Financial advisors and planners – while they may have the word “plan” in their title – are struggling to create and engage successful business and marketing plans.
A new study by the Financial Planning Association Research and Practice Institute found that business growth is a major challenge in today’s financial advisory businesses, with only 25% of advisors reporting that they exceeded their business growth goals in the past year.
During a visit to ThinkAdvisor’s office on Tuesday, Janet A. Stanzak, FPA president and soon-to-be chairwoman, called these study results “so ironic.”
“We are a profession of financial planners, and yet what our studies are revealing? This one says financial planners are not doing business plans and marketing plans well,” she said. “… It’s ironic as heck that here we are group of planners and where we in our own businesses fall down is in some of the planning aspects of what we do.”
The 2014 Drivers of Business Growth study — which included the input of 434 professionals across the country, including FPA members and non-members, certified financial planners, advisors across all channels and a wide range of business sizes and models — found a substantial gap in advisors’ current business development between where they want to be and where they are.
Edward W. Gjertsen II, FPA president-elect, pointed out that only 9% of respondents indicated that their business development process is “very effective.”
“Which means 91% don’t,” Gjertsen told ThinkAdvisor. “So, that’s a good gap.”
Study participants were asked, “Thinking about your current business development process, how would you rate its overall effectiveness in helping you reach your growth goals?”
More than half of respondents gave their process a subpar rating — with 33% calling their plans neither effective nor ineffective, i.e. “neutral;” 19% saying they were “not very effective;” and 4% calling them “not at all effective.”
“When you ask some really tough questions you get some interesting answers coming back,” Gjertsen added.
Gjertsen’s day-to-day is spent at Mack Investment Securities Inc. in Northfield, Illinois, as vice president and financial planner.
“As a practitioner,” he said, “it’s very valuable to know that there’s some work that needs to be done.”
From those that reported effective business goals and plans, the researchers were able to compile a list of winning tactics and strategies.
While the study found that “most advisors are struggling to grow their businesses in a way that is directly impacting their bottom line,” as Lauren Schadle, FPA executive director and CEO, said in a statement, it also found two overarching solutions that could help the advisors that are struggling.
These two solutions include the need for a clear, defined business plan and the need to focus on the right marketing tactics.
“This study probed further into the matter and uncovered that while many advisors try similar business growth tactics, it is those advisors who think and plan strategically about their businesses who are succeeding in adding new clients and assets,” Schadle added.
The study found that successful firms had a defined value proposition. Of those who exceeded their goals, 79% had a defined value proposition, compared with 57% of those who fell short of their goals.
A formal, written business plan also proved to be important to those who exceeded their goals and those that experienced high growth (those who grew 20% or more). According to the study, high-growth advisors were considerably more likely to have a formal, written business plan (38%) compared with low-growth advisers (21%) and even more so among those who exceeded their goals (48%) versus those who fell short of their goals (18%).
The “right marketing tactics” that the study focused on were center of influence referrals, client events and thought leadership, which the study defines as building a personal brand or platform using thought leadership and social media.
While a relatively low percentage of respondents are using thought leadership as a tactic, the study found that the larger and growing businesses were more likely to be using this strategy.
According to the study, respondents who achieved faster growth were also more likely to be working with centers of influence (68%) to generate professional referrals than those with the lowest growth (54%). Client events as a way to both add value for clients and attract new clients proved to be beneficial for respondents who were growing the fastest (58%) compared with those who were not (41%).
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