Keep Those New Clients Coming

My five Ranger teammates and I were hunkered down on a mountain ridge near the Laotian border with an enemy base camp less than 500 meters away. I had a sick feeling that something bad was about to happen. Our team leader signaled the radio operator to call in our position. As he keyed the handset, our world exploded around us with a blinding flash of light. I regained consciousness face down 30 feet from where I’d been crouching and it seemed to take hours to drag my legs back up the muddy hill to locate my team. No, it wasn’t enemy fire, it was lightning.

The other men were in about the same or worse shape. Only two of the guys had found their weapons; the lightning stroke had destroyed everything else. The only thing that kept me from panicking was knowing that, in the Army, there is a practiced procedure in place for every contingency. And since we had missed our scheduled radio report, it would only be minutes before HQ would dispatch a helicopter to search for us. We all made it out that day.

When I talk to advisors who have no marketing procedures for gathering new prospects in the midst of one of the biggest attacks on their market share, I get that same premonition. Your vulnerability is evidenced by the high percentage of your new business that previously came as passive referrals, as depicted in the pie chart on the right. But these are not passive times. You can expect to lose those referrals in the near future to industry competitors.

The demographics of an aging, affluent U.S. population are attracting an onslaught of competitors who are not playing by the old rules. Marketing tactics of building “Centers of Influence” and strategic alliances with attorneys, accountants, and brokers have been discarded as these same professionals step onto the field of battle prepared to offer their own financial advisory services. As pricing competition with industry giants lowers your margins, you are under more pressure to turn more prospects into clients.

Meanwhile, the stream of prospects you grew accustomed to during the long bull market has dried up. If you are not spending time building a proactive marketing system to attract prospects, you could end up a casualty.

You can probably identify with Nick Hamilton’s problem, who says, “I don’t worry about sales; whenever I talk to a new prospect, I get their business. Only lately, I haven’t been talking to very many qualified prospects.” Nick, a successful 49-year-old independent advisor for 20 years in Phoenix, has two employees and over $60 million under management, but he has recently watched his asset growth slow to a crawl.

Nick followed the advice of all the top consultants and established strategic alliances, built a center of influence, cloned his best clients, and even “fired” his weakest clients. However, the professionals Nick was aligned with are offering everything Nick does, plus everything he doesn’t. As a knee-jerk reaction, Nick considered renaming what he does and calling himself a Life Coach, but he would still be acting and looking like every other financial advisor in his community.

Although Nick’s clients say they are satisfied, there’s really nothing they can say about him that would give anyone else a reason to choose to do business with him over any of his look-alike competitors. And why should they? What’s in it for the referring client? Once the client has signed the closing documents and transferred their assets, and the advisor has delivered on his or her sales promise, both parties have fulfilled a basic reciprocal agreement. As soon as the advisor asks for a referral, the relationship is thrown out of balance. The client didn’t sign on to become the advisor’s marketing agent.

The best referrals come without prodding–usually from having done something that is so impressive the client can’t wait to tell others. But even in that environment, the advisor is still up against human nature, like the dissuasive factor of perceived liability. Most people are afraid that something beyond their control will negatively affect their relationship.

The challenge is to manage your client relationships in such a way that clients see that helping your business grow and prosper is also in their best interests.