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Practice Management > Building Your Business

Blowing Your Own Horn

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In this, the first of a three-part series on the challenges facing fee-only advisors, the authors address these advisors’ marketing challenges. The next two articles in future months will address how advisors can employ technology to increase their efficiency and competitiveness, and how they can use comprehensive business benchmarking to measure success and improve their practices.

While fee-only financial advisors represent one of the fastest-growing markets of the financial services industry, the challenges facing these advisors mirror those that are impacting the industry as a whole. Prolonged economic uncertainty, shaky investor confidence, global tensions, and lingering fallout from corporate misfeasance make this a difficult time for financial professionals to expand their business.

One challenge is particularly acute for fee-only advisors: tougher competition. While the fee-only advisor segment is expected to continue on its rapid growth track, at the same time the fee-only approach is attracting new converts from banks, brokerage houses, CPAs, and insurance agents.

Proactive sales and marketing are probably an advisor’s most effective weapons to ward off this threat. However, research conducted at Tiburon’s business benchmarking Web site for fee-only financial advisors ( and through thousands of telephone interviews with advisors shows these advisors are expending very little marketing effort–almost certainly a case of no necessity, no invention. The bull market of the 1990s was extremely profitable for the fee-only advisory business. Advisors did not need many new clients, and those they got came freely from a groundswell of referrals from satisfied clients.

If lack of necessity explains lack of marketing in the past, the situation for fee-only advisors is rapidly changing. Since asset growth withered in the bear market, disenchanted clients are now less inclined to make unsolicited referrals. Even more critical is the increasing competition. In the future, investors seeking a fee-only advisor will probably be selecting from among multiple referrals, as well as from advisors who have approached them directly. As advisors recognize a greater need for business development, marketing may soon emerge as one of the primary success factors in this channel.

Marketing Done Well

Needs Structure

Although some fee-only advisors have responded to mounting competitive pressures by gradually exploring marketing options, others seem to be daunted by the perceived burden that marketing would place on their firm. This is a potentially serious Achilles’ heel in their long-range business planning. Marketing should be integrated into that plan alongside client service, technology, and even investment management. The time when advisors could discount marketing is over.

Most advisors already have a defined structure for their investment process and their operations or client service functions. Treating marketing in a similar fashion will better ensure that their practice can withstand increased competition or market-driven hurdles like the recent bear market. First, translate marketing ideas into a plan; then assign responsibilities for executing that plan, just as someone is responsible for handling quarterly client reports.

An overly ambitious effort may actually hinder long-range success, so the most effective plan is not necessarily the most substantial. Unlike firms where marketing is second nature, fee-only advisors should gradually cultivate their marketing philosophy. Like any small business, advisors are most likely to find success if they begin with a focused goal and a relatively short but well-defined list of action steps. The scope of the marketing efforts can be gradually expanded in keeping with the growth objectives of the firm.

The marketing function within a fee-only practice should have one goal–to create opportunities for the partners. Significant opportunities can be created with a small commitment of human resources and capital.

Maximizing Resources Of Your Firm

For many people, the word marketing conjures up images of glossy brochures, television advertising, and golf tournament sponsorships, complete with a very large price tag. Fortunately for small- and medium-size businesses, some of the most effective marketing is done on a moderate scale at a local level. The type of marketing that will have a measurable impact on profits is probably well within the resources and capabilities of most advisors.

Before undertaking any marketing program, advisors should take stock of their human resources. Depending on objectives, assigning responsibilities to current staff may be sufficient to initiate the program, or dedicated marketing talent may be hired. Regardless of spending plans, there are a number of options:

Use Existing Staff. A significant part of any marketing effort is administrative–tracking client referrals, coordinating mailings, or making hospitality arrangements–all of which can be handled by existing staff members, as long as they are detail-oriented and willing to accept the challenge.

Employ an Intern or Recent College Graduate. Available at substantially less cost than an experienced marketing professional, such people are often eager for experience and can adequately execute the groundwork of marketing efforts, although they likely will not have the ability to steer the overall program.

Rent Part-time or Freelance Marketers. For marketing programs that are self-contained, such as hosting a client appreciation event or customizing a technical research report for clients, a freelance marketer may be satisfactory.

Engage a Mid-level Marketer. A person with five to seven years of marketing experience can contribute to the strategic direction of the marketing effort, while also executing administrative tasks.

Hire a Senior Marketer. If resources are available, it may be beneficial to hire an experienced marketing professional to assume full responsibility for the program. This person should have both marketing and sales experience, enabling her to plan and execute a strategy and also confidently interact with clients.

Take the Outsourcing Route. A number of third-party marketing firms cater to small financial services practices. They can provide prototype newsletters, develop Web site templates, or create customized marketing materials. When using an outsourcing firm, advisors should review their previous work and obtain references from other advisors.

Don’t Make the Mistake Of Relying on Passive Referrals

The fee-only advisory business is referral-driven. According to Tiburon data, 54% of these advisors’ new clients come through referrals from existing clients. Further, about 43% of new clients come from passive referrals. On the surface, this seems an ideal model–clients are so pleased with their experiences, they do the marketing and sales work by voluntarily telling friends, colleagues, or family.

However, reliance on passive referrals is not without risk. Clients are less apt to make a referral when they are not earning big returns. By contrast, a proactive referral process should be the primary marketing initiative of every advisor based on three critical steps:

1) Identify a comfortable way to ask for the referral, whether it be a direct approach or a more subtle suggestive method.

2) Make it easy for clients to give a referral when they are ready to do so.

3) Integrate referral gathering into the firm’s regular routine.

Asking Current Clients for the Referral

Some advisors may be completely comfortable asking clients to introduce them to friends or family. If this approach seems too blunt, there are more subtle methods:

o Mention in a newsletter or client letter that the firm is currently in a position to accept new clients. This is even more effective if it can be linked to a new partner joining the firm or the addition of staff.

o Host an appreciation event or give a presentation on the current market environment and invite clients to bring a guest.

o If the firm publishes a regular market outlook or research reports, send any extra copies to clients and suggest they pass them along to their friends.

o Time referral requests well. After reviewing favorable portfolio results, consider saying, “We’ve had a good quarter. Would you know anyone who might be interested in the investment advice I’ve provided to you?”

Some advisors find a way to bring up referrals with every client contact; others may feel that is too frequent. The key is to set an expectation for a minimum number of referral contacts with each client during a given period of time, say, six months or a year. Advisors may ask for referrals at semiannual or annual client meetings; they may mention referrals in every client letter; or they may distribute four special mailings a year. It is important to have a process so that referral opportunities are regularly presented to clients.

Making Referrals Easy For Clients

Here are five ways to improve the odds of getting a referral from every client:

Plant the seed. Few people keep a mental Rolodex, so asking people to instantly produce names is ineffective. Instead, give clients advance notice that the firm will be looking for referrals. Send a confirmation letter before client meetings, mention that the firm is accepting new clients, and suggest that if the client knows anyone who might benefit, he/she can let the advisor know.

Give a response mechanism. “Call me if you know anyone” is not likely to generate a referral, so consider giving clients a postcard to return with the names of potential clients. Follow-up phone calls or letters can also be productive.

Raise the comfort level. Some people are deterred from referring others for fear that the advisor’s actions might mar their relationship with that other person. Be clear about the firm’s intentions by explaining that it plans to contact the prospect by phone or mail.

Allow clients to control the initial contact. They may be unwilling to name names, but would be perfectly comfortable recommending you to others. If this seems to be the case, encourage them by providing a brochure or letter detailing your capabilities that they can pass on to potential clients. Provide a reply card that referrals can return.

Reward desired behaviors. When clients provide a referral, reinforce the behavior by sending a handwritten thank-you note or even a small token of gratitude. Showing appreciation promotes continued referrals.

Focusing on referral marketing is likely to be profitable for at least two reasons. First, it already accounts for most new assets, making it the cornerstone of the firm’s business. Second, there is little need for additional marketing expertise. The best people to ask for referrals are partners or other key relationship managers whom the client already trusts. Administrative work related to an expanded referral program, such as mailing confirmation letters or compiling call lists for partners, can typically be handled by existing staff.

Work Routinely With Other Professionals

Once advisors have formalized a proactive client referral process, a logical next step is to begin developing centers of influence, or relationships with other professionals. Many advisors already benefit from professional referrals. Tiburon research finds that about 14% of new client assets are generated by CPA, attorney, and broker referrals.

However, anecdotal evidence suggests these relationships are informal and sporadic, and advisors could benefit from a systematized focus on expanding centers of influence.

Not only does the advisor want other professionals to regularly send referrals, but it helps to have a reliable network should clients ask you for a referral to another professional. Establishing a process to nurture these relationships is vital.

One of the easiest ways to initiate a relationship is through clients. Most high-net-worth individuals have long-term relationships with a lawyer, accountant, estate planner, and insurance agent. To establish a list of potential contacts, an advisor could ask clients to share this information or make an introduction to their other advisors.

Extending a professional referral network beyond the client base may take a more concerted effort. Advisors can start by sending market updates or research reports to advisors with whom they would like to work. They can then expand beyond attorneys and accountants to include real estate agents, mortgage lenders, and other less traditional contacts.

Educational seminars can be valuable tools in this effort. Dedicated professionals often strive to expand their understanding of areas such as portfolio management or seek to update their knowledge of industry trends and regulations. In addition, most professionals are required to complete continuing education. It is not difficult to develop a presentation and have the appropriate industry association approve it for continuing education credits.

Planning a series of educational seminars and arranging approvals by professional organizations can be assigned to a mid-level marketing person. The expenses associated with such programs are generally reasonable–presentation space, refreshments, and invitations. You may not reap immediate results, but as you demonstrate your expertise and actively follow up with these professionals, they are likely to thank you with regular referrals

How to Manage Seminars Efficiently

As a marketing strategy, seminars are one of the most heralded, yet most frequently criticized methods. While conducting a seminar is not as time-intensive, nor as costly, as many advisors think, it does require a strong commitment to achieve results. Here are the key ingredients of a profitable seminar program:

o A partner or other credible staff member who is a dynamic, persuasive, and effective public speaker.

o Sufficient administrative support to coordinate the logistical details of promoting and executing a seminar.

o A visually appealing presentation on a topic that is interesting and relevant to target clients.

o A willingness to conduct follow-up communications with seminar attendees in an effort to convert them to clients.

An efficient seminar program should involve a minimal amount of the senior partners’ time. The critical role for the partners is to deliver the presentation, which can be prepared by staff or even purchased fully packaged from an outsourcing firm, and to engage the attendees before and after the presentation.

There are also some variations on a traditional seminar that create better opportunities for success:

o Target seminars toward other professionals rather than the general public. Each contact may lead to multiple potential clients rather than just one.

o Use seminars to further bolster client referrals. Rather than inviting the general public, which can attract attendees who may not fit your client profile, include only existing clients and invite them to bring one or more guests. Existing clients are likely to bring people with profiles similar to their own, ideal for prospecting purposes.

o Present the seminar to a pre-existing audience rather than gathering an audience of your own. Offer to make a presentation to a Chamber of Commerce or other suitable organizations in the community.

A mid-level marketer should be capable of driving the seminar program. They probably would not have the presence or prestige to be the featured speaker, but should be able to design materials and manage all organizational aspects of the seminar.

Now, Take These Practical Steps

What should advisors do first, once they have decided to expand their marketing efforts? These practical steps are worth following:

o Determine approximately how much money and human resources the firm can commit to the effort.

o Select one or perhaps two areas from those discussed above to form the core of the plan.

o Establish at least three objectives for the first six months of the program.

o Discuss with staff the growing importance of marketing; outline the plans for expanding the firm’s marketing function; and assign specific responsibilities to individual staff members.

o Review the progress of marketing efforts on a regular basis.


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