The Prospecting Professor

Blue Collars, Green Pastures

During a presentation a few months back, I asked the assembled group of newly-licensed registered representatives to identify the top five niches of potential investors. Their shouted collective response was: attorneys, accountants, physicians, dentists, and corporate executives. Not surprisingly, all of these niches represent "white-collar" professions...none were of the "blue-collar" variety.

This bias reflects the bias of the financial services industry, the society at-large, and of many of our parents too. Growing up we all heard about the importance of getting a good education. "Blue-collar" work, coveralls, calloused hands, muddy work boots, and lunch pails was not an appropriate path for anyone desirous of societal status. Heaven forfend the person who expressed a desire to become a welder, machinist, or auto mechanic.

In 2005, this is an out-dated notion. While many of the "white-collar" professions are outsourced across the globe, the humble "blue-collar" tradesmen and women are earning six-figure salaries.

In large part, this is a simple function of supply-and-demand. It is also an outcome of today's fast-paced U.S. economy, where the distinction between traditional boundaries in the "blue-collar" workforce are constantly blurred. As the U.S. economy evolves, the distinctions between operator and manager, machinist and engineer, architect and carpenter, is becoming increasingly  fuzzy. Jobs that once required nothing more than backbreaking manual labor now demand specialized  math,  computer and science skills. These demands have diminished the pool of qualified workers, which have led to a labor shortage of crisis proportions. Many companies are taking to extreme measures to recruit new employees: going out of state, attending high school and junior college job fairs...reaching out to women, immigrants, laid-off airline workers, etc.

With the demographics of the workforce, this is a trend that is likely to continue. Consider manufacturing. 80% of manufacturers have a serious shortage of production workers, machinists and craftworkers. By the year 2020, manufacturers will need as many as 10 million new skilled workers to replace the aging baby boomers who compile the majority of the 14 million manufacturing jobs today.

Here's a test. The next time you visit your dentist (or physician or accountant), ask them how many solicitations, phone calls or direct mail pieces, they have received from financial service concerns over the past week. Contrarily, ask the welding technician at a local oil refinery who is making $100,000 per year, the same question. My guess is that there will be no comparison in the responses.

Here's the other secret. Financial advisors want to work with clients who have accumulated, or are accumulating, financial assets. More often than not, this means working with clients who have good SAVING  habits. Too often, "white-collar" professionals with very high incomes have very little in the way of savings. Although their spending habits are first-rate, their savings habits are non-existent. Sadly, in this age of conspicuous consumption, spending tends to rise in accordance with one's income, regardless as to how massive one's income is (Exhibit A: Michael Jackson). The point to be made is that individuals, who have decent salaries and EXTRAORDINARY savings habits, can accumulate significant savings over the course of their life.

For those financial advisors who want to be a tad contrarian, and think "outside the box", do not ignore: machinists, auto mechanics, heavy equipment operators, welders, or cement masons. You might need more of them to build your $100 million book-of-business...yet you will certainly find that the queue knocking on their doors, is much shorter.

Niche Focus: Commercial Real Estate Attorneys

With the economy doing better, and commercial real estate picking up, attorneys who specialize in real estate transactions are seeing their plate full these days. For those financial advisors who are seeking networking opportunities within this specialized niche, here are some places to start.

The national publication that covers the commercial real estate beat is National Real Estate Investor. This is a good source to use to become familiar with events and trends.

How do you identify the commercial real estate attorneys in your region? The best resource, as it is for all attorneys, is www.martindale.com. On the Martindale home page you will find tabs that resemble file folders. Choose the "Location/Area of Practice" tab. From here you will want to select the geography and "Specific Area of Practice" box. Type in, "commercial real estate", and complete the city/county/state for your search...and voila...you will find a nice contact list.

To become even more immersed in this niche, you will want to build a network with the same professionals and referral sources that commercial real estate attorneys rely upon. These would be: mid-size businesses, CPA's who specialize in this area, commercial real estate agents, commercial bankers, business brokers, and community business leaders.

Another possible networking resource is the real estate editor for your local paper. In fact, there is a national association that encompasses this group, the National Association of Real Estate Editors. Many of them are just returning from their annual convention.

Final point on positioning. I know an advisor who has done very well by delving deeply inside this niche by positioning himself as an expert on ultra-safe, short-term financial instruments. He calls himself, the "Stay Rich Guy," and seeks those consummated deals that need a place for the proceeds. It stands to reason that attorneys who specialize in real estate transactions would want to have this type of an advisor as a resource for their practice.

Niche Focus: Shredding Companies

"You tell me over and over and over again my friend, ah, you don't believe we're on the eve of destruction."...lyrics from the worst rock-and-roll song ever, Barry McGuire's Eve of Destruction

Last year, 9.3 million consumers were victims of identity theft. The cost to U.S. businesses and consumers exceeds $50 billion annually. Interestingly, most identity theft is not of the 'hacking into the LexisNexis database' variety. It is rather low tech, e.g. dumpster diving.

In an effort to reverse this trend, federal rules have been enacted regarding disposal of documents containing personal information. Beginning today, June 1st, anyone who maintains or otherwise possesses consumer information derived from consumer reports for a business purpose...must properly dispose of any such information. The Fair and Accurate Credit Transactions Act is intended to reduce the risk of consumer fraud by improper disposal of personal documents.

As you might expect, this federal law has been a boon to shredding companies. In a recent survey by the National Association of Information Destruction (NAID), the average annual growth rate for document destruction companies over the past four years...has exceeded 27%. Already on the books is the Health Insurance Privacy and Accountability Act, which governs companies that handle medical records. The new law covers any business who use documents with personal information...from families with nannies or gardeners, to companies that dispose of tons of records monthly.

For a list of companies that specialize in information destruction, the best source is the NAID. Their website, www.naidonline.org, has a directory of member companies in your region.

The NAID website also has a list of, what they term, "interesting facts":

1. Every business has information that requires destruction.
2. Stored records should be destroyed on a regular schedule.
3. Incidental business records discarded on a daily basis should be protected.
4. Recycling is not an adequate alternative.
5. A Certificate of Destruction does not relieve a company from its obligation to keep information confidential.
6. Most record storage companies do not provide shredding services.
7. Internal personnel should not be responsible to destroy certain information.
8. Information protection is a vital issue to senior management.

Ciao!

Niche Focus: Janitorial Services

In the coming decade(s), the most significant growth in the US economy is projected to come from service industries...and janitorial services are expected to grow among the fastest. Last year, annual  revenues for the commercial cleaning sector were about $100 billion, and grew 6.3% for the year. By 2008, total receipts could exceed $138 billion.

The growth of commercial cleaning services has been helped by the boom in the construction of office buildings. In addition, schools, hospitals and government agencies...entities that traditionally had in-house staffs have "outsourced"...and are now using contractors for the work.

Janitorial service companies can be small, closely-held firms, or the larger multi-branch concerns. The barriers to enter the business are not high, and since 2001, many laid-off employees in other sectors have gravitated to the industry. Indeed, the number of janitorial service companies without paid employees has soared by more than 20% annually over the past few years

The industry association is the Building Service Contractors Association International (www.bscai.org). The industry's top issues are:

• High employee turnover...as much as 30-40% employee attrition monthly,
• Low client loyalty...66% of service contracts are lost within a few years,
• Increased clients security concerns,
• A growing demand for "green" cleaning...and a,
• Move to total service packages, e.g. landscaping, minor maintenance and security issues.

Additionally, because commercial cleaning is a low-tech business that's easy to enter (and many do); some of the savvier players are finding lucrative niches, i.e. damage restoration, mold remediation, and maid services.

For a list of commercial cleaning service companies in your area, visit the BSCAI website, and access the Member Directory.

Finally, there is an opportunity for financial advisors to insert themselves between the business relationship of janitorial service companies...and their clients. The national association BOMA, Building Owners and Managers Association represents (shockingly) building owners. In a future post, I will discuss how financial advisors can build networks with the BSCAI members, and the BOMA members...and build self-perpetuating referral networks.

Niche Focus: Scrap and Recycling Industry

With strong global demand, driven by China and other Pacific Rim countries leading the way, the market for recyclable goods has never been higher. China has been on a building boom...electrifying the country and preparing the country for the showplace of the 2008 Olympics.

Although prices for scrap steel have moderated since December, prices for many metals are at, or near, all-time highs. In the last 18 months on the London Futures Exchange; aluminum futures are up 40%, zinc up 69%, lead up 74%, and copper is up 82%.

For financial advisors, this may present opportunities to engage business owners in the scrap and recycling industries. The national association is the The Institute for Scrap Recycling Industries. Their monthly publication, Scrap, is a good resource. An even publication is, Recycling Today...(see link), which provides a comprehensive industry view.

Niche Focus: Landscape Architects & Nurseries

The feature article in the Weekend Journal section of the WSJ this last Friday is entitled, "Growing Celebrity". The gist of the article is that US homeowners are spending a lot more on their yards, gardens and landscaping these days. The National Gardening Association reports that in 2004, consumers spent $38.4 billion, up from $30.2 billion in 1999.

The piece begins with an anecdote about Jim Clark, the founder of Netscape, who was looking for a landscape architect for his new six-acre estate in Palm Beach. The total bill for this project ended up exceeding $2 million. Top landscape architects charge $15,000 for a blueprint and $250 per hour.

The downside to networking/prospecting this group now is that they are just entering their busy season. Most contractors of any industry are notoriously difficult to reach during spring/summer...and landscape architects can be among the busiest.

However, here are a number of resources for the financial advisor who wants to begin a networking campaign within these industries:

1. The National Gardening Association is a good place to start. They have a Buyers Guide too, although it is not very comprehensive.
2. TheAmerican Nursery and Landscape Association is the national association for the nursery industry. The website has a pretty good member directory, where you will find listings of the nurseries in your area. American Nurseryman is one of the trade journals that serves the industry, and provides an overview of some of the topics of  general concern.
3. The American Society of Landscape Architects is the national association for landscape architects. The online member directory is a good one, and the magazine, "Landscape Architecture" can be accessed from the site. The Dirt is the Landscape Architecture News Digest, and is a great site for interesting daily nuggets and comings/goings in the industry. By the way, April is National Landscape Architecture Month.

One final point, industries like landscape architects are good places to form Strategic Alliances. With a Strategic Alliance the advisor forms a bilateral referring relationship with another referring source (CPA, attorney, landscape architect, etc.). The advisor positions themselves, in the eyes of the landscape architect, as someone whose clients parallel the clients of the architect. Strategic Alliances are best formed when the advisor is prepared to "give" a referral before they "get" one.

Physicians: 2382 Years After Hippocrates

'I swear by Apollo Physician and Asclepius and Hygieia and Panaceia and all the gods and goddesses making them my witnesses, that I will fulfill according to my ability and judgment this oath and this covenant."

Thus begins the Oath of Medical Ethics developed by the father of modern medicine, Hippocrates, who died in 377 B.C. Hippocrates' revolutionary thinking rejected the commonly held belief that illness was caused by the possession of evil spirits, or the disfavor of the gods. Contrarily, he believed that illness had a physical and rational explanation. He also believed in the natural healing process of rest, a good diet, fresh air and cleanliness.

The medical profession has evolved a long way from the days of Hippocrates. Today, physicians are more likely to be concerned about: plummeting income levels, soaring malpractice costs, restrictive managed care, massive debt loads from medical school, and molasses-like reimbursement flow.

The physicians market can be a very difficult market for financial advisors to penetrate. Moreover, as indicated above, many physicians are not very good prospective clients. For example, 84% of medical school graduates have some debt, with the average educational debt is now about $110,000. That's hardly a good place to begin a career...and many young physicians compound their troubles by jumping headfirst into a high-expense lifestyle, e.g. expensive home, expensive cars, etc.

To get a better handle on the financial realities of the medical profession, I recommend that financial advisors bookmark the magazine, Medical Economics, www.memag.com. There are always many good and interesting insights into the fiscal aspects of running a medical practice. In the latest issue, the lead article is,  "What are these doctors doing right?"...which is a piece that looks at financial, not medical, issues.

Another good  resource for financial advisors interested in marketing to physicians can be found in this month's On Wall Street, (link). In a piece entitled, "To Snare Doctor's, Get a Net", the author describes how certain advisors have been successful in positioning themselves in this market.

Like many white-collar professionals, physicians are over-prospected by financial advisors. In fact, for those advisors who continue to randomly cold-call physicians, they should reconsider this annoying and negative approach. It is a method that is ineffective, inefficient, and deserves to be retired. To network with physicians effectively, advisors should consider the realities of the medical profession today...and adapt accordingly.

A $450 Billion Market: Gen X Women

When financial advisors indicate that they specialize in working with women, they usually mean one of two broad niches: divorced women, or widows. However, fewer advisors focus on "Generation X" women, the 4 million or so women, the daughters of the Baby Boomers, born between 1965 and 1978. Although there is a lot of guesswork in studies like this, Allstate Corp. estimates that 16% of Gen X women will inherit more than $100,000...which represents a total market of more than $450 billion.

A recent article in National Underwriter entitled, "She's Young and Will Be Rich...Reach Her Now". Here are some of the article's observations:

• Affluent families may be more likely to educate their daughters about money, but many young women are as confused about money as previous generations.
• Given that the mothers and grandmothers of the Gen X women still have large, unmet planning needs, the younger generation has been largely ignored by financial services marketers.
• Spectrem Research has found that Gen X women are more conservative about investments and depend more heavily on advisors than comparable men.
• Younger women face concerns about what might happen if they marry men who are dishonest or bad with money.
• Savvy wealth advisors aren't waiting...they are attempting to build relationships with daughters and granddaughters of their clients now.
• A significant proportion of young women are interested in using part of their wealth for societal good...therefore socially conscious investment strategies have resonance.
• A certain amount of Gen X women have/will marry young men from overseas...creating complicated tax-planning problems, and possible immigration issues. Advisors who have clients with these needs should have relationships with experts on immigration and international tax law.
• To break into the young affluent female market, advisors will need to pursue far more targeted strategies than employed currently.

Sadly, Generation X also expects to receive another, more unfortunate legacy...$4 trillion in national debt. For those of this generation who have the good fortune of inheriting substantial family wealth...the sooner that planning begins, the better.

Niche Focus: Women Entrepreneurs

Female entrepreneurs are a fast-growing target market. Consider these facts:

• Women own an estimated 10.6 million firms, or 48% of all privately-held firms in the US.
• In the past 12 years, the number of women-owned businesses has more than doubled. Between 1997 and 2004, the estimated growth rate for women-owned firms was nearly twice that of all firms, 17% vs. 9%.
• Women emphasize relationship-building as well as gathering facts...are more likely to consult others, including experts...and may take more time in making decisions.
• When selecting a financial advisor, high net worth women are more likely than their male counterparts to say it is important to feel confident that the advisor is "acting in their best interest". (93% vs. 83%).

These observations, and others, can be found on the website for the Center for Women's Business Research, http://www.nfwbo.org/index.asp.

Wilma Anderson is the president of Senior Care Associates, a firm that serves the insurance industry. She believes that LTC insurance is the best way to reach, and begin relationships, with female business owners. She observes that women business owners are usually more receptive to hearing about LTC insurance because they're more often caregivers for aging parents and other relatives. Because women live longer than men, they realize they're more likely to need long term care...and businesswomen want to remain financially independent and not become a burden to their children. Her favorite question to ask a business owner is "What are your plans when your health changes?" In her view, women understand the question. Men tend to deny that anything will happen.

Whether or not LTC insurance is the 'lead product' for female business owners, the emergence of this female entrepreneur target market is undeniable. Annually, these firms generate 2.5 trillion in sales and employ 19.1 million people. That's a force!

Niche Focus: Industrial Distributors

Industrial supply distributorships are intermediaries between the manufacturers and the users of construction and industrial products. Industrial supply distributorships supply construction and industrial  tools, equipment and services...to a diverse group of contractors, e.g. electrical, HVAC, mechanical, drywall, concrete, masonry, plumbing, commercial construction, etc.

Industrial supply distributors can be found in the yellow pages under, "Industrial Equipment & Supplies, Wholesale." The SIC code (Standard Industrial Classification) is 5072. Their national trade association is the Industrial Supply Association, WWW.isapartners.org.

The outlook for industrial distribution suppliers is steady through 2007, fueled by a strengthening economy. Residential construction is likely to slow. Industrial and office construction will see an upsurge. State tax revenues will help to accelerate public construction.

However, the real opportunity for  financial advisors who gain industrial distributor clients...is the opportunity for referrals within the distributor's own client list. Typically, industrial distributors have built strong relationships with their contractor clients. To the extent that a financial advisor can differentiate themselves...underpromise and over-deliver...they will be afforded a gateway to a diverse group of under-prospected business owners.