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Practice Management > Building Your Business

Why It’s Getting Easier to Win New Clients

By John Sullivan

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Maybe it’s the “taper tantrum,” wild markets, dysfunctional government or riots overseas—whatever the reason, advisors are confident clients need, and are looking for, help.

A new report from Russell Investments released Thursday found the “overwhelming majority” of advisors optimistic about client acquisition in 2013: 87% reported feeling optimistic about acquiring new clients and households.

This follows similar numbers for 2012: 86% of advisors acquired more clients than they lost in 2012, with nearly half indicating they brought on more than 10 clients or households.

The quarterly Financial Professional Outlook survey focused on client acquisition, the use of referrals to drive business growth, and the implications of an aging client base.

Top acquisition strategies for 2013 include receiving client referrals reactively (76%), referral prospecting through current clients (54%) and professional networking (43%).

Fully 32% of advisors say they believe clients are optimistic about the capital markets over the next three years—the highest proportion since the March 2011 FPO survey. Three-quarters (75%) of advisors reported that they, too, are optimistic about the markets.

“Many advisors are finding it easier to acquire new clients than it was just six months ago, as investors’ willingness to participate in the market is bolstered by strong recent performance,” Kevin Bishopp, director of practice management for Russell’s U.S. advisor-sold business, said in a statement. “Yet there is a finite universe of individual investors and a highly competitive environment for advisors. To differentiate themselves, advisors need to deliver a superior service and relationship experience, not just a product or portfolio.”

In addition to acquiring new clients, most advisors reported fairly high levels of client retention. The majority of respondents (55%) said they lost one to three clients in 2012, while only a quarter (26%) lost four or more clients. In identifying the primary reasons for losing clients, many advisors pointed to a cause beyond their control: a client’s death.

“It’s important for advisors to consider the composition of their books of business when establishing an acquisition strategy. If an advisor has many clients in the decumulation phase of retirement, when income distributions begin to exceed investment returns, it can be important to seek out younger clients in their peak accumulation years to help maintain a sustainable business,” Bishopp said. “One rule of thumb is that for every client over age 70, an advisor likely needs one or two clients in their fifties who are accumulating at an increasing rate. This can be an important consideration when thinking about the types of new clients to seek out.”

He also pointed to the “generational risk” clients in retirement can pose, or the danger that an advisor may not retain the assets transferred to an investor’s beneficiaries.

“When thinking about client acquisition, it’s also important that advisors consider establishing relationships with their clients’ children and heirs,” Bishopp concluded. “If they can demonstrate their value and engage these emerging prospects, they can put themselves in a strong position to continue to manage inherited assets and drive referrals amongst the next generation of investors.”

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Check out Lessons From Losing a Client by Mike Patton on AdvisorOne.

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