Robert J. Powell, III

ContactRobert Powell is the editor of Retirement Weekly, a Marketwatch/Wall Street Journal Digital Network publication. Powell also serves as a columnist for MarketWatch, writing about retirement and investing. Powell is also the editor of the Retirement Management Journal and the curriculum director of Boston University's Online Retirement Management Program.
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Financial Advisors Do a Poor To Average Job At Sales And Marketing: Chip Roame edit
Sunday, July 15, 2012 08:33

Tags: account consolidation | Chip Roame | client referrals | client retention | internet marketing | IRA rollovers | LinkedIn | marketing | professional referrals | sales | target marketing | Tiburon Strategic Advisors

Financial advisors will have to do a much better job at sales and marketing if they want to build a successful practice. Or at least so says Charles “Chip” Roame, managing partner of Tiburon Strategic Advisors, whose firm recently released a report outlining the nine winning tactics for financial advisors.

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In the second of an occasional series on that report, we spoke with Roame about the second of the nine winning tactics, sales and marketing. The first report examined the first of the nine winning tactics, target marketing.

A4A: Overall, how would you rate the sales and marketing efforts of fee-only and/or fee-based financial advisors?

Roame: Average to poor, with a few terrific exceptions: Fisher Investments, The Edelman Financial Group (Read A4A’s report on Edelman’s firm), The Mutual Fund Store, Hanson McClain, and Clearly Gull.

A4A: In your report, you say that client retention and client consolidation will be the most critical sales and marketing activities for financial advisors? Why so? Are advisors at risk of losing their clients and share of wallet?

Roame: There are two separate issues. One, client retention needs to be every financial advisor’s first goal all the time. There is no logic to prioritizing chasing the next client if one has a leaky bucket. And, due to recent market volatility and industry stumbles, retention is a bit lower, client movement is a bit higher, so now more than usual, client communication which drive retention are critical. Two, client consolidation is the easiest asset-gathering program and often goes overlooked a bit. Many clients have additional liquidity events, the sale of a house, the cashing in of a retirement plan and the like, and financial advisors need to be focused on capturing each of those sums as their second sales and marketing goal before chasing new clients, which necessarily will take more effort.

A4A: You also mention in the report that client referrals will remain the best marketing method. Do you see that changing over time as the internet (such as LinkedIn and the like) creates the potential to reach one's target market in a cost effective and efficient manner? 

Roame: Yes, beyond client retention and client consolidation, client referrals will remain the best marketing strategy for financial advisors with clients (obviously this is not true for new financial advisors who have no clients from which they seek referrals). I agree that the internet will make sourcing a new client increasingly easier and this will grow in popularity, but it will grow in a related ways, which is this: Prospects my source three or four advisors via the internet and then ask amongst their friends who must use any of them, and this will lead back to client referrals.

A4A: Why do you think professional referrals are so important as a part of the winning sales and marketing tactic? 

Roame: I am not sure I think that professional referrals are as successful as others claim. I think many financial advisors overemphasize this relatively passive marketing strategy. When done correctly, financial advisors would be asking each of their clients for the names of their CPA, lawyer, insurance agents and the like, and asking those clients to connect them. That would be an aggressive and likely successful strategy but few financial advisors take to it to such an extent.

A4A: You in the report also mention that firms using target marketing will be the most successful. Is there one target market that you think will prove more successful than another, say IRA rollovers or inheritance? 

Roame: The key to target marketing is to find a segment that has both a publication and a meeting. In the publication, a financial advisor should seek to get quoted, write an article, and/or advertise. At the meeting, financial advisors should seek to speak, to exhibit, and/or attend. Nearly any market segment that gathers its members through a publication and meeting can be successful – Microsoft employee, doctors, auto dealer owners, country club members, and the like.

Q: A4A: In the report, you write that the “moderately affluent” may provide the best opportunities for financial advisors. Why so? Is it that the “affluent market” is well mined and no one is pursuing the moderately affluent? Do you think that serving that market could prove challenging given that it's costly to service?

Roame: Yes, the ultra-affluent market is small in numbers and they do not exactly run around looking for new financial advisors. The affluent market is desired by every financial services firm and is competed for aggressively by thousands of wirehouse brokers. THE more moderate affluent households are often ignored by many, sometimes even fall below account minimums for many. Note that Fisher Investments, Edelman Financial Group, The Mutual Fund Store and Hanson McClain all target moderate net worth households, not the super affluent. Technology and outsourcing (e.g. turnkey asset management programs or TAMPS) can still allow such a firm to be extremely profitable.

Comments (4)

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lisagray
I agree completely with Chip's notion that advisors should be asking for the names of clients' other advisors. In fact, they should be positioning themselves as leaders of the client's entire advisory team.

This requires an artful approach - one that holds a win for each of the other advisors as well as for the lead advisor.

And with the significantly wealthy and super affluent, there is quite a bit more to developing successful relationships than marketing tactics.

I also like Chip's points about referrals. Building a team approach to helping the client reach his or her definition of success is the key. The 2005 Capgemini Merrill Lynch World Wealth Report noted that the number one desire of these clients was to simplify their complexities, specifically by having a central point of contact consisting of a personne de confiance level of trust. From my work in the family office field, I can tell you that this is still the case.

Attracting significantly wealthy and ultra affluent clients requires a different approach than marketing to the lower hanging fruit of moderate net worth households. But coordinating an advisory team works at any level of wealth, even if there are only three advisors to coordinate.
lisagray , July 16, 2012
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brentb843
I am always doubtful. A lot of firms like Chips claim to know so much about advisory practices and how to make them successful. I have yet to see any evidence and I think the largest evidence against this is that why would they not create their own firm? Much more money in that than in what they do....

They define success as AUM, whether the client is receiving value is unknown.
brentb843 , July 17, 2012
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brentb843
Lisa - I have read, let me find it, reports to the contrary on UHNW. Most of the investments are being outsourced, which means the personne de confidance is not reponsible or accountable for the investments, they are getting referral fees.
brentb843 , July 17, 2012
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Financial Advisors are in sales -- this is a well-kept secret by most firms. If new FA's don't know how to sell, or don't learn how, they'll go out of business.
This e-mail address is being protected from spambots. You need JavaScript enabled to view it , July 19, 2012

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