For many advisory firms, 2015 was a year of missed opportunities. According to
The InvestmentNews 2016 Financial Performance Study of Advisory Firms more than half (54%) of advisory firms missed their revenue growth goals for the year. This is reflected in the 8% growth rate experienced by study participants in 2015 – a sharp contrast to the 15% and 18% growth rate they enjoyed in 2014 and 2013, respectively.
No doubt, some of this slowdown can be blamed on market performance. But the study cast a light on an equally important shortcoming among firms: a disorganized approach to bringing on desirable new clients. The study found that many firms are reluctant to set growth goals – and, even if they do, they tend not to hold people accountable for meeting them. Further, most firms (62%) avoid tracking an investor's journey from lead, to prospect to client.
The study found that firms' average closing rate was 21%, or roughly one new client for every five original leads. On the surface, that doesn't seem too bad. However, there's a big question to consider: Were these the right leads to begin with? The closing rate doesn't matter much if the leads themselves are sub-optimal. The real value lies in increasing the number of optimal leads at the onset, and then sustaining a measurable, effective process to guide the right clients into the fold.
Here are three suggestions for pursuing this important goal:
1.Clarify Your Brand and Value Proposition
Ideally, anyone who encounters your firm's brand – whether through an ad, a web site, a conversation, or some other means – will have an adequate understanding of your value proposition. This means that both investors and your centers of influence will know whether you specialize in serving high-net-worth people, or business owners, or some other market. When you have a clear value proposition, and you communicate it consistently, you will tend to get more leads that fit the profile of an ideal future client. Simply make sure you have the right information out there, so that prospects can easily determine whether they might be a good fit for the firm. That way you can spend more time cultivating their interest in you, and less time trying to find them amidst a crowd of sub-optimal leads.
Guidebook: Developing a unique value proposition
2. Create a Simple Tracking System – and Use It
Advisory firm leaders often ask me to recommend an effective lead-tracking system from among those on the market. And my answer is always this: What is truly required is a process that everyone is committed to using. There are five clear steps for generating new business:
• Lead Generation
• Follow Up and Qualify the Lead
• Engage or Discovery of Needs
• Presentation/Mandate and
• Close/Convert
Your approach and sales culture will determine the overall experience, but it's critical to commit to specific actions for each step in the process. If someone shows interest, through any channel, what does your team do first? The response should be specific and time-bound for this preliminary step and for subsequent steps. Each action and result should be documented. As the saying goes, “what gets measured …gets done.”
There are two powerful advantages to this approach. First, prospects get a consistent experience: they have the opportunity to learn about your firm, and to share a picture of their needs with you. Second, your firm gets real data. You can look at what's generating leads – ads, centers of influence, social media, COI's, client referrals – how those leads are handled, and whether they ultimately blossom into desirable clients. You can thus choose to invest in the marketing strategies that yield real results.
3. Cultivate the 3 Rs: Responsibility, Recognition, Rewards
The study found that just 21% of firms set individual business development goals for their partners. If this sets the tone for a firm, then it can be very easy for marketing and sales efforts to drop down the list of priorities as client service and other needs take precedence. To keep business development on everyone's to-do lists, firms can cultivate 3 Rs. The first is Responsibility, which means that partners and other professionals agree to specific goals, with progress tracked throughout the year. As members of the firm bring in new clients, the second R – Recognition – comes into play. Few things are as emotionally powerful as publicly praising individuals who meet their targets, whether it's at a meeting or at a team lunch. Finally, make use of the third R – Rewards – so there is a direct financial (or equivalent) benefit for those who take business development seriously. A reward could be a bonus [Gift card? Paid vacation? Extra time off? Vacation days?]. Make it meaningful; people will pay attention.
Whether 2015's reduced growth rate becomes a trend or not, the firms that are most likely to succeed tomorrow are those that communicate a clear value proposition, guide prospects through a well-defined pathway, and measure and reward staff who bring desirable clients into the firm. The tools for this critical business effort are simple and widely available. It's time to leverage them.
Pershing provides a comprehensive array of practice management resources, programs and personalized support to help advisory firms manage and grow their business. You can engage with our consultants in multiple ways—receive guidance for implementing one of our advisor programs, attend a Pershing event or practice management forum, or online through our webcasts. You can learn more at pershing.com.
About the author
Gabriel Garcia is a Managing Director for Pershing Advisor Solutions, a BNY Mellon company, in the Relationship Management group. Mr. Garcia works with registered investment advisors (RIAs) interested in developing and growing their practices, helping them to manage business issues they face. He engages advisors to help them make informed decisions around maximizing Pershing's resources and evolving their firms to become more scalable, profitable and productive. Mr. Garcia spent his previous 15 years with Charles Schwab & Co., where he held several leadership positions in sales, training and consulting. The last six years were spent working directly with RIAs. Mr. Garcia has consulted with more than 100 firms ranging in AUM from $50M to $3B. He also is a frequent speaker at industry and national conferences. Mr. Garcia has 20 years of experience in financial services. Mr. Garcia earned a Bachelor of Science degree in Finance and Business Administration from Radford University.
