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Most registered investment advisors find new clients the old-fashioned way: referrals from satisfied customers. Word-of-mouth referrals have always worked well in this business, since would-be clients commonly ask friends, family, or colleagues for advice, and will likely act on a glowing recommendation. It’s a tried-and-true approach and yes, still effective. However, from a marketing perspective, it’s a passive way to develop your business.

In recent years, industry leaders have begun implementing active marketing strategies to complement the traditional word-of-mouth model. The active model is becoming vital, and RIA firms that can develop targeted and efficient marketing programs will enjoy an enormous competitive advantage in the years to come.

Consider the big picture: U.S. investable household assets have tripled in the last 25 years to $23 trillion, and the retirement needs of baby boomers will drive the continued growth of professionally managed assets. The lion’s share of those assets are going to RIAs, who have historically outpaced all other channels in asset growth. As an industry, we’ve enjoyed a 24% compound annual growth rate (CAGR) in assets under management, with a 20% CAGR projected over the next five years, according to the 2007 Moss Adams Fast Forward: The Advisor of the Future report conducted for Pershing Advisor Solutions. With that kind of growth, you might be thinking, “Why go to all the trouble of developing a complicated marketing plan? Why not just sit back and wait for the referrals to roll in?”

The answer is that we all need to develop new strategies to stay competitive. While the entire industry has enjoyed healthy growth, the top 10% of RIA firms–the growth leaders–regularly surpass the industry average, and they do it in part through active marketing, the same Moss Adams report found. These are firms that acquire clients through the strategic and tactical use of marketing: identifying their strengths, knowing their target audience, creating a message that speaks to that audience, and devising a multi-channel approach for delivering their message. Among these firms are many that have joined the Focus Financial Network; we will base many of our suggestions below on the real-world experiences of these firms.

Don’t Get Left Behind

The competition in the wealth management industry is increasing as RIAs, most of them independent, have grown more than 47% in the last two years, according to a 2007 Cerulli report on RIAs, Evaluating Opportunities in a Maturing Marketplace. The firms that rely on the old passive word-of-mouth model of business development risk getting left behind. The winners of this competition will be advisory firms that find new and creative ways to identify, attract and serve profitable clients.

To be an industry leader–or to simply remain competitive in an increasingly crowded marketplace–now is the time to develop a marketing plan. Marketing plans don’t have to be elaborate, time-consuming, or expensive. It’s not rocket science either. It’s simply effective and sustainable techniques that have been time tested in other industries with similar client segments and can be balanced with the many demands of running your firm. Besides, investing in a down market means you’ll be positioned to reap the benefits of an upswing.

Know Your Strengths

The first step is to assess your strengths and your failings: What do you do well? What are your weaknesses? The foundation for growth rests on excellent client service, high customer satisfaction, and strong client retention. Knowing the strengths and addressing the weaknesses of your company solidifies a foundation for a successful active marketing plan.

The best way to measure your performance is to conduct a client satisfaction survey which can be outsourced to a professional firm at a fairly low cost. You just need to make sure you have an updated client e-mail list so the survey can be conducted electronically. Encourage clients to complete the survey over a two-to-four-week period. The survey would include questions such as:

  • Why did you join the firm?
  • How satisfied are you with the firm?
  • Are you more likely to maintain, increase, or decrease the assets you have with the firm over the next 12 months?
  • How satisfied are you with the level of service provided by your advisor?
  • How satisfied are you with the performance of your financial plan? Do you believe that plan will allow you to meet your long-term goals?
  • Would you recommend our company to a friend or colleague?

These questions will help to measure your core strengths and overall effectiveness. Ask clients to provide names at the end of the survey so you can follow up with them if they are dissatisfied in any way and to ask them for referrals. Make it optional so they remain comfortable with providing honest feedback. The survey information provides you with a real-world-based “unique value proposition,” i.e., the reason prospective clients should choose you over another financial advisor.

Perhaps the most important question for you right now is the final one in the list above: “How likely is it that you would recommend our company to a friend or colleague?” This is the question that will help identify a prioritized list of clients (“net promoters”) most likely to refer someone in the near term. These are the people who will be of greatest value to you as you move through the steps of developing a new active marketing plan.

Set Specific Goals

Now ask yourself what you’re trying to achieve. Your answers should go beyond generalities and include specific growth objectives tailored to your strategic and financial business goals.

The advisory firm of HoyleCohen in San Diego set a goal of becoming the city’s premier wealth management firm with $1 billion in assets under management within five years. If you’re a firm that targets high-net-worth clients and your advisors typically bring in two or three new clients each year, set a target for your advisors to bring in four or five new clients, then stick to a minimum asset threshold to ensure they’re the kind of clients you want.

Goals can inspire tremendous excitement and motivation within an organization. Dream big, but be realistic about your targets. A goal of $1 billion in AUM is a great motivator, but it must also be attainable. It’s important to involve the entire organization in determining your goals, and to regularly remind staffers of the goal while rewarding them for incremental progress toward achieving those targets.

Know Your Audience

Your goals will help determine who you want to attract. A profitability analysis of your current client base will help identify the most profitable target segment for your practice. Your ideal clients aren’t necessarily the ones with the most assets (though assets never hurt). Rather, your best clients are those who can benefit most from your special skills or approach; these clients are also usually the most profitable. Your active marketing plan will help those prospective clients understand what your business can do for them.

Define your target segment using demographic and psychographic descriptions: keep it simple because you have to be able to explain this segment to your clients so they can, in turn, think of ideal referrals.

Determine the areas where your core skill set is differentiated from the competition and where there are suitable market opportunities to grow. If you’re missing key products or need to reconfigure your service experience, tackle these areas first. You may also have existing clients who don’t fit your new target audience, such as lower-profit clients who take up a disproportionate amount of your time (see following article). You may need to deploy new models of servicing those clients. One way to handle this is to adopt a team approach to handling clients with the goal of creating capacity within your firm to best attract and service your “ideal” customers. If you’ve pinned your growth on the top-tier clients, you need to deliver on your promises to them.

Bob Kresek, a former Hewlett-Packard executive, began Founders Financial Network in Cupertino, California, after having difficulty locating good wealth management advice for himself. He and his advisors have a very clear “ideal” client–Silicon Valley entrepreneurs who have recently had a significant increase in personal wealth, primarily from company stock or options. (Kresek’s experience is also a reminder that investors disillusioned with the financial guidance they’ve received from advisors at major financial institutions represent a growth opportunity.)

You can also target a particular market niche to help you develop those top-tier customers. Once again, make your niche strategy goal-oriented. Set specific goals for number of new clients obtained and amount of their assets under management. Remember to track cost per million in acquired assets and profitability per client to help you track the growth of this particular subset of valued customers. Assign a team leader to oversee the development of this market, ideally one who has served and already understands this niche. There are at least two other steps you should take to focus your marketing efforts:

Sharpen your message. A lot of firms in this industry look and sound alike–think about all the brochures you’ve seen that highlight a firm’s expertise in working with affluent clients so they can enjoy a secure and fulfilling retirement. You need to set yourself apart with a message that’s crystal clear and aimed directly at your target audience. Your firm’s marketing message should say, unequivocally, “Here’s what we do. Here’s what makes us different. Here’s why we’re the absolute best choice for you.”

Founders has a crisp, clear introductory message: “Founders Financial Network is a financial planning and wealth management firm dedicated to growing assets and achieving lasting value for Silicon Valley executives and entrepreneurs who have experienced a significant increase in personal wealth.”

Be consistent. Update your collateral so that every channel reflects your market positioning–brochures, Web sites, newsletters, statements, video, and media sound bites.

An Active Referral Plan

You know your strengths, you know your audience, and you have a message ready to go. What’s next?

This is an ideal moment to revisit that trusty business development tool, the customer referral–except you aren’t just waiting for referrals to come to you. There’s a lot you can do to transform the referral process from passive to active and provide a solid foundation for your new marketing plan. Following are some strategies that work.

Just ask: According to Cerulli Associates, nearly 50% of new clients come from referrals. By effectively facilitating your referrals, you can expect to grow your practice by an incremental 7%-8% annually. Yet a recent survey for Janus Labs, conducted by Prince & Associates, found that only about one in ten advisors actually ask for referrals. Sure, it can be awkward to ask clients for referrals, but the results are well worth the effort. Ask as part of your regular or annual meetings with clients. You should especially target your “net promoters”; set up meetings with them early in the process, and cultivate them as your front-line resource for referrals.

Educate your clients: Share with clients your growth strategy, aspirations, and ideal-client model. Ask them for names of friends, family, and business associates who fit your target audience. Some clients might be reluctant to provide such names at that moment; so don’t push them. Instead, give them opportunities to mention you to their friends themselves.

Keep clients in the loop: Share what you learned in your client satisfaction survey in a note to clients highlighting your strengths, as well as noting areas where you are making improvements. Mention that you are particularly proud that they are willing to refer you. Keep clients updated on your progress, and thank them with a call, a letter, or a small gift. Use every “thank you” from a satisfied customer as an opportunity to share your firm’s aspirations. “Don’t send me a basket of fruit,” you can tell them, “send me a referral.” Just be sure to work closely with your legal and compliance people to make sure you fully understand all relevant privacy and fiduciary standards when communicating with clients. Benefit Funding Services Group, a retirement plan consulting firm in Irvine, California, trained all of its consultants to conduct a follow-up conversation with every client after the survey to discuss opportunities in greater detail–and the strong survey results helped develop consultants’ confidence when seeking referrals.

Business Development Ex Referrals

In addition to turbo-charging referrals by actively soliciting them, there are a number of other tactics you can strategically deploy to attract more prospects to your firm.

Hold events: Set up a series of events–of a financial education nature or just social–and invite clients to bring a guest. StrategicPoint Investment Advisors in Providence, Rhode Island, has hosted events featuring a consultant who talks about strategies to help clients’ children get into top universities. That’s a topic of great interest to many current and prospective clients, and one that resulted in new business for the firm. If your clients sit on philanthropic or corporate boards, arrange to make a presentation to the board. GW & Wade of Wellesley, Massachussetts, generated many new clients by presenting to their clients’ fellow board members.

Create a client advisory board: Ask a group of clients to talk to you a couple of times a year about what you can do better. Clients willing to spend time on your board, and who see you are committed to listening to their suggestions, will be your strongest advocates.

Do some PR: Work with a public relations firm, or reach out to local media yourself to make sure they’re aware of your firm and your position in the market, and that you’re available as an expert source in stories about money and investing. Be sure to communicate milestones such as new hires or assets under management.

Push the newsletter: Encourage clients to forward your newsletter to friends, and offer to add non-clients to your mail and e-mail lists. It’s the best way to help prospective clients “try before they buy” your services. Dion Money Management in Williamstown, Massachusetts, has a strong newsletter subscriber base and it scored by producing a series of informative investing Webcasts aimed at tech-savvy clients and prospects. Recipients forwarded the Webcast links to friends and associates, resulting in a surge of new clients for the firm.

Keep track of client networks: Above all, set up a system to track your client-prospect networks, and be religious about keeping that information up-to-date. Set realistic but ambitious goals for increasing monthly, quarterly, and annual referrals. Follow through on each and every interaction. When you get a referral, act on it. And don’t forget to thank your clients appropriately for each and every referral.

The old model of dispensing wisdom and waiting for the referrals to appear isn’t enough in today’s market. There is still plenty of low-hanging fruit well within your reach, but these days there are many more hands waiting to harvest it. You may want to consult a marketing expert to help you define a strategy that suits your firm’s resources, goals, experience, and expertise. Regardless of whether you go it alone or hire outside help, a well-conceived marketing plan will help you get your share–and then some–of the enormous opportunities that exist in our industry.

Ruediger (Rudy) Adolf is founder and CEO of Focus Financial Partners, a leading international partnership of independent, fiduciary wealth management firms. He can be reached at [email protected]. Rajini Kodialam is a co-founder and senior VP of practice management at Focus. She can be reached at [email protected].


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