Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards
A phone, laptop and social media images

Practice Management > Marketing and Communications > Client Retention

Kitces Research Shows How High-Growth Advisors Market Their Services

Your article was successfully shared with the contacts you provided.

What You Need to Know

  • Just 29% of practices deployed SEO, the top-ranked tactic in terms of returns in new client revenue versus cost to implement.
  • High-growth practices rely much less on client referrals than other practices at every practice development stage.
  • High-growth practices typically are twice as likely as others to have a structured marketing approach, including a marketing accountability point person.

Kitces Research released a study this week aimed at helping advisors understand “what really works” when it comes to marketing.

The study found that successful marketing results from a combination of actions that are both aligned with the growth strategy of the practice and in sync with practice owners’ preferences. Good marketers constantly refine their marketing approach as the practice and the markets it targets evolve.

Kitces Research based the study on data it collected online from April 18 through May 20 from more than 1,000 advisory practices, resulting in 457 usable responses. To be included in the study, respondents were required to represent a business that provided financial advice or implemented investment products. The practice had to have been established in 2020 or earlier and actually served clients and earned revenue in 2021.

Client Acquisition Costs

The survey findings showed that bringing a new client on board in 2021 cost a financial advisor a median $2,167, of which about 70% was the cost of the advisor’s time spent on marketing and sales activities, and just 30% on hard-dollar marketing expenses.

The cost rose to $4,056 per client for firms with upward of $250,000 of revenue, as the cost of the advisor’s time rises as the practice grows.

The typical advisory practice spent 7.1% of its 2021 revenue on time-based and dollar-based marketing, rising to 8.8% among practices with more than $1.5 million of revenue — again, because the advisor’s time is more valuable as the practice grows.

Among the 25 different advisor marketing tactics researchers examined, a successful one attracted at least one new client for 55% of practices on average. The success rate was 100% for custodial referral programs, and 96% for client referrals, while blogging and social media had success rates of only 20% and 39%, respectively.

Successful tactics had median first-year revenue per new client of $4,000.

The typical practice invested $1 in marketing to generate $1.20 in new client revenue, for a marketing efficiency measure of 1.2, according to the study. However, marketing efficiency was 2.5 for practices with less than $250,000 in revenue, compared with just 0.8 for practices of $1.5 million or more.

Sustainable Growth

Kitces Research noted that increasing costs and decreasing efficiency as practices grow result mainly from reliance on tactics that are hard to scale, either because of the advisor time required or the finite opportunities some tactics represent. “These results highlight the importance of evolving marketing tactics as the practice grows,” the study said.

The research found that many advisors may not fully understand a tactic’s costs and returns. Take search engine optimization, the top-ranked tactic in terms of the highest return in new client revenue versus the cost to implement. Just 29% of practices in the study deployed SEO, and only 20% used drip marketing, the second most efficient tactic. 

In contrast, consider client referrals, the marketing tactic that 93% of practices rely on. Referral marketing does not scale well, according to the research. The acquisition cost is low, but the cost is almost entirely advisor time, a finite resource. Not only that, a client will make a referral only so many times. 

The study found that high-growth practices rely much less on client referrals than other practices at every practice development stage.

Kitces Research said sustaining growth across a practice’s development cycle requires a shift away from time-intensive tactics toward hard-dollar-based ones, such as drip marketing, online lead generation listings and SEO, which scale well. 

According to the study, the pandemic had a significant effect on advisor marketing: In-person tactics decreased measurably since Kitces Research’s 2019 study, and digital tactics increased.

Use of client appreciation events dropped to 17% of advisors from 36%, and seminar marketing dropped to 15% from 26%. At the same time, webinar usage shot up to 22% from 8%, and online advisor listings for lead generation rose to 26% from 11%.

SEO was already on the rise, with adoption increasing to 29% or firms from 22% and 42% indicating that they plan to increase SEO efforts going forward.

High-Growth Practices

High-growth practices achieve two to six times as much annual revenue growth as their peers, depending on the development stage, according to the study. This is a function of both the marketing tactics they use and a more assertive and deliberate approach to marketing overall.

Across the five practice development stages, high-growth practices typically are twice as likely as others to have a structured marketing approach, including a marketing accountability point person, a routine planning process and ability to track marketing time and expenses. They spend more on marketing in terms of expenses as a share of revenue.

The study found that the typical practice struggles with most content-based tactics, including blogging, videos and podcasting, as well as with their social media and drip marketing distribution channels. In contrast, high-growth practices disproportionately invest in such tactics.

Moreover, high-growth practices are significantly more likely to have a niche or hone their marketing messaging toward a clearly identified target clientele, especially in their earlier development stages.

Because of their aggregate investments and focus on marketing, the typical high-growth smaller practice is twice as likely as others to be niche-focused. As they scale up their marketing, larger high-growth practices are more than twice as efficient in their marketing spending that all other practices.

Kitces Research has identified a general framework that the most effective advisor marketers share. For one, they are willing to proactively invest in marketing, including tracking results to ensure efficient marketing spending. 

The most effective marketers are aware of the cost and efficiency of marketing tactics their practices deploy, including recognition of the time investment that each tactic requires. 

Most important, effective advisor marketers focus on scalable, hard-dollar-based tactics that can scale with the advisory practice as it grows. True, these tactics appear expensive initially, but they will pay off with much greater marketing efficiency over time, Kitces Research said.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.