Promotional perks can actually unleash structural opportunities for advisors looking for ways to leverage capacity into mission-critical pursuits while unbundling everything but the essential.
When Los Angeles real estate billionaire Rick Caruso built an Uber depot into his legendary shopping center The Grove, the motive was a lot bigger than simply subsidizing visits from people with more cash to spend than urge to drive.
Granted, it’s a nice headline when you make it easy for shoppers to leave their cars at home. But advisors need to understand the behind-the-scenes math here from all the angles.
As luck would have it, we’ll be touching on these themes in tomorrow’s free Trust Advisor webinar on the power of next-generation “robo” advisory platforms. A few seats are still open for those who register HERE.
Behind the promotional stunt
Caruso brews free hot chocolate and cider for Grove shoppers who come in via the designated Uber depot. In past holiday crunch seasons, he’s even paid for every car service ride into the center and kicked in up to $150 for the ride back as long as shoppers spend $450 or more.
The logic there is pretty clear. If paying for transportation boosts foot traffic at the center — the equivalent of “prospects” for retailers — then Caruso’s tenants remain happy. And if those shoppers spend the money in the stores that they saved on transit, those tenants remain happy.
A typical Uber fare in Los Angeles might cost the sponsor $30-$90 one way. The trip into the center is a gamble, but Caruso knows that more than 90% of the people who come in end up buying.
The average Grove shopper spends $45-$50, so it only takes 1 in 4 people to qualify for the free trip back and cover those who simply take advantage of the offer. Everything beyond that is pure profit for the shopping center.
That’s the kind of math that makes it worthwhile for every advisor in the country to send a free town car to pick up local high-net-worth prospects for a no-strings-attached consultation and trial relationship.
It’s a glossier version of the age-old free lunch with an educational seminar. You put on your best show, lay out the value you can add. If even 1 in 4 people you send the car to pick up ends up placing just $40,000 with you, the door-to-door service pays for itself in the first year.
Naturally the car impresses, but it’s really the demonstration that you’re eager to deliver maximum convenience that seals the deal. Anything better than 25% conversion or $40,000 per client win and your in-house “chauffeur service” actually becomes an instant profit center.
The true meaning of “on demand”
That said, when shopping centers “send the car,” the real benefit is behind the scenes, in what we would call the back office.
Every third-party taxi that pulls up and drops a shopper off doesn’t need a parking place. And parking is a vast drain on every commercial property developer’s resources.
Maybe you need one 150-square-foot space for every 250 square feet on the sales floor. Add all the turning lanes and landscaping and the developer is probably handing half the acreage to a lot where customers can leave their cars.
Drive every shopper to your mall and you can build twice as much income-generating store space. For The Grove, that might mean an extra 575,000 square feet potentially bringing in another $800 million a year in tenant sales and $41 million a year in tenant rent.
That’s the revolutionary impact. The store layouts remain the same. The food courts remain just as crowded. In theory, the center can draw more foot traffic than ever because the “population” in any given hour isn’t constrained by room to park.
The Grove already has a problem with parking. There’s maybe only 1,100 spaces within a 10-minute walk, which creates a remarkably hard capacity constraint in car-centered Los Angeles.
Advisors have a similar constraint on their ability to serve clients and produce revenue. There are only 3,000 hours in a standard working year. And like the typical shopping center, we almost universally allocate vast personal resources to areas of the relationship that aren’t essential any more.
In the Uber model, the car only “belongs” to the passenger during the trip. When the passenger steps out, the vehicle functionally disappears, eliminating the need to find a parking space. When it’s needed again, it materializes, on demand.
In the advisory business, a lot of firms invested in specialized expertise that is absolutely mission-critical when you need it but is actually a cost center most of the time.
Think of the parking lot. Every historical shopping center needed to buy that land. Advisors once needed to do their own market research, stock the client portfolios and execute every trade when it was time to rebalance.
We all dedicated a lot of career space across those 3,000 hours to these tasks. But the world is changing. We’ll touch on a lot of these themes tomorrow in the webinar, so if you’d like more detail on how advisors today are handing over the “parking lot” to third parties, you’ll definitely want to REGISTER and log in.
In general, it really revolves around focusing as many of those 3,000 hours a year on the essentials and delegating the rest. Rip out the no-longer-necessary “parking lot” in the back office and you might find yourself with more room in your week to give today’s clients what they really want.
Study after study shows that they don’t actually care whether you’re an investment genius or source your ideas from the best minds on Wall Street. They don’t care whether it’s your car that picks them up or the best Uber provides.
And they definitely don’t care where you park it. What matters is that you have the contacts and the will to find them what they need, when they need it. If they need a lawyer, a trust, a financial plan, a hedge fund, a household manager, they value your ability to provide on demand.
When you’re not providing, that expertise can remain offscreen like an Uber car after it drives off. Don’t pay for what you’re not using. Only take what you need.
In the meantime, you’re giving what they want, which is personal rapport and communication, the sense that you too are available on demand. That’s how tomorrow’s advisors are going to thrive.
Be your own Uber
We’ll also talk tomorrow about how liberating outdated professional “parking lots” allow advisors to broaden their personal capacity and actively serve more clients, thus making more money.
The secret here is to take a cue from Uber itself. Their fleet exists as a way to unlock previous slack time, getting private cars working in hours when they and their owners would otherwise be off the road.
Relatively few Uber drivers are full-time professionals. But technology allows them to slice up their week into micro-transactions, bits of what used to collectively constitute a taxi service.
You can do that too. If you find yourself with a few free hours in a slow season, you might be able to sell a one-time financial plan or plan review to investors who otherwise wouldn’t be suitable as long-term clients.
They’re not buying a car from you. They’re just paying for a ride. You’re tapping capacity that you would otherwise waste and opening up a micro-market that you would otherwise not be able to serve.
In the past, the financial plan was often considered a loss leader, a marketing lure just like that hypothetical free car service we talked about up the page. Advisors looking for a reasonable investment placement to manage bundled the plan into the annual fee and called it even.
But it’s a service in itself that people will pay for even if they don’t have the assets to make personalized investment management worthwhile.
Unbundle that piece of your personal capacity — your time, the “car” your firm already owns — and get it making money during the downtime. If you like, recommend a robo to run the assets, or find a fee that works and roll the account into a robo platform yourself.
There’s a lot of money in the middle market that the traditional bundled advisory relationship can’t serve effectively. It’s not a good fit for them and not profitable for you — they can’t afford to own the ride.
They can rent the wheels by the hour, though. And you keep your wheels on the road.
Again, we’re talking new ways humans can keep themselves in the center of the robo conversation tomorrow. Registration page is HERE.