Contentment or complacency?

The advisory industry is experiencing stable levels of profitability and continues to grow but at a rate slower than five years ago. This slowing will require changes in how firms are managed in order to build their bottom line. That revenue growth at the average advisory practice is slowing is something of a surprise given the long market bull run which, on its own, should be supporting strong revenue growth. Furthermore, peoples’ financial lives are becoming increasingly complex and should be a fundamental driver of demand for additional advisory services.  Hundreds of new millionaires are added to the population each year and a growing number of younger people are overwhelmed by the vast variety of options offered on the impersonal internet. Consumers in every segment could benefit from professional help but advisors are not attracting new clients at the rate they should given the current need. In the U.S., advisory firm revenue growth hit a high of 16% in 2013 and then dropped to 8% in 2015 and 5% in 2017. Certainly, the high rate of attrition due to the dwindling of assets by retiring clients is a factor but the potential clients that should be taking their place don’t seem to be getting the message that advisors can add value. 

Most advisors depend on referrals for their growth. Advisors who wait for introductions from existing clients must pray that the most loyal ones are on constant alert for people who are experiencing a liquidity event, a change of life transition or a crisis. Further, advisors must trust that these helpful clients are able to articulate what you provide and why you are special. While this confluence does occur from time to time, most advisors only attain a handful of qualified new prospects each year from existing client referrals.

While the number of referrals is important, it is not the only objective of an effective marketing plan. Client loyalty is an important foundation for growing a business but to really grow a business it is critical to grow one’s presence. Studies show that when a professional service business is one of the top three providers in their market, they will get twice as many opportunities to do business as the fourth next firm. This does not require the firm to be the largest in size, but the largest in presence.

Therefore it is important to create a marketing plan that increases the size of the firm’s market presence. The plan incorporates the business vision and service models, distinct and differentiated messaging, definition of optimal clients, measurable goals, and the strategies and tactics designed to achieve those goals.

Building a Marketing Presence:  A well designed marketing plan has three main components:

Brand Infrastructure

It is important not to stop at the creation of a logo and collateral material, but to think about the identity you want to create in the market, your messaging, your website, your brand collateral and your social media profiles.

Content Creation and Delivery The language many advisory firms use can be mushy or too similar to other advisors or financial service providers. Your intellectual capital and expertise is unique to you. Use that power, and think about how the words and images will resonate with the market as well as internal stakeholders. It's also critical to think about the regularity and timing of messages.

Digital Marketing

Perhaps the biggest challenge today is to be relevant in your messaging while being responsive to how prospects and clients consume information today. A thoughtful approach to digital advertising, public relations and social media can create a very high impact. Once a plan is in place, start developing actionable and measurable tactics as the key to an effective plan is making a resource commitment to it. This means money and people. Advisory firms typically spend less than 2% of their revenues on marketing while large retail firms spend orders of magnitude more. Clearly, small advisory businesses do not have the ability to compete on that level in terms of dollars, but targeted communications spending allows you to convey a differentiated message in the communities you choose to serve. Think in these terms — if you aspire to grow your top line by 20% year-over-year, it will be difficult to generate that volume if your marketing is just a whisper.

Marketing does not begin and end with advertising and public relations. To convey who you are and why people should do business with you, develop your brand. Your brand begins with your public image but is realized ultimately by how you touch clients and prospects. Consider how your physical office looks relative to the message you wish to convey; does it say cheap and tacky, or opulent and excessive? Do you communicate directly or abstractly? Does your staff welcome clients in a way that demonstrates their importance? Does your reporting reflect all that you claim to do for the client or does it emphasize one dimension of the relationship, for example investment management? Is your sales process consistent with how you want to be seen? The point is that small efforts combine to make a big impact.

The financial advisory profession is experiencing a material transformation from practice to business. Firms that present themselves to the market as reliable, relevant and responsible enterprises likely will prevail. Advisors who do not take control of their identity will find it harder to compete with more assertive contemporaries. While you always want the potential for referrals from happy clients, it's important to recognize that referrals require coincidence and serendipity. A disciplined approach to marketing and branding will help advisory firms achieve greater results.

For more information, visit provisus.ca. Financial advisors can visit provisus.ca/advisors.