Starting an investment business has a certain cachet attached that other kinds of business don’t. Right from the start, you’ll be dealing with some very big numbers and interacting with well-known companies, and although it’s right and proper to use this to impress other people, you can’t let it go to your head. If you’re going to impress those who really count – potential clients with serious money to invest – then you’ll need to approach it in just the same way as any other business. This means that you’ll need suitable qualifications, a good business plan and a unique selling point (USP).
What does a USP mean in the finance world? It’s that distinctive something that persuades clients to choose your company over the competition. Early on, you won’t be able to dazzle them with your track record or the sheer scale of your business, so what can you do? These four different areas will give you something to consider.
Fees and liability
The simplest way to attract clients in your early days as an investment business is simply to offer them what looks like a more attractive deal than other companies. You can do this by keeping your fees low or by assuming liability for a higher-than-average portion of losses on investments that don’t work out. This has to be balanced, however, by your need to actually make a living. Usually, investment companies have to be approached as second jobs for their first two years of operation, which is one of the reasons why the successful ones are more often started by people who are wealthy to begin with and can afford to devote a lot of unpaid time to them at the start. You should aim to be making enough to get by on by the end of that time, even if it takes longer to get rich. Accepting more liability can be an attractive initial approach because, after all, you won’t have to pay tax on losses, but it increases the length of time that you’re likely to be struggling for.
When you’re first starting out, it can be tempting to offer as wide an array of asset choices as possible in order to appeal to customers, but in fact most successful investment businesses make their names by specialising in particular ones. This gives you the chance to get really good at what you do and introduce additional asset classes simply for the purposes of balancing or hedging portfolios. This means that you’ll still be getting experience and you’ll still have the flexibility to work with clients who have different priorities when it comes to risks and returns, but you’ll be more likely to make really good decisions in your specialist areas, and those (along with any really bad ones) are what you’ll be remembered for.
Specialising in particular sectors can be a great way to appeal to clients because you can target your branding and marketing accordingly as well as associating what you offer with current events in order to boost your profile. This can work even if your main sector takes a downturn because clients with existing assets that they’re reluctant to let go of may transfer to you from a more general investment company in the belief that you’ll be better placed to look after them. Taking this approach also allows you to draw on expertise that you may have from working in another field prior to taking the plunge and launching your own company.
Many small investment companies make themselves stand out by focusing on particular countries or regions and using this as a hook with which to grab clients’ attention. Specialising in this way enables you to really get to know particular markets and find much better deals there than more general investment businesses can. This doesn’t mean being limited by sector. Many people think of the Middle East as all about oil, but Al Masah Capital is based there and works across healthcare, education, logistics and food. If you’re originally from another part of the world, you studied there or you have good contacts there, then this can make you particularly attractive to clients who are interested in exploring its investment potential but don’t know how to do so on their own.
Choosing one or more of these approaches can help you to define your business and will make it stand out far more effectively than if you simply offer the same range of investments as other companies for roughly the same price. You’ll always have the option of altering your strategy later on, but a start-up really needs to be distinctive.