While it’s been said time and time again that advisors have a long way to go before they can be dubbed stellar marketers, let’s hold off on etching that mantra in stone. A good number of advisors are indeed making strides in perfecting their marketing techniques to help them stand out from their competition and attract new business–either by using their own out-of-the-box strategies like starting community service programs and getting referrals from other advisors and professionals like accountants or estate planning attorneys, or by sticking with the tried-and-true methods like client referrals and building attractive Web sites. An increasing number of advisors realize that they need to clearly define themselves to potential clients and the overall market, or their competitors will do that job for them.
Many advisors still rely on referrals to bring in a sizable portion of their new business. According to Rydex AdvisorBenchmarking’s 2006 survey of the RIA business, The RIA Industry: The Momentum Continues, 97% of the 600 advisors who provided data for the study said client referrals continued to be their most common marketing method. Seventy percent of the advisors polled engage in professional referral agreements, and 70% also rely on their firms’ Web sites to drum up new business. In addition, the study found that 6% of advisors’ total budgets were spent on marketing and advertising in 2005, a slight jump from the 4% they allocated to marketing in 2004.
David Welling, VP of marketing and strategic programs at Schwab Institutional, would argue that “the foundational building block of any good marketing and business development strategy has to start with referrals.” Schwab’s research of about 1,400 affiliated advisory firms over the past six months shows that while 75% to 80% of an advisor’s new business comes from referrals from clients or intermediaries, “some advisors get 5% growth a year [in assets under management] from that, others get 40% growth. Advisors are already pretty good at getting referrals from their clients, but there are ways to be great.” Welling says that in Schwab’s work with advisors, it encourages them to have an active referral strategy, though he hastens to point out that “Active doesn’t necessarily have to mean sales-y or harassing your clients,” but you should have a “disciplined process around how are you sourcing business from your clients.”
Welling says it’s also important for advisors to benchmark themselves against their peers in terms of size and style of firm. To that end, beginning in August Schwab will conduct an online advisor benchmarking study. Advisor clients can input their firm’s data and by late September or October “get a peer benchmarking report delivered back to them online.” Then, they can use additional analytical tools delivered under Schwab’s practice management and business development GrowthPoint program “that will allow them to slice and dice and compare” their numbers with their peers.
A Disciplined Referral Process
Bert Whitehead, president of fee-only Cambridge Connection in Franklin, Michigan, has a “disciplined process” of building and solidifying referrals through a program Cambridge dubs the “Relationship Bonding Experience.” When a new client signs up, “we invite the client to dinner at a very nice restaurant and invite the client who referred them to join us,” he says. “It is a thank you to the old client and a welcome to the new client.” During the dinner, Whitehead asks the new client about his experience in hiring Cambridge, asking questions like: “What did his friend say that was most compelling? Why did he pick us over other advisors? What did he find to be the most or least helpful experience in working with us?”
Whitehead says the dinners allow him to “get to know our clients better, and learn what works in our system and what doesn’t.” Plus, “spending $200 to 400 for each client recruited (or about 2%-4% of the first year’s fees) to encourage more referrals and train new clients on how to refer clients is the most cost-effective system I have ever seen.” Whitehead says his firm grows 15% to 20% per year through client referrals–which is the biggest percentage of growth his firm can manage. His firm doesn’t advertise, pay for referrals from any custodial referral programs, or conduct seminars, and spends a “very small amount of time” on marketing and devotes very little money to it. Ninety percent of his firm’s clients come from client referrals, with the other 10% hailing from NAPFA referrals and people who’ve read about him in the press. The secret to Cambridge’s referral success is recognizing that “clients are our sales force,” Whitehead says. “We mention referrals during every [client] meeting, thanking them for recent referrals, or telling them about the new Cambridge Financial Review (CFR), which provides a two-hour focused appointment for those interested in being clients.”
It’s All About the Relationship
Steve Sanduski, managing partner of PEAK, a financial advisor coaching and consulting firm based in Omaha, Nebraska, (www.joinpeak.com), argues that marketing is indeed all about relationships. He and PEAK President Ron Carson, who is an advisor himself, wrote a book on advisor marketing, Tested in the Trenches, (Kaplan Business, 2005). Sanduski recommends that advisors build deep relationships with a relatively small number of clients, around 150, and provide great service to that manageable number of people. If, as he would expect, the business grows beyond that 150 number, add an associate advisor, raise the principal advisor’s minimum asset level, and turn over smaller or less complicated relationships to the associate advisor.
Sanduski encourages advisors to work with people with whom they share common interests or passions, whether it’s cooking, theater, golf, or the arts, and find creative ways to share those interests in memorable ways: “Give clients access to something they couldn’t get on their own.” For instance, if there’s a new art exhibit in town, “contact the museum and see if you can arrange a special showing for 15 or 20 people,” Sanduski explains. Clients associate those memorable moments with the advisor, and it deepens the relationship. If you know something about wine, hold a high-end wine tasting in a private room at a local restaurant for eight to 10 people, with the restaurant’s wine wholesaler or a local wine store’s expert walking the group through the tasting. Encourage clients to bring friends to these events, and those friends may develop into new clients.
The Niche Approach
Advisor Stacy Francis connects with her women clients by holding special networking and educational events in New York through a non-profit she started a couple years ago called Savvy Ladies (www.savvyladies.org). Savvy Ladies is designed to “educate and empower women about financial issues,” she says, because she found that the financial services industry was not providing women with a place where the not only “feel comfortable and learn in an unbiased environment” but also aren’t being “sold something.” Francis, president of Francis Financial in New York, provides cocktails, hors d’oeuvres, and networking time at the more than 30 seminars and workshops she holds throughout the year. “It turns out to be a fun girls’ night out on the town.” Topics range from how to live large on less in New York City, she says, to how to own a home, to getting over the budgeting blues. “We cover all areas of finance,” she says, and it’s a great place for women of all ages to network. Some of the women “are true millionaires and some are just getting off of welfare,” Francis says, but “it’s wonderful because the thing that binds them all is that they want to become financially free.”