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Financial Planning > Behavioral Finance

Can Prospecting for Clients Be Outsourced? Part 1

By Michael E. Kitces

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Traditionally in the financial services world, services offering “lead generation” for advisors were used to deliver prospects who might want to buy a particular financial services product—not necessarily people who were looking for advice. For consumers who wanted to actually find a real advisor, the primary option was to seek one out through the financial planning membership associations. 

In recent years, though, there has been a dramatic rise in the number of platforms providing prospective clients for financial planners, following a wide range of business models, from a “registry” of qualified planners to choose from, to companies that give away some basic planning for free in the hopes of drawing some prospects in to go deeper, to advisor review sites.

While many remain skeptical about the value of such services, the reality is that the process of “sales” –converting a prospective client into an actual client–is very specific to an individual firm and its advisors, but the process of “prospecting” to find prospective clients is a marketing function that really is much more conducive to size and scale.

Thus, while not all the companies competing in this space will be winners—many will likely be gone in a few years—it appears that outsourcing prospecting may be an emerging trend as yet another way for some financial planning firms to get more efficient and grow, especially for firms that don’t yet have the size and scale to effectively market themselves.

Lead Generation for Financial Planners 

For many years, the primarysource of “financial planning leads” has been the membership associations, as both NAPFA and the FPA have had consumer-oriented “Find A Planner” services that deliver prospects interested in financial planning to members. More recently, the CFP Board itself has also ramped up its efforts with its new “Let’s Make A Plan” website tied to the new public awareness campaign for the CFP marks and funded with an increase in the recertification fee.

To the extent that any other services provided prospective clients to financial advisors, they tended to be focused on particular products that advisors might deliver, rather than seeking out prospects who were interested in advice.

However, in recent years, a number of third-party services are coming forth to deliver a similar value proposition to advisors as the membership organizations: finding prospective clients who are interested in financial advice. This new trend is not surprising given that getting new clients has significant economic value to an advisory firm, and therefore would certainly be something on which a business could be based, but is certainly a shift that may change how some advisors generate new clients in the future.

Different Methods for Lead Generation 

Unfortunately, there is not necessarily a clear “best practices” approach for generating financial planning leads, and consequently the firms that have cropped up so far use a wide range of tactics. Some function as a “registry”—trying to connect consumers to advisors who have registered with the site and have either been implicitly or explicitly screened, such as Paladin Registry or Vestorly, and the recent AdviceIQ; the emerging new Charles Goldman/Steve Lockshin startup Advizent also has expressed an intention to use a similar model, where RIAs will be rigorously screened before being allowed onto the platform. Arguably, this is similar to the underlying model using by the membership associations as well, which implicitly suggest that advisors in their membership organization are uniquely qualified to deliver effective financial advice.

Other services try to lead with an initial value benefit for prospects, and allow the advisor to follow up to try to convert the individual to an ongoing client, such as My New Financial Advisor with their Free Retirement Report or the Advisor Marketing Tool from BoulevardR. The idea is to get the client interested in some initial advice and basic guidance, and then seek out an advisor to take it to the next level.

Another approach for trying to connect consumers with advisors is establishing a third-party service to provide ratings and reviews of advisors, which is the model Tippybob has been implementing. This model is perhaps the least certain—will enough advisors have enough of their clients provide reviews on the site to reach a critical mass of reviews that makes it a relevant decision-making tool for the public? Nonetheless, given the success of “review sites” in a wide range of other industries, expect to see more advisor review sites cropping up in the coming years. 

In the second part of this post, we’ll look at the difference between prosepcting and sales and the key value proposition for lead generation products.

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