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Life Health > Running Your Business > Marketing and Lead Generation

Demystifying Referrals

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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 for the publication “99 Ways to Improve Your Marketing.”)

o Lead nurturing is the second step in lead creation, and is primarily a smart communication process where the advisors establish themselves in the minds of prospects with a series of contacts.

o Qualifying is the third step, during which the advisor comes to understand the needs and concerns of the investor and what the advisor can offer clients.

Phase Two: Opportunity Pipeline

Once an investor is qualified, she moves fully into the opportunity pipeline. Over time, the advisor identifies investors who closely adhere to the advisor’s ideal client persona. Consequently, the advisor will spend more time with those investors who raise their hand and indicate an interest in learning more about the advisor’s practice model. The opportunity pipeline stage is actually a conversation between the advisor and the prospective client delineated by a series of touches between the advisor and the investor. A touch is defined as a pre-determined contact, e.g., a face-to-face meeting, a phone call, an e-mail, a Tweet, a handwritten note, a social function. Years ago, a Sales and Marketing Association survey found that it takes an average seven to 10 touches before a lead becomes a client. My instinct is that this number is still pretty accurate.

Phase Three: On-Boarding

The final stage of the Client Acquisition Process is this orientation period. We have observed that top-performing advisors continue the “courtship” process well after the investor has formally agreed to sign up. The first 30 to 45 days of a new relationship is a sensitive period where both advisor and client are just getting to know each other. During this time, the advisor should go out of his way in serving the new client, as well as teaching the client the full scope of the advisory practice’s services.

The 71% Solution

Third-party sources are the predominant driver of new business for financial advisors: 71% of new client introductions originate from just two sources: loyal client advocates and other trusted advisors.

Loyal client advocates possess three important qualities: they understand and appreciate what the advisor does for them; they can articulate to others (accurately) what the advisor does; and they are actively engaged with the advisor in providing introductions to prospective clients. Loyal client advocates are at the top of the totem pole with regard to their engagement level, and can be surprisingly motivated to proselytize on behalf of the advisor.

We refer to the trusted advisor network–the other major source of new client introductions–as the professional advocate network, which includes, but is not limited to, CPAs and attorneys. Other professionals might include: commercial lenders, business brokers and appraisers, tax preparers, business agents, and TPAs. What works best is when the advisor focuses on the cultivation of the network itself, for the benefit of serving the client. Introductions and referrals to other prospective clients should never be the prime motivator of making these connections, but are an important by-product of this outreach. Indeed, CPAs and attorneys have all been contacted by other financial advisors over the years, with their hand greedily outstretched seeking referrals. As a consequence, the legal and accounting community can be somewhat jaded in their relations with advisors.

Nonetheless, when we have interviewed the clients themselves, they almost unanimously endorse the concept of all of their trusted advisors, talking to and connecting with each other.

Your Own Gold Rush

In 1848, Sam Brannan built a store in Sutterville, California, on the Sacramento River, just below Sutter’s Fort, where gold had been discovered. One day in May, Brannan set out for San Francisco with a bottle of gold dust. Walking up and down the streets of San Francisco, Brannan bellowed, “Gold! Gold from the American River!” to anyone who would listen. Within months, Brannan’s store was selling over $150,000 in goods each month, or about $3.8 million in today’s dollars. Brannan soon became the Gold Rush’s first millionaire.

For advisors today, it’s not that easy. The SEC, FINRA, and local authorities would most likely frown on financial advisors wandering through the streets shouting “Gold!” However, client acquisition is not as knotty an issue as some advisors perceive it to be. With some strategic thinking, and by breaking the client acquisition process into smaller nugget-sized pieces, financial advisors can create their own gold rush.

Bull Market for Advisory Firms

Ray Sclafani is founder and president of ClientWise LLC (, a full-service executive coaching firm that helps its clients optimize growth, maximize revenue, and manage risk. He can be reached at [email protected].


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