7 Reasons Your “Ideal Client” May Not Be Ideal • Financially Simple


What do you think of when you hear the term, “ideal client?” Does it conjure images of the billionaire next door who always invites you to join him on exotic hunting trips because he’s so appreciative of the way you’ve handled his accounts? No? Maybe that’s just me. In all seriousness, what does the ideal client look like for you? If you can’t answer that question, or if you’re only able to give a vague description, then your ideal client (or lack of one) could prevent you from making the eight-figure exit. In this entry, I explore seven reasons your ideal could be holding you back.

Follow Along With The Financially Simple Podcast!

This week on The Financially Simple Podcast: 

  • (1:18) What Is the Ideal Client?

  • (2:48) How Do We Define Our Ideal Client?

  • (3:46) Defining Your Target Market

  • (4:20) You Haven’t Defined Your Ideal Client Well Enough

  • (7:33) Geographical Distance Could be Problematic

  • (10:19) You’re Targeting A Shrinking Market

  • (11:56) Cultural Misalignment

  • (13:46) You’re Not Reaching Them Soon Enough

  • (15:50) You Have No Common Ground

  • (17:37) You Don’t Have an Ideal Client

  • (18:12) How to Address the Problem

Identifying Your “Ideal” Client

As a financial advisor, you may have heard the term “ideal client” thrown around quite often. But what exactly does it mean to have an ideal client? According to FJ Solutions, a digital marketing agency, an ideal client is “someone who finds the perfect solution to their problems or needs in the services or products that your company provides. The ideal client will be loyal to your company, frequently uses or buys your products or services, and is likely to recommend you to their friends and colleagues.” In other words, your ideal client is someone who provides maximum value for the least effort.

To better define your ideal client, it’s essential to determine your Client Lifetime Value (CLV). The CLV represents a client’s value to your firm over a period of time. To calculate your CLV, multiply the frequency of purchases by the lifetime of the client by the gross profit margin. Once you know your CLV, you can determine your Client Acquisition Cost (CAC). The CAC is an approximate calculation of the total cost of acquiring a new client. To determine your CAC, divide your sales and marketing expenses by the total number of clients. Finally, divide your CLV by your CAC to determine your CLV over CAC.

RELATED READING: 3 Ways to Determine Your Ideal Client and Use the Results

It’s also important to define your target market. Your target market is a group of people who have been identified as the most likely potential customers for your product or service because of shared characteristics such as age, income, and lifestyle. Once you know your target market, it’s essential to determine where your ideal client is located and how to reach them. This can be done through lead generation platforms, social media, in-person meetings, and other marketing strategies.

7 Reasons Your Ideal Client Is Hindering Your Success

I’ve come up with seven reasons advisors struggle to connect with their ideal clients. Understanding when and where you get tripped up in the process can help you to troubleshoot. Let’s take a closer look!

1. You Haven’t Defined Your Perfect Client Well Enough

According to a study by SmartAsset, 63.09% of FAs said they used lead generation platforms to target new clients more in 2022 than in previous years. Similarly, 45% claim they’re using social media more often to engage potential clients. On the other hand, 52.42% of advisors surveyed said their cold calling decreased in 2022. The 2018 FA Insight Study by TD Ameritrade found that firms with a specific target market achieved 35% greater median annual client growth than their peers.

Although FAs are becoming more focused on marketing to their ideal clients, it’s possible that you haven’t defined your client well enough. For example, if you’re ideal client persona says something like, “52-year-old married business owner with a college degree,” that might seem specific, but it’s really only scratching the surface. Instead, you must get into the granular details.

You need to become hyper-specific by considering things like values, demographics, psychographics, hobbies, jobs, and family. Therefore, your client persona should look more like this: “52-year-old married male; 2 children about to graduate from high school; loves dogs but isn’t fond of cats; owns a manufacturing company with a 7-figure revenue; teaches Sunday School; enjoys spending time boating, hunting, and fishing.” You see, you have to really identify the person you’re trying to reach in order to know what resonates with them.

2. Miles Between

With the rise of digital communications, it may seem silly to think that your clients’ geographical location could prevent you from reaching them. However, there are still many investors who value the ability to sit across the table from their advisors. In fact, the AdvisorComms 2019 survey by Redtail revealed that in-person meetings generate the most engagement from clients (76%). This could create a big disadvantage for you and your team if your ideal client is concentrated in a different area.

I’ve encountered this in my own career. I have several long-time clients who live a few states over and just aren’t interested in trying to hold meetings over the phone or through teleconferencing. Because of this, I actually travel to meet with them twice a year. I schedule each of their meetings during the same week (usually, during turkey season and again, during deer season) and we get to really connect and discuss in detail, how they’re progressing toward their goals around a campfire. It doesn’t hurt that they’ve also become dear friends of mine.

3. A Shrinking Market

If you’ve determined that your target market is pre- and post-retirees (50 and above), you should be aware that you’re operating in a limited window. The 2022 Fidelity RIA Benchmarking Study revealed that about three-quarters of advisory clients are over the age of 50. Likewise, this sect of the market makes up the largest Share of Wallet in most firms.

Why is this a problem? Well, let’s assume that your client is receiving a 4-5% annual distribution. In a perfect world, this would remain steady and constant. However, life happens and there are often instances that create a need for a greater withdrawal. Now they’re taking 8% per year. That’s not such a big deal if you’re looking at a 40-year-old investor who is still working and can replace the funds over time.

On the other hand, when your client is a retiree, they don’t have a way to replace those funds. Therefore, your AUM fee takes a hit that can’t be recovered. Likewise, it’s no secret that this group of investors is either in their twilight years or they’re quickly approaching them. Therefore, your revenue will be on the decline as you’re preparing to make your exit.

4. Misalignment with Your Firm’s Culture

Although it may be a hard pill to swallow, you may have determined your ideal client is one that does not fit your firm’s culture. In this case, your ideal client isn’t ideal. So, what does that mean? Let me give an example from my own experience.

Every year, I like to send my clients Christmas cards with a photo of my family. I’m just a good ol’ country boy, and that’s just what you do. When Christmas time comes around, you send cards and you say, “Merry Christmas!” Well, a few years back, I mailed out the cards and had 2-3 clients that really got upset over this gesture. They called me up and said, “I can’t believe you would send this to me and say ‘Merry Christmas!’” They weren’t a good cultural fit.

I very sincerely told them that I understood where they were coming from and that it wasn’t my intention to offend them. However, I also made it clear that I could not apologize for being me and wishing them a Merry Christmas. As a result, I lost those clients. If your “ideal” clients are misaligned with your culture, it could create increased attrition which will negatively impact your firm’s valuation. Based on the 2022 RIA Benchmarking Study by Charles Schwab, the average client attrition rate is right at 3%. So, if yours is higher, you may want to examine whether your clients are a cultural fit.

5. Your Timing is Wrong

Another reason you may struggle to connect with your ideal clients is that you aren’t talking to them soon enough. As you know, being an advisor is a relationship-based profession. You have to establish trust before you win your clients over. Some clients take longer to make decisions, and if you aren’t reaching out to them early on in their decision-making process, you could miss out on the opportunity to work with them. For example, if your ideal client is in their early 60s, and you’re only reaching out to them when they reach 60 years of age, you’ve likely missed the chance to connect with them when the relationship could have been truly mutually beneficial (say when they were 50 years old and just starting to plan for retirement).

Several years ago, I had a prospective client come to me. He fit the basic mold of my ideal client but was still not quite there in all areas. Rather than taking him on immediately, I began the relationship. I told this client that I thought I could help him, but I needed him to do a few things in his business and personal finances first. He took my advice and went to work.

Three years later, this gentleman called me up and said, “Justin, I don’t know if you remember me but I’ve been listening to your podcast and reading your newsletters and blogs. I’ve finally completed what you asked me to do.” As a result, he was now ready to be my ideal client, and friends let me tell you, the guy has been a rock star. So, timing matters.

6. Uncommon Ground

Still, another potential challenge in connecting with ideal clients is a lack of common ground. It can be difficult to build a relationship with someone if there are no shared interests, hobbies, or values. Therefore, you should consider assessing your own personal interests and hobbies and seek out clients who share those interests. You might also consider participating in community events or organizations where you can meet potential clients who share your values or beliefs.

For example, I’m an avid outdoorsman. I love getting out in nature and seeing all the majesty of God’s creation. I’m probably not going to have a lot of common interests with someone who’s a professional gamer. Not that there is anything wrong with either side of that coin. My point is that you need to be sure that you’re ideal client has, at least, some of your common interests. Otherwise, you’re really going to struggle to make a connection and build trust. You’ve got to have a common ground with your ideal client. If you don’t, you could end up with atrophy within your client base after the sale.

7. You Don’t Have an Ideal Client

Finally, if you haven’t taken the time to identify your ideal client, you’re probably experiencing a lot of pain in your business. If you aim at nothing, you’ll hit it every time. That’s what Joe Pulizzi of the Content Marketing Institute meant when he said, “If your content marketing is for everybody, it’s for nobody.”

You see if you haven’t identified an ideal client, you have no idea how to speak to them. You won’t know where to reach them, who they are, or even how you can help them. If this is where you find yourself, I implore you to stop what you’re doing and gather your team to brainstorm a detailed client persona that helps you understand who you’re trying to attract.

What You Can Do About It

If you haven’t defined your ideal client or you’re struggling to connect with them, there are several steps you can take to improve your approach. One of the first steps is to better define or redefine your ideal client. This means getting into the nitty-gritty of who your ideal client is based on concrete data, such as demographics, psychographics, hobbies, jobs, family, and values. You have to really know them. I’m talking about knowing them so well that you can identify them from across the grocery store.

Work with your team, coach, or contractor to develop creative ways to connect with your ideal client. This may involve developing a targeted content marketing strategy that speaks directly to your ideal client’s needs and concerns. It may also involve using lead-generation platforms or social media to engage potential clients. You can use these tools to share information about your services and expertise and to connect with clients who are actively seeking financial advice.

In addition to refining your marketing strategy, you may also consider using technology to connect with your ideal clients. For example, video conferencing and screen-sharing tools can be used to provide virtual consultations and advice to clients who are unable to meet in person. This can be particularly helpful if you have clients located in different parts of the country or world.

Another key strategy for connecting with ideal clients is to build a strong referral network. You can ask existing clients to refer friends and family members who may benefit from your services.

Wrapping Up…

Friends, connecting with your ideal clients is critical to making the eight-figure exit. You must define your ideal client, understand their needs and concerns, and develop targeted marketing strategies to reach them. By doing so, you can position yourself as a trusted advisor who is committed to helping them achieve their financial goals.

Look, I know life is hard. We all have stuff that we’re dealing with. I get it. But life is good. Identifying the ideal client to help you toward an eight-figure exit can be frustrating, but it doesn’t have to be. Measure your firm’s ideal client against these seven reasons to determine whether your ideal client is truly ideal, or just an ideal path to stagnation. Friends, by taking a little time to define your ideal client, you can make growing your RIA at least, financially simple. Hey, let’s go out and make it a great day!

Could you benefit from having an outside perspective to help evaluate ways your ideal client might be hindering your firm’s growth? Reach out to our team. We’re always here to help.

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