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Life Health > Running Your Business > Prospecting

Worst Practices

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This is supposed to be an article about “best practices.” However, given the fact that there is not a whole lot of prospecting going on, I’m going to focus here on “worst practices.” Those abound.

I want to begin this tale of woe with two anecdotes.

A couple of years ago, I did a prospecting seminar for a complex manager at one of the national firms. As we were wrapping up, he told me, “Let me show you something.” He pulled up a spreadsheet that listed the 60-some advisors in his complex. There was a horizontal line drawn about halfway down. His comment: “People below this line are negative over a five-year period on net new households.”

I replied, “I know exactly why. They’re not doing anything.” And then I added, “Even a blind pig can find an acorn. Since they are not finding any acorns, they are not doing anything.”

Just two weeks ago, I had a telephone conversation with a complex manager at another firm. He commented that a substantial percentage of the advisors in his complex were not showing any growth in client relationships. Again, those blind pigs are staying in their huts, not rooting around.

 Best Practices 2011

In my July Research magazine article, I appealed to my readers to take a 48-question “best practices” survey. To date, 325 have responded. The amount of data to analyze is overwhelming. So I am chipping away at it, both in my monthly feature here, and in my new blog at Research’s affiliated website (If you want to take the survey, you can go to There you will find links to current and past blog articles.)

For this issue, my plan was to focus on prospecting best practices. I spent hours analyzing my data. I did filters and cross tabulations to see if I could locate best practices. Guess what? There are not a lot. But “worst practices” are everywhere.

I use a survey website called “Survey Monkey.” It’s quite a marvelous program with tremendous analytic capabilities. If best practices were there, I would find them.

In my search for best practices, I decided to focus for this article on advisors with $50 million in assets under management and above.

Quite obviously, these are people who have been in the business for a longer period of time. Many of them have “an established clientele.” For the established producer, prospecting is always a challenge.

The table nearby summarizes my findings. Each of the columns except for the last represents a subset of advisors with more than $50 million AUM. These subsets were just different ways I filtered the survey data.

The key question on my survey as far as prospecting is concerned, was No. 17: “In the last 12 months, how many new client relationships have you opened?”

Start in that column on the right. That’s the breakdown of how everyone with more than $50 million AUM answered No. 17. Pay close attention to the bottom row. That’s the number of advisors in each category opening 10 or fewer new client relationships per year.

Here’s what we know from this.

The absolute worst practice is relying on “referrals only.” 56 percent of the sample who relied on referrals opened 10 or fewer new clients in the last 12 months.

It does not help to be a member of a national firm. 50 percent of this group opened less than 10. And quite frankly, based on anecdotal data, I think it’s more likely closer to five.

As you can see, there is not a lot of difference between those who are “not regularly prospecting” and another group, “regularly prospecting but not relying on referrals only.”

The only place this failure rate drops significantly is in a fairly small sample of: “Prospects regularly, does not rely on referrals only, and has a marketing assistant or junior broker.”

This category also has the highest success rate as we push north of 10 new households a year. A total of 35 percent of this group is doing 20 new households per year.

Let me come right out and say it: 10 or fewer new clients a year is not enough. 10-20 might be, depending upon amount of assets being brought in. Now, 20 and above pushes into the growth range. That’s where you need to be.

Best Practices

OK, you’re tired of hearing about “worst practices.” Let’s look at best.

  1. You have to have more than one channel of developing new business. To put it another way, if you rely only on referrals, there is a 56 percent likelihood you are opening 10 or fewer new clients. Further, even if you are opening a lot of new clients from referrals only, it never goes on forever.

    Another anecdote: last week I met with a client who showed me an incredible string of referrals. It just went on and on. Do you think he has any other method going on right now? Not a chance. Do we think that chain of referrals will go on forever? Not a chance. And what will happen to his growth when that referral chain poops out? You know the answer to that as well.

  2. Always be prospecting. In my opinion, there is no point in your business career where you are “done.” Sure, it’s expensive to keep another campaign going when referrals are filling the frig. It requires energy, money and time. But you have to get out of that hut and root around.
  3. Have someone other than the FA charged with prospecting. This is something I’ve known for a long time. However, my survey bears that out.

Here’s what happens. Advisor gets “prospecting religion,” starts networking, cold calling, seminars or whatever. They either work or do not. If they do not, advisor gives up. If they do, that creates a problem. Advisor now has prospects to deal with, financial plans to write, portfolios to analyze. Advisor stops prospecting. In a few weeks, the pipeline is just as dry as an old bone in the desert.

So, in addition to referrals, what are your choices today? Well, the next chart shows what some peers are doing.

For a few, cold calling is working. Seminars and direct mail are working for others. Radio is working. Canvassing businesses is working. And certainly networking is working.  


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