This title may have gotten your attention. I hope it did. Of course you should be prospecting in a down market or an up market or any market.
Many people do not. As a matter of fact, when I ask people a question about prospecting I normally say, “in addition to referrals, how are you developing new business?”
But you say, “I always prospect. Isn’t that what referrals are?”
The reality is: Everybody wants referral business. But is that enough?
One of the principles I have taught for years is this: Always have at least one channel of developing new business in addition to referrals.
Now why is that?
Because, in a down market, referrals tend to dry up.
In the down market following March 2000, I saw lots and lots of people exit the industry stage left. Not only was this crowd heavily invested in growth stocks, but they had also been telling me, “Bill, I don’t have time to prospect. I’m generating all the business I can handle.”
Came the crash, it was then apparent that the rising tide of the bull market had not only been confused with investment expertise, but with marketing expertise as well. Neither, of course, proved to be the case.
Down-Market ProspectingBefore discussing down-market prospecting, let’s look at: “When is the optimum time to prospect?”
Obviously, it’s not in an up market. Then, people are throwing money and referrals at you and you don’t have time.
Equally obvious, it’s not in a down market. You are depressed. Your clients are depressed. Nobody wants to talk to anyone.
This theoretically leaves only two days in any market cycle in which you can prospect. You can prospect on the day the market changes from an up market to a down market or on the day that it changes from a down market to an up market.
But since you won’t recognize that for a few weeks or months, it is apparent that there is no good time to prospect.
But of course that’s false. In up markets, you want to have a prospecting system in place so that when a down market hits, you can just turn up the heat. Starting a prospecting system from scratch in a down market takes much longer than it would if you started it when times are good.
So when should you start on a second prospecting channel if you don’t have one?
Now would be a good time to do that.
How Much Prospecting Is Enough?This is a question I have wrestled with for years. Back in the days of transaction heaven, I did an analysis of people whose business was up in the down market of 1991. I found that a significant number of people whose business was up that year were opening more than 100 accounts a year (you read that right — it was commonplace). The people who were down were prospecting significantly less.
Those figures no longer hold.
Today, you can get by on far fewer new clients and new assets, but you have to have the ability to regulate the flow so that you yourself don’t sign up for the fabled income reduction plan.
Now let me answer my own question.
“How much prospecting is enough?” has two answers.
The offensive answer is: You need to prospect enough so you can double your business in two or three years.
The defensive answer is: Bring in enough new clients and new assets so that income doesn’t go down.
Figuring How Much Is EnoughI’m going to give you an example. The mathematics for this is not complicated, and you can immediately get it and apply it to your own situation.
Let’s say for the sake of argument that you have $100 million in assets under management. You want to double your business. Obviously, you need to manage around $200 million.
Where is it going to come from?
Some of it will come from new clients and some of it will come from existing clients.
So, let’s assume on average you have been bringing in $1 million a month from existing clients. We will assume that continues. Over the next three years, that could bring in $36 million from existing clients.
So you need $44 million from prospects.
First, take a look at how much you are bringing in from referrals. Let’s say you are opening one nice referral account a month that’s bringing in $500,000, so you’re getting $6 million in new assets a year from referrals. So, over a three-year period that could give you $18 million. That forecasts $54 million from your current pace of business. To hit your double, you need another $44 million.
That’s what you raise over the next three years from some source of prospecting other than referrals.
Defensive StrategyLet’s take a defensive look at that same book of business. You’ve got $100 million. You think the market could go down 20 percent in the next year. You’re getting $12 million in new assets from clients. You believe that will continue, but we’re not going to count on the $6 million from referrals. That might or might not continue. So, you need $8 million from some source other than your clients and referrals in order to maintain your current income.
Other ChannelsNetworking. Without a doubt, the most popular “alternate channel” is “networking.” You can break down networking into two sub-classes: networking with business associates and with social acquaintances.
Each has its own challenges that must be overcome.
Your business contacts may not know you well enough as a financial advisor to feel comfortable if you solicit their business.
Let’s take an example.
For 10 years, you have been friendly with the owner of the dry cleaning store where you have your business attire cleaned. This business owner mostly knows you as the guy or gal with the expensive suits. That identity does not give you entr?e to ask, “By the way, Jack, who are you using as a financial advisor?”
Take another example.
You know the MD that you normally sit next to in Rotary also owns 17 Taco Bell franchises. You would love the business. But you cannot solicit that business at all. It breaks the social rules. She has to come to you.
So how do you convert network contacts into business prospects?
Over a period of months or years, you drip on them and never ask for anything. I call this a “No Key” campaign. “Low Key” is low pressure, right? Well “No Key” is no pressure.
The original version of this, which I cooked up back in the ’80s, instructed people to write hand-written notes along the line, “Here’s some info I thought you could use.” If you are in Rotary, send stuff on what you know people will be interested in. But only rarely send anything business-related. Rotary is after stamping out polio. So be on the look-out for that. Just make sure you send it on your firm letterhead. Sooner or later, your contact will ask, “Tell me again what you do.”
Seminars. I hear more teeth grinding on the subject of seminars than almost any other marketing program. “Our area is ‘seminared’ out” is the mantra.
The reality is: Seminars are harder today to make profitable than ever before.
The good news is: If you do everything right, they can be very profitable. You can in fact build your business up to a new level using seminars.
I have compiled some past Research articles on seminar marketing into a White Paper, “The Seminar Success Zone.” If you would like a copy, go to www.billgood.com/successzone.
Cold Calling. Suppose I tell you that cold calling is so hard today, hardly anyone does it. Would you consider it? Suppose I further tell you that the few who do often succeed wildly.
I know one senior FA who hired a tough-as-nails caller and sicced him on a very wealthy area of town. Believe it or not, there are still some people who had not signed up for the “Do Not Call” list. His instructions were, “Get me one seminar a month with six wealthy families.”
It took a month of calling to get those six families. At best, the people in this area are resistant to solicitors of any kind. This caller could go days without anyone accepting the invitation. It was awful. And in about three years this FA added $1 million a year to his assets under management.
Best Time to ProspectSo, if I ask: “In addition to referrals, how are you developing new business?” Remember: The correct answer is, “In addition to referrals, we ….”
Bill Good is chairman of Bill Good Marketing Systems in Draper, Utah; see www.billgood.com.