Russell Investments recently surveyed 358 advisors from 132 firms and found, not surprisingly, that many of them are making significant changes to their businesses in reaction to today’s market environment. The results of the survey confirm many of the things that we have been hearing and saying over the past year, but are worth repeating:
1) Referrals and word-of-mouth marketing continue to be the best sources of new business. We all know how important it is to ask for referrals in a systematic way. The importance of word-of-mouth marketing is consistent with focusing on a niche clientele, where you are more likely to find clients similar to those you already have.
2) Clients remain skittish, though not necessarily to the point where they are switching advisors. Top-notch client service and attention remain the best ways to alleviate client concerns and maintain relationships.
3) Many advisors are facing squeezed margins and therefore looking for technological solutions to finds way to become more efficient. For example, many are installing more sophisticated CRM systems. We have been saying for a long time that becoming more efficient is one way to increase profitability and counteract the lower revenues that have resulted from poor market conditions.
4) More and more advisors are embracing goal-based as opposed to benchmark comparisons for their clients. This is an acknowledgment of the fact that clients are more concerned with meeting their own individual goals then beating a mostly irrelevant benchmark. Advisors have also become more risk averse and have rejiggered client allocations accordingly.
5) And finally, most advisors acknowledge that they want 250 clients or fewer, and the need to segment clients – in other words providing services based on relationship size – is an important component to building a lasting and profitable business. Advisors must become better at leveraging their own time without sacrificing client service.
We continue to operate in a challenging business environment, and those practitioners who are open to adapting their businesses and practices are likely to emerge as the winners. This not only goes for advisors, but for all segments of the financial services business.
