Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Life Health > Running Your Business > Prospecting

Prospecting Strategy

Your article was successfully shared with the contacts you provided.

A  recent survey by Cerulli showed that wirehouse broker-dealers had about a 43% market share of retail asset management as of end-2010 — down from almost half the market in 2007. Naturally, other distribution channels were gaining, among them independent broker-dealers and registered investment advisors.

Cerulli suggested the wirehouse share would drop to 35% by 2013.

Question: Why are independents and RIAs growing at the expense of the wirehouse advisor?

Anyone who has been talking to advisors in different channels — wirehouses, independents, RIAs — knows the answer: Independents and RIAs are out there prospecting. Wirehouse advisors are not.

Of course there are exceptions to the rule.

From my observations and conversations, new client development is not sufficient to overcome disintermediation and assets lost due to death and normal attrition. The loss of clients through death is compounded by firm account minimums.

Advisors cannot take “starter accounts,” and smaller accounts are sent to the hated call centers in New Jersey. Some of those sent packing are the heirs to parents whose advisor is at a competitive wirehouse. So when Momma Oldebucks dies, the assets don’t even blow a goodbye kiss.

The independents and RIAs, with no minimum account requirements, are out there scooping up the small change which will become big bucks when she and her generation die.

It’s the same problem for investors whose liquid net worth is almost entirely in their 401(k). They may have only chump change outside of that account. When they retire, the wirehouse advisor who would not talk to them is not even in the race. Bye-bye assets.

This puts an even greater strain on the wirehouse advisor to prospect and do so heavily. With this in mind, I recommend the following prospecting strategy.

Prospect Enough

In any class or speech I give on the subject of prospecting, I always ask, “How much prospecting is enough?”

The usual snap answer is, “There’s no such thing as ‘enough.’”

My response is always, “Not true. There is ‘too much’ and quite obviously, ‘too little.’ Therefore, there must be ‘enough.’”

We have all known great prospectors. They get so addicted to the adrenaline rush of the hunt that they never develop a clientele. They open an account, sell a product and move on. That’s “too much.”

The flip side of “too much” is “not enough.” This is clearly a condition where new client development does not overcome losses. Asset balances are shrinking, not growing. Too many wirehouse advisors live here.

Your first step in shaking yourself to life is to decide how much is enough for you. Let me give you a defensive and offensive guide that can help you decide.

Defensive: You need to bring in enough new assets to counteract possible asset losses through bad investment performance, client attrition, disintermediation, and assets fleeing as a result of death.

The average wirehouse rep has $94 million under management. If you think the market could drop 6% and you could lose another 4% from these other leaks, then to counteract the hated income reduction plan, you need to bring in $9.4 million a year. If you get market growth and Velda doesn’t die as expected, your business grows. But investment performance is down, and if Velda does die and her dreadful nephew takes the money and invests in a racehorse, for your income not to have dropped you need to be bringing in $783,000 a month.

In developing a marketing plan, we generally assume you can get half of that asset goal from existing clients. So your new asset goal from prospects would be about $400,000 per month — a far cry from what is actually being done in the wirehouse channel.

Offensive: Suppose you want to double your business from $94 million to, say, $200 million. Let’s assume you want to do this in three years.

You therefore need $106 million more under management. That’s about $3 million a month. Again, assuming we can get half of that from existing clients, you need to bring in one and a half million per month from new clients. That’s some serious prospecting.

Can it be done? Of course.

There are two great sources of money in motion — death and retirement. You better have your hand in the stream. Let’s continue with our strategy.

Always Be Prospecting

Here is the usual pattern when an established advisor begins to prospect.

1. Advisor wakes up one morning with pit in stomach realizing three of his biggest clients are likely to die in the next few months, and that he does not have relationship with heirs.

2. Begins prospecting campaign of some kind.

3. It works. After all, this advisor did not develop a $94 million book by being a prospecting slouch. Yes, I know. You think you developed it all from referrals. Not true. At some point, before you had any clients to refer you, you were out there prospecting. No one ever built a $94 million book from referrals only.

4. Because it’s working, advisor does not have the time to continue prospecting and process the new business that is coming in. Therefore, advisor stops prospecting.

5. Some months or years later, the advisor again jolts awake and realizes, “I have to start prospecting. Why did I quit? What was I thinking?”

Guess what? It was not a “thinking problem.” You ran out of time.

Question: So how can you keep prospecting?

Answer: Every team must have a person on it whose primary responsibility is new business development.

That is the simple answer. It is the true answer. And it is a bitter pill to swallow because it is expensive. You have to lay out the money first. You might not get it right the first time. But it is the only way an established advisor can continue the prospecting effort.

So buck up. Get that team member. Or if you are under 40, become that team member and inherit the book.

Multiple Channels

Have at least one prospecting channel other than referrals. Here is the harsh reality. In any downturn, advisors who rely only on referrals participate in the income reduction plan. Clients unhappy with their returns do not refer as often. That’s why you must have at least one other channel.

To help you with this, I have created a “Prospecting Resource Page,” including some past Research magazine articles, white papers and cold calling scripts. You will find these free for the taking at

Quality Control

Maintain rigid quality control over people designated as prospects. These are future clients.

I rarely ask people to commit anything to memory. But you should memorize this definition: A prospect is anyone who has responded or been referred that you would like to do business with.

You have to constantly clean up your prospect file. At the foundation of this definition is this concept: You have to want to do business with them.

If you don’t know enough about them to know if you want to do business with them, throw them out. If you don’t like them, send them to a digital shredder. If they don’t meet your concept of your ideal client, get them out of your file.

There are two reasons for these instructions: (1) Later on down the road, you won’t wind up with a bunch of people you don’t like and don’t want to do business with. (2) If you allow people in your prospect list that you do not care about, and do not want as clients, you will not develop that list. A prospect list must be developed. You must communicate with it.

I have more points to cover, but I’m out of space. You will find these over at my Prospecting Resources page at  

Bill Good is chairman of Bill Good Marketing. His Gorilla CRM System helps advisors double their production or work half as much; visit His seminar program, “No More Pies,” helps advisors manage ETF portfolios using technical analysis; see And his blog,, has lots of useful information for advisors who need to beef up marketing. To preview Bill as a speaker, see his YouTube channel:


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.