The key to growing any business often lies in how the company’s products and services are marketed. A sound marketing plan is the growth engine behind a business and will shape how the world perceives that business and the uniqueness of its offerings.

Similarly, establishing the right price point for goods and services dovetails with savvy marketing and is often necessary to the very survival of a business. The “Goldilocks” theory of pricing dictates that finding (and periodically resetting) just the right price point is a must for any thriving business. Setting too low a price erodes profits, while setting prices at too lofty a level could scare away clients.

The latest AdvisorBenchmarking survey of registered investment advisors, which included 912 RIA respondents and was conducted online in May 2007, yielded some surprising results about advisors’ marketing efforts. For the first time, we asked how advisors price their services and what changes, if any, are planned.

How RIAs Spend Their Time

Establishing a professional identity can be part of an advisor’s overall marketing strategy. The survey found that 40% of respondents refer to themselves as “investment advisors” while 30% have assumed the title of “wealth manager.” Those that dubbed themselves wealth managers indicated that, on average, high-net-worth investors comprised 60% of their client base. Wealthy investors are decidedly most advisors’ primary focus, with minimum account sizes in our sampling of RIAs now averaging $421,000, up from $225,000 in 2002.

Although not an officially accepted title, more than one-third of advisors (34%) also noted that they are positioning themselves as retirement “coaches,” which they see as a practical way to prepare for the much-anticipated Baby Boomer retirement rush.

While advisors recognize marketing as a key component of their businesses, actual time spent marketing dropped by one-third from the previous year, while hours spent on tasks related to business administration increased by 47%, and time engaged in research grew 150%. Advisors reported that an equal 10% of their days are now spent on the tasks of marketing, business strategy, and research (30% total), while business administration and client services combined eat up 37% of their time. Time spent on portfolio management also declined, dropping from 27% last year to 20% in the latest survey (see chart below).

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This drop in hours dedicated to marketing is evident even though much higher percentages of advisors this year admitted that competition from CPA firms as well as online financial services firms pose a threat to their business.

What Is Marketing, Anyway?

As for specific marketing initiatives, an almost unanimous 97% of advisors reported that client referrals were their primary marketing tool, with an equal 65% relying on professional referral arrangements and their Web site (both down from 70% last year.) Over 85% of advisors predicted that client referrals will be a vital part of their growth strategy over the next five years, while 45% expect that increasing their marketing/networking will be a key driver.

“The best marketing is our clients’ word of mouth,” said Michael Sadoff, an investment advisor with Sadoff Investment Management of Milwaukee. Expanding his referral circle of CPAs, accountants, and lawyers runs a close second. Sadoff says he is always open to new initiatives. He’s tried client appreciation events such as an outing to a baseball game for clients and their friends, but found that local fishing trips with just four or five people were more intimate. Since January he has been running ads in his local newspaper but has yet to see results. “We are trying to think of out-of-the-box ideas,” Sadoff admits.

According to the newest AdvisorBenchmarking survey, registered investment advisors have been ramping up the formalization of policies and procedures in a variety of areas–but marketing isn’t one of them. A higher percentage of advisors now report having formalized business plans in place (59%), as well as policies and procedures manuals for senior executives (29%). A significantly higher percentage of respondents (39%) also noted having a formal employee evaluation program in place, compared to less than a quarter (23%) of advisors polled in the previous year.

That extra time invested, however, has apparently taken its toll on the development of formalized marketing plans for advisors’ businesses. This year, a smaller 39% reported having a marketing plan in place, versus 44% one year earlier. In addition, a much greater number of advisors reported having to delegate meetings with clients because of a general lack of time. Last year, only 6% delegated client meetings, while this year a notable 15% of advisors reported having done so.

About Those Prices . . .

More than three out of four advisors (77%) noted that they have not considered changing their pricing models, such as charging a per-service fee versus imposing a retainer fee or an hourly charge. But an almost equal 76% responded that they do plan to raise their retainer fees either “moderately” or “significantly” this year. Of those who have already revised prices, 40% reported that they increased hourly fees in 2006, while 32% hiked their retainer fees. The key reason for hiking fees, according to almost three-quarters of advisors, is the need to be adequately compensated for all services. Another 26% noted that fees will rise as a result of newly added services.

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In addition, the median asset management fee among advisors has crept higher for accounts of all sizes, the survey showed.


Maya Ivanova i s the research manager at Rydex AdvisorBenchmarking. She can be reached at 301-296-6385 or mivanova@advisorbenchmarking.com. AdvisorBenchmarking, Inc. is a research and analysis center focused on the RIA marketplace and is an affiliate of Rydex Investments of Rockville, Maryland.