Many advisors and advisory firms have relied primarily on referrals to build their business. While this strategy has been quite effective in the past, the market downturn of the past two years has made clients more skeptical and, as a result, this avenue of growth has slowed. The problem is that many advisors and advisory firms – even some very large and successful ones – have either never actively marketed or have not done so for a long time, and are therefore beginning the process from square one. Yes, they must learn how to market.
This phenomenon was confirmed in a study of almost 700 advisors and wealth management firms conducted for Genworth Financial. Almost three quarters of the respondents plan to spend more time on marketing, and half of respondents more money on marketing; the respondents overwhelmingly acknowledge that active marketing will replace referrals as a key driver of growth.
Interestingly, and reinforcing the above point, only 32% of respondents had an actual marketing plan, and only half of these advisors and firms have actually used their plans. As growth rates have slowed with the markets decline, and referrals have waned, the difficult reality is that advisors and firms must become better and more active marketers.
That raises the interesting dilemma many firms face – recognizing that you need to develop a marketing a plan is one thing; actually figuring out how to do so is another matter! Respondents also recognized that other complementary avenues of future growth will include either acquisitions or hiring addition business development staff. Many organizations are budget-constrained today, therefore so while in theory hiring new business development and marketing employees makes sense, this might be a longer-term strategy, which does little to help replace lost assets today.
Another interesting conclusion from this study is that respondents cited delivering top-notch client service and building and maintaining efficient operations as the two top ways to generate business opportunities moving forward. I agree – happy clients will be more apt to begin giving referrals again in the future. And operating efficiently is always important. But this will take time…..
In the end, many companies are going to have to figure out how to become more active marketers – budget constraints notwithstanding – and quickly if they hope to build their assets back to previous levels.
