A consistent story and referral strategy are correlated with high performance, Fidelity says.

Fidelity’s 2014 RIA Benchmarking Study found that RIA firms that have a formal marketing and business development plan; write and share internally and externally a shared corporate story; and have a clearly defined referral process outperform their advisory firm peers in client growth, AUM and revenue.

Fidelity Clearing and Custody calls these firms ‘Marketing Leaders,’ since they report that they spend 33% more (2.4% of revenue versus 1.8%) than the other advisory firms in the survey on business development and marketing. That investment, however, yields 40% more client growth, 23% more asset growth and 20% more revenue growth. 

In an interview, Mathias Hitchock of Fidelity pointed out that of the 400-plus advisors (the majority of whom custody at Fidelity) in the survey, only 30% said they had marketing plans, about the same as in the 2011 study. However, the Marketing Leaders report that they’re “doing well; seeing results” which suggest that “there is so much opportunity” for other advisors to follow their lead, Hitchcock said.

Why don’t more advisors take advantage of the opportunity? “Many advisors’ core competency is working with clients and managing money. They don’t have a background in marketing, and they don’t have the resources” to invest.

Then what has motivated the leaders to invest in marketing? Hitchcock says a variety of factors are in play, including lessons learned from the financial crisis, after which many firms “recommitted to investing in marketing and business development” since they learned that what the market giveth in growth, the market taketh away.

So the market leaders succeed not only because they have a higher-quality formal plan, but also because “the plans had goals and assigned leaders; with deadlines.” Those goals, Hitchcock said, “can be at a high level — asset growth, monthly net new assets — or around specific initiatives,” such as developing their centers-of-influence (COI) strategy — but the key is to assign that goal to a specific person.

“An initiative without an owner is more likely to not get done,” he said, while the marketing leaders “are far more likely to link compensation to actual results,” noting that 70% of them use incentive compensation to drive marketing results.

Yes, larger firms are more likely to spend more time and money on marketing, but the leaders are also heavier social media users, and while “the more sophisticated measuring” of social media’s results “is a little down the road” for most advisors, Hitchcock says they’re “trying things out, and they’re learning.” The next hurdle in advisor use of social media is consistency, he says, since when many advisors “venture into social media, they’re challenged at getting the consistent level of messaging.”

Consistency is important in a non-tech way as well for the leaders, “in your firm’s associates focused on telling the same story” about the firm to clients and prospects. Since for most firms referrals “come from current clients,” he said, it’s important that everyone in a firm keeps “a real focus on telling a consistent firm story so their referral sources are clear” on what kind of client is a good fit for the firm. “If the client or center of influence describes the firm in the same way,” in effect pre-screening prospects, the firm gets a more appropriate prospect and the prospect is more likely to find a firm that meets her needs. Two other insights come from the study and Fidelity’s consulting work with RIAs. In addition to having a clear story to tell, successful firms are “now tailoring that story in an explicit way to different segments the firm is targeting,” Hitchcock reports. Finally, Fidelity is helping advisors to realize that when it comes to COI referrals, it should be “a two-way street.” He says that  “one of the most effective ways to establish a strong COI relationship” is by being “reciprocal: sending referrals to that COI.”

Looking back and ahead at the same time, the study found that the marketing leaders are 42% more likely than their peers to say growth is a priority. So why is growth important? “Because,” said Hitchcock, “it creates value; ultimately a firm’s valuation is driven by growth.” If a firm can “demonstrate it has a repeatable, sustainable growth engine in terms of marketing and referrals,” the firm will be more valuable when a merger or acquisition candidate calls. So, Hitchcock says, “in our 2015 study we’ll be focusing on valuation.” The 2015 Fidelity Benchmarking Study is fielding now.

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