Originally published on Advisor Perspectives on February 20, 2017
Few firms have a standard process they follow when trying to convert a prospect into a client.
Here’s a quote attributed to Tacitus, a senator and historian of the Roman Empire: “The desire for safety stands against every great and noble enterprise.”
As advisors, you counsel your clients about risk. But based on my experience, you don’t take enough risk. I agree with Tacitus. Your excessive caution is imperiling your business.
Mark Zuckerberg once told a budding group of entrepreneurs that, “The biggest risk is not taking any risk. In a world that's changing really quickly, the only strategy that is guaranteed to fail is not taking risks.”
Many of you are entrepreneurs. Are you taking enough risk?
Your business is changing
Ric Edelman, the chairman and CEO of Edelman Financial Services, observed at a conference sponsored by Inside ETFs over a year ago that robo-advisors would put most advisors out of business. Many disagree, but everyone believes the industry is undergoing rapid change.
The reaction of many advisors to this potential disruption has been excessive caution. Instead of investing in technology to be competitive, these advisors trivialized the threat. Even now, when I discuss the subject of whether a fee based on AUM is competitive, some advisors are in denial. They believe the disruption, if any, will take place slowly, over a long period of time.
While no one knows what the future will hold, it is more likely that technology will continue to accelerate at a very rapid pace, permitting investors to access not just low-cost portfolios online, but also to engage in sophisticated financial planning, tax planning and estate planning.
Huge fund families like Fidelity, Schwab and Vanguard are already competing for retail business at fees significantly lower than those charged by independent advisors. They will likely lead the charge towards more sophisticated offerings. They already have the technology in place, and their resources dwarf those of the largest independent advisors.
Your marketing is mired in the past
Advisor marketing is typically a hodge-podge of uncoordinated activities. I’ve rarely seen a coherent marketing plan from an advisory firm. Your written communications are often text dense: too long and poorly designed (or not designed at all). Little effort is made to determine who reads them, and whether those that do find them helpful.
While late to the game, many advisors have ventured into video and podcasts. While some of these efforts are better than others, the bar is still low.
Advisors are reluctant to invest in professionally produced videos. How many times have you seen an advisor behind a desk, talking into a camera about an investing topic? These videos often are five minutes or more in length. I have trouble watching past the 30-second mark. There’s ample evidence I’m not alone.
There are also rules for producing an effective podcast. It takes time, effort, creativity and, above all, quality content.
Your prospect conversion process is ad hoc
Few firms have a standard process they follow when trying to convert a prospect into a client. Each advisor approaches this task in their own unique manner.
Those firms that have a process typically ignore the vast evidence on this subject, which I summarize in my book.
Embrace out-of-the-box thinking
Those who extoll the virtue of “caution” often do so to mask their lack of creativity. As advisors, you have ample opportunity for out-of-the-box thinking. Why isn’t there more of it?
Here are some examples:
One firm doesn’t just thank clients who refer new business. It holds a dinner at a fine restaurant at the end of the year and invites all clients who made a referral to attend. These dinners have become valuable networking and marketing events.
Some firms are very creative with events. Instead of holding them in a meeting room with a procession of talking heads extolling the merits of the firm, events have been held at museums, in vineyards and even at spas.
Finally, Wealthsimple, a Canadian based robo-advisor, recently announced a premium service, Wealthsimple Black. It’s geared to higher net worth clients. In addition to the usual offering, clients gain access to more than a thousand airline services around the world.
While I’m not endorsing the concept, no one can dispute the creativity behind it.