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Planning For Success

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As Senators John McCain and Barack Obama began their presidential campaigns, each set out a plan for themselves–including opportunities, weaknesses, messaging, analysis of competitors and campaign finances. While they sometimes had to adjust their plans during the primary season, each had a valuable blueprint to help them reach the goal of securing their respective party’s nomination.

Likewise, an advisory practice’s marketing plan contains opportunities and weaknesses, key messaging, market and competitor analysis and financial projections. Having a robust marketing plan in place will bring independent advisors one step closer to influencing how their clients and potential clients perceive them–and help advisors reach their goals.

Establishing a Marketing Plan is Crucial

Though independent advisors have long sought a way to increase the solidity of their client base through the use of effective marketing campaigns, most firms lack marketing savvy when searching for new clients. In fact, while a firm’s ability to have a clear marketing plan is fundamental to its survival, more than half (54%) of the advisors we surveyed have no marketing plan in place compared to almost every best practice (91%) have a marketing plan.

Sharpening Your Marketing Tools

One of the major challenges investment advisors face in today’s environment is how to market their firm’s financial products and how to create a sustainable process for attracting new clients without relying solely on referrals. Advisors depend on passive referrals from existing clients. For instance, in 2007, nearly half (45%) of new clients came from advisors “replicating” their existing clients via passive referrals. Currently, only a small portion of new clients originate from professional referral sources–12% come from CPA and attorney referrals and 10% are referred by another financial advisor or broker. However, as firms continue to grow, external referral sources should become much more important. A marketing plan considers these key partnerships and is a crucial part of positioning to and reaching out to potential clients in their target market.


Finding Your Market Niche

Finding your market niche enables you to develop areas of expertise and prevents you from being spread too thin. Many advisors, however, do not follow this advice. Eleven percent of firms have absolutely “no focus,” while 74% of firms consider wealth range to be a “niche” market. Alternatively, top firms are much more focused than their “average” peers.

Since wealth range is the No. 1 criteria when choosing a new client, most advisors seek high net worth (HNW) customers with net worth assets in excess of $1 million. This market segment makes up 28% of the average firm’s client base. Ultra-high net worth investors (those with more than $5 million in investable assets) make up 5% of the average client base. Moderate net worth investors–those with investable assets between $500 thousand and one million dollars–make up 27% of the average advisor’s client base.


Becoming More Focused on Clients

The very best marketing companies in the world are able to communicate a single message that their clients are able to easily understand. Think about Starbucks — high-end (expensive) coffee in a comfortable, lounge-y setting. Or consider Bridgestone Tires, which stands for safety (think about their ads of tires with babies sitting on them). That’s what you’re trying to accomplish with your business–building a brand and communicating a message of what you stand for and what you’re promising to deliver to your clients. A few tips to get you started include:

- Consider your own expertise. Use a little self-examination and think about what you’re good at (or not good at). Ask your clients what they think you’re good at–their perceptions of you may be surprising, in that they may see strengths in you that you’re not aware of. Are you well-versed on retirement? Or experienced with aging clients? Or adept at helping clients prepare for college expenses? Or maybe you are an expert in alternative investments. Your areas of expertise and strengths make you unique and help you create a more focused marketing effort.

- Examine your client base. What do your clients have in common? Looking at shared demographic and psychographic trends across your client base will help you identify “niches” within your own current client base. Are they of a certain age? Do they have common goals (retirement, college planning, charitable giving)? Do they have common jobs or job characteristics (such as stock options)? Do they share common hobbies (are they environmentally conscious or avid cyclists)? Your ability to discover these similarities and determine which types of clients you want to pursue will help you stop being a jack of all trades and build expertise in important focus areas.

- Create a marketing plan. Having a specific client type in mind also enables you to be much more specific in your marketing efforts. Your marketing plan will reflect a strategy of finding the “right” clients for your firm. For example, if you are looking for clients that are interested in charitable giving or have stock option plans, you can ask current clients about people they know who have similar needs or you could sponsor or advertise in a magazine or arena that favors that demographic. If charitable giving is important to your clients, you could even incorporate a donation to the charitable cause of their choice into your business structure and marketing plan. But don’t forget that your plan must also reflect your business goals –how many clients you need to retain and attract, the profitability goals you’re looking to attain and the areas of expertise needed by your clients. Understanding your niche market, identifying their unique needs and the channels for reaching them is essential for any practice. The best firms excel at this, focusing on specific market demographics when selecting potential clients. Borrow a page from the best–all the best practices firms focused on specific client types.

By finding your market niche, determining your expertise and taking a close look at your client base, you’ll be on your way to creating a robust marketing plan that helps you succeed in a competitive marketplace and pave a way for your future success.

Maya Ivanova is a market research manager with Rydex She can be reached at [email protected].

About Rydex AdvisorBenchmarking, Inc., an affiliate of Rydex Investments

AdvisorBenchmarking is a free practice management program designed to help RIAs better manage and grow their firms. The analysis on Rydex is based on the number of completed surveys and reflects only information from those surveys. This information is intended to be general, and these overviews are no substitute for professional, legal or consulting advice. This information should not be construed as advice from Rydex Investments or any of its affiliates.


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