Getting and keeping clients. It’s the lifeblood of an advisory business, regardless of what’s happening in the markets, and often a factor in whether practices rise or fall. That’s because winning clients is a source of fees, and often a way for advisors to find other assets and clients, which together help drive business growth. No wonder, of all the things advisors do, client meetings and acquisition takes most of their time—about a fifth, according to the latest Rydex AdvisorBenchmarking report. The survey has seen a trend in the shift in how advisors spend their time, suggesting that the industry may have settled into a “new normal” with a strong emphasis on relationship basics, including spending more time on client communication and client relationship management.
The focus on clients is not surprising, since advisors also report that their largest challenge is getting new clients. According to the most recent study, the biggest threats to RIA practices have remained consistent for the past couple of years, except that technology concerns have become less of a priority, replaced by issues relating to market impacts on assets and managing client expectations.
Among a list of potential threats to advisors’ businesses, client acquisition was number one, trumping even the need to meet the demands of compliance and deal with the continuing impact of a bear market. Assets are still hard to come by. Clients remain cautious and require a lot of handholding. And in the wake of investigations into the causes of the financial collapse, the entire financial services industry has come under greater scrutiny—including RIA firms, which potentially face more stringent regulation and higher compliance demands. The result is that management demands on advisors to run their businesses increasingly conflicts with their role “in” the business working with clients and prospects.
For many advisors, there’s no better way of acquiring clients than through referrals, which usually stem from strong relationships with existing clients and with “centers of influence,” such as accountants, lawyers and trustees who are often asked by their clients for financial advice.
In fact, respondents in the latest AdvisorBenchmarking survey said referrals from existing clients are expected to be the key driver of growth over the next five years.
Three Key Points on Client Acquisitions
Acquiring clients could easily absorb every minute of an advisor’s day. But keeping the following points in mind may make the time spent obtaining clients more productive.
Point No. 1: Ensuring Your Practice Is Compatible With the Prospect
A critical aspect of acquiring new clients is determining their compatibility with the advisor’s business model. Some independent advisors, for example, often encounter prospects who feel it’s important to be associated with a large national brand. Other prospects may not understand the value proposition of an independent wealth management advisor; for example, that it holds client interests at heart and has fewer conflicts of interests. Also, an independent advisor provides a greater opportunity set to clients than does the sometimes limited shelf space of a large broker/dealer.