Advisors’ desire to grow their businesses has never been greater. From peak to trough, advisors saw assets and revenues decline 20% to 40% during the market decline of 2008-2009. Although we have seen a rebound over the past 12 months, most advisors are still significantly below where they were at their high-water mark. Consequently, client acquisition is by far the top concern for most of our coaching clients.
We have observed in our coaching that many advisors tend to look for a “secret sauce” that will solve all of their client acquisition ills, but there is no one single solution. However, our experience has demonstrated that advisors who are successful at client acquisition have a process they have built that acquires clients in a systematic manner.
They Called It “Prospecting”
Between the years 1848-1855, 300,000 gold-seekers arrived in California to prospect for gold. By 1865, three-quarters of a billion dollars worth of the shiny stuff had been clawed from the hills and stream beds of California. (In today’s dollars, the figure would be closer to $19 billion.)
In the 1970s and 1980s, thousands of stockbrokers “prospected” for a different sort of gold, by cold-calling random lists of prospects at their homes or offices. For most brokers, cold-calling was how you broke into the business.
Today, with close to 200 million numbers in the federal Do Not Call Registry, and legions of wary and cynical investors, cold-calling, which was never very efficient as a business development method, has largely been discredited as a client acquisition tool.
Advisor, Value Yourself
It is strangely ironic that advisors who spend much of their day exploring the valuations of public enterprises ignore the valuation that is closest to them: that of their own business. We have found that close to 68% of the advisors who come to us do not have a functioning client acquisition process, which is an important driver of their company’s valuation. Moreover, more than 80% of the advisors we survey cannot tell us which marketing campaigns are the most effective for them.
I use the phrase “client acquisition process” very specifically, with the emphasis on process. We find that the top-performing advisory practices recognize that client acquisition is a strategic system where the advisory firm deploys strategies to actively seek and acquire prospective clients.
An important forerunner to new clients is lead flow. Lead flow is what’s in your pipeline, and to have an effective client acquisition system, you must be cognizant of the various stages within that pipeline. New clients are a result of a rigorous attention to the strategy of first generating leads, and then nurturing those leads through a process that results in new clients, and net new assets.
As an alternative to organic growth, some advisory practices are exploring the potential of growing their business through the acquisition of other advisory practices (for an update on the advisory practice M&A market from a valuation perspective, see the “Bull Market for Advisory Firms?” sidebar). According to David Grau, the valuations director of FPTransitions, which conducts valuations on more than 400 advisory firms a year, “The key driver in valuation is growth. Buyers like to see new clients and new blood…as well as how you are getting these new clients. “By extension, those practices that have a client acquisition system in place, with a pipeline of prospective clients, are more likely to command a premium multiple in the marketplace.
The Client Acquisition Process Simplified
At ClientWise, we visualize the client acquisition process as a three-step process:
Phase One: Lead Creation
This initial stage can also be broken down into three complementary steps:
o Lead generation is the creative process whereby advisors identify potential clients who are interested and likely candidates for the advisor’s services and solutions. Lead-generation methods might include introductions from client advocates, introductions from other trusted advisors, educational workshops, networking, niche marketing, and so forth. Hypothetically, the types of lead-generation methods are limited only by one’s creativity. In practice, this is not the case because many advisors seem to be uncomfortable straying from the traditional models of lead generation. (For a survey of best practices with regard to lead generation techniques please visit clientwise.com/99 for the publication “99 Ways to Improve Your Marketing.”)