July 8, 2010

Advisors Tackle Marketing Basics, Part II: Practice Edge for July 2010

Last month we talked about marketing basics--in particular, about product, price, promotion, and place, the 4 P's. In a nutshell, the 4 P theory you learned in your college marketing classes is that by offering the right products at the right prices to the right people using the right promotional vehicles, success is virtually guaranteed. In our June issue, we explored the first two of the 4Ps-product and price. This month, we'll examine the remaining two Ps-promotion and place. For investment advisors, promotion and place translate to using the right marketing methods to reach the right target audiences.

Effective promotion strategies are the key elements of advisors' success at any time, but it's especially important when the economy is in flux. The challenge with promotion strategies for advisors is experience: 61% of advisors surveyed don't have marketing plans, according to the latest AdvisorBenchmarking survey.

In 2009, there was a significant shift in how advisors gained new clients. The percentage of clients gained from actively seeking referrals nearly doubled to 21% in 2009 from just 12% in 2008 (see Chart 1 below). In contrast, the percentage of new clients coming from passive referrals, traditionally the most common source of new clients in the past, was 10% in 2009 versus 20% in 2008. This underscores the importance of seeking clients through active referrals. Also, advisors reported that their Web sites played a larger role in bringing in new clients in 2009-17% of advisor clients were attributed to leads from the Web.

When considering marketing tactics for 2010 (see Chart 2 below) , almost half (40%) of advisors surveyed said they would organize seminars or invitation-only events and 38% said they would host client appreciation events. Social networking sites are playing a bigger role in advisors' marketing efforts, with 28% of survey participants planning to use social media Web sites such as LinkedIn (28%) and Facebook (23%).

Determining a Target Niche

Most successful businesses identify specific target markets and create messaging--as well as marketing strategies and tactics--to effectively reach these markets. Traditionally, advisors have not actively defined specific target markets, with the exception of identifying certain wealth ranges for their optimal clients. Concentrating on smaller groups of clients with similar needs and goals may enable advisors to build specialized knowledge and leverage that knowledge across the client base, rather than having to support disparate needs. The percentage of advisors who targeted clients with specialized investment needs and specific career descriptions did increase in 2009. Advisors increasingly relied on wealth range as a determining factor for focusing on potential clients-63% compared to 49% in 2008. We would caution that wealth range may not be enough of a criterion in creating a target market, as age, career, and lifestyle can have significant impacts on investors within the same wealth range.

Communicating with Clients

As the global financial crisis continues, it's essential that advisors re-establish relationships with their clients. In the wake of the market collapse of 2008, clients are less trusting and less willing to bring new assets to advisors, according to a 2009 Horsesmouth RIA survey. Clients want more communication with their advisors than in the past and expect trust-strengthening actions--such as proactive communication--from their advisors.

In 2009, advisors instinctively realized the need to be more proactive with clients and relied more heavily on more personal communication methods, such as phone calls and in-person meetings (see Chart 3 below). Of those advisors we surveyed, 83% communicated to their clients over the phone--a significant jump from the 51% of advisors who communicated with their clients by phone in 2008. Use of in-person meetings also jumped significantly--78% of advisors used this method in 2009 versus 59% in 2008. Advisors cut back on less personal methods, such as e-mail. In 2009, 76% of advisors used e-mail for client communication, down from 84% the previous year. Newsletters became more popular among advisors--84% of advisors used newsletters as a method of client communication in 2009 versus 62% in 2008. About half of advisors organize quarterly one-on-one meetings and conduct annual client reviews to keep in close contact with their clients. We believe those advisors who spend the most time with their clients will be able to significantly strengthen relationships, receive more referrals, and increase their asset flows.

Just like price and product, promotion and place are must-haves for business success. A few pointers include:

  1. l Focus on the right client. A great starting point is looking at your current client base and identifying common characteristics-career, age, investment needs, hobbies, age of children, etc. A great target audience may be one of your current client groups.
  2. l Create a marketing plan to reach that target audience. Your marketing plan will reflect a strategy of finding the "right" clients for your firm. If your clients have a common hobby or career, for instance, identify places or marketing outlets that may enable you to reach these clients.
  3. l Re-establish relationships with your clients. Make sure your clients realize the value you offer and be more proactive in communicating with them-both about good news or bad.

As with all client-centered businesses, client service and marketing are very important areas of focus for advisory businesses. Those financial professionals who master client services and marketing skills will be successful at gaining--and retaining--clients, thus positioning their practices for future growth.


Maya Ivanova is a market research manager with Rydex|SGI AdvisorBenchmarking She can be reached at mivanova@advisorbenchmarking.com.

Rydex|SGI AdvisorBenchmarking is a research and analysis center focused on the registered investment advisor (RIA) marketplace. Preliminary study results quoted in this article are based on the 373 RIA firms that took the online survey in March-May 2010. The service is aimed at helping advisors grow and enhance their firms by comparing how their businesses fare against other advisors. Advisors also learn best practices of the most successful advisors in the business.

AdvisorBenchmarking is an affiliate of Rydex Investments. The analysis on Rydex|SGI AdvisorBenchmarking.com is based on the number of completed surveys and reflects only information from those surveys. This information is intended to be general in nature, and these overviews are no substitute for professional, legal, or consulting advice. This information should not be construed as advice from Rydex Investments or any of its affiliates.

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