All marketing tools work.
But some work better than others, Consilium head of advice, Ben Brinkerhoff, told the group’s inaugural adviser ‘growth forum’ in Auckland last week.
Brinkerhoff said freshish data on adviser marketing techniques – notably, a 2022 study published by US advisory guru, Michael Kitces – has given an unprecedented level of insight into the success rates of various strategies.
And the data shows ‘organic’ growth efforts typical outshine business buyouts as measured by the client acquisition cost ratio known as ‘marketing efficiency’.
Marketing efficiency weighs the total cost of acquiring a client (measured in dollars plus time-dollars) against annual revenue expected from the customer.
On average, organically sourced clients deliver a marketing efficiency of about three-times bought ones, Brinkerhoff said – although the ratio varies according to firm size with the equation tipping more in favour of acquisition at the bigger end of the scale.
Regardless, he said whatever advisers pay to acquire a client they can get “amazingly compensated”.
“So why don’t advisers prospect consistently?” Brinkerhoff said.
The answer, he said, is partly because advisers “don’t trust their value” but also related to a fear of rejection that can lead to a paralysing search for “the perfect method”.
“Advisers often try the perfect method, get imperfect results then give up,” Brinkerhoff said.
But while most prospecting efforts end in failure, he said, the rewards of successfully securing a long-term client are worth the “psychologically difficult game” of constant rejection.
The Kitces study found certain tactics including internet search engine optimisation and ‘drip marketing’ (or providing regular, relevant material to a client database) offer the highest efficiency gains.
Perhaps the most common prospecting technique advisers claim to use, client referrals, also features a high marketing efficiency score.
However, Dan Allison, founder of the US-based Feedback Marketing Group, told the Consilium crowd of 120 plus that financial advisers, in general, fail to maximise the referral ‘goldmine’.
The Consilium keynote speaker said most clients would willingly refer their adviser to others “but they don’t do it effectively”.
Allison said a 2017 Dimensional Fund Advisors (DFA) global survey of 30,000 financial planning clients found that 98 per cent of respondents would refer their adviser.
About half of those surveyed said they had given a referral at least once in the previous 12 months with others referring numerous times in a total that added up to 100 referrals for every 100 clients.
Yet advisers typically report referred clients every year numbering in the low single digits.
“So why did those clients anonymously lie [in the DFA survey]?” Allison said.
Clearly, most ‘referrals’ fall into a void with no follow-up, largely due to a lack of process in how advisers ask for clients to refer, he said.
To retain and grow their client networks, Allison said financial advisers need to get three things right: offer a service “so good clients don’t even think about going somewhere else”; ensure clients use all relevant services provided by the business; and, “learn how to have referral relationships”.
He said the rules of referral should be established at the offset with a simple early filter question to distinguish between “goldmines and landmines”.
Typically, 70-80 per cent of clients are comfortable referring, Allison said, with the remainder, for whatever reasons, non-referrers “even if they like you”.
Concentrate referral efforts on the goldmines with a “cross-education” program to inform those clients of the breadth of services available and how to pass on that knowledge to others, he said.
After more than 20 years in the business of interviewing advisory firm clients, Allison is pretty sure what works.