will be able to achieve your goals, but there are no guarantees. It’s the difference between influence and control.
The law of reciprocity is pervasive throughout human culture because it fosters interconnectedness. It’s instrumental to social evolution. It enables people to give resources without having to just give them away, which promotes sharing and the division of labor.
The societal benefits of the law of reciprocity are such that people are socialized into a sense of obligation to others for their beneficial actions. Consequently, there’s internal pressure (in the form of anxiety) and external pressure (in the form of shame) to give back. Moreover, people who fail to give back can be ostracized and considered freeloaders.
Exhibit 8.5 illustrates how thought leadership drives the law of reciprocity between partners.
Two types of high-quality thought leadership content are instrumental in this framework. Optimally, you will use both of these types of content to establish and strengthen your relationship with your partners:
Content on best practices focuses on how the most successful professionals catering to the wealthy are achieving their success. There are generic best practices and industry-specific best practices. Using thought leadership content that addresses both is usually the most effective. Most important, reaffirming the almost universally agreed-on best practice of becoming a thought leader is very useful.
Targeted business development content is high-quality thought leadership content your partners can share with their wealthy clients, affluent prospects and referral sources. It also includes coaching them on how to leverage the material you provide to become thought leaders. When implemented well, this content helps them become thought leaders and regularly generates new business for them.
All in all, the high-quality thought leadership content you will provide will help your attorney and accountant partners become meaningfully more successful. Spurred by their greater professional accomplishments—thanks to your efforts and contributions—they will likely make greater and greater efforts to reciprocate by sending you wealthy clients for your expertise.
The Multiplier Effect
Always remember that by helping your attorney and accounting partners become thought leaders, you deliver to them a solution to build larger high-net-worth practices and subsequently earn more while increasing the equity values of their practices. And in return? You will enjoy a pipeline of wealthy clients.
This works because of what we call the multiplier effect—using your thought leadership content and expertise to bring in new business not just for yourself, but also for your centers of influence and even their centers of influence. Like the ripples from a stone tossed into a pond, the impact of your efforts will be magnified, often well beyond what you could have envisioned. In short, the multiplier effect will enable you to reach more high-quality prospective clients than you ever could on your own.
Exhibit 8.6 shows how the multiplier effect works. You provide high-value thought leadership content, along with guidance on how to use it, to your centers of influence. When your centers of influence distribute your thought leadership content to their professional relationships—wealthy clients, prospective clients and high-end centers of influence—they will likely get more business. This results in your centers of influence referring more affluent clients to you.
It’s important to understand that it’s not the norm—in fact, it’s very unlikely—that the people to whom your centers of influence send your thought leadership content will seek you out. This will almost never happen. These individuals will turn instead to the professionals who directly shared with them your high-value thought leadership content. Your centers of influence are essentially curating their own content using your content—which itself can be curated.
Since the wealthy individuals to whom your COIs send your thought leadership content are unlikely to reach out to you to become your clients, and since the centers of influence they send your content to are unlikely ever to send you a wealthy client, what’s the point of this approach?
It’s this: Your centers of influence will direct more of their wealthy clients to you for your services. You want your COIs to become more successful because they are the ones who will help you become more successful. This is true economic glue at work.