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A Contrarian View of Marketing

The simple truth is not all advisors need to market.

David J. Drucker, 10/19/2006

This January, join Dave in Miami Beach for the 2007 Technology Tools for Today Conference. Learn how today's latest technology can improve your practice.

The need to market your advisory services is self-evident, right? It would seem counterintuitive to suggest otherwise. Yet, industry observers treat the need to market as immutable when, in fact, it may not apply to all advisors.

Let's start by examining some marketing stats. According to recent research by Tiburon Strategic Advisors:

  • Approximately one third of independent reps have a written marketing plan in place.
  • 83% of advisors with annual revenues greater than $1 million have a written marketing plan in place.
  • Approximately 55% of new business comes from passive or proactive client referrals for all types of advisors (full-service brokers, independent reps, and fee-only advisors), yet over half of advisors do not ask clients for additional assets. Not surprisingly, those who do tend to do even better;

The thrust here is evident. If you want to grow your firm, you need a marketing plan. Does it follow, then, that if you want to keep your firm at a size that meets goals other than unfettered growth you should not have a marketing plan?

The assumption underlying every study and every piece of consulting advice we hear in the press is that growth is good. What's not talked about is how much growth? Most advisors don't want to grow indefinitely. Like most small service businesses, advisors start their firms as technical specialists (i.e., financial planners and/or investment advisors) and find out as they go along whether or not they have an aptitude for business. Those who don't fail to grow because they can't. And those who do aren't necessarily inclined to grow their firms beyond the point where the entity they create compromises the lifestyle they want for themselves and their families.

What I've just described is the vast majority of our industry. Consult the studies of any research group whose focus is financial services and you find that smaller firms (solo practitioners and two-principal firms with a handful of employees) comprise the bulk of our industry in spite of perennial predictions that we're in for an apocalypse-like consolidation in just a few years.

So for the average one- or two-principal firm with fewer than 10 employees, which has been around awhile, which knows the ropes, which has efficient operating systems, and, perhaps most important, which is meeting its owners' personal financial goals, what should its marketing plan look like? Or perhaps, more accurately, we should ask--in contradiction to all the one-size-fits-all advice we hear--whether any marketing plan is needed at all?

Martha Kapouch would say no. Kapouch, along with her son and her husband, run More for Less Financial Solutions in West Hartford, Conn., serving 80-plus investment management clients along with occasional planning-only clients. Celebrating her firm's 10th anniversary, Kapouch is happy with her firm and says that its greatest efficiency may just be that it doesn't have a marketing department.

"We also don't have a Web site and have never asked for a referral. All of our clients came to us through NAPFA inquires or unsolicited client or associate referrals," says Kapouch. Okay, her situation might be a little extreme. I mean, no Web site!?

Gerald Gasber of Gasber Financial Advisors in Gold River, Calif., maintains a site for his firm. He also holds an annual client appreciation dinner and sends out a client newsletter. Other than that, he can't market, he says, because 1) he couldn't handle the increase in new clients and 2) he doesn't see his referral rate subsiding anytime soon. Gasber has 110 clients and $65 million under management and makes a good living.

So, who really needs a marketing plan? The advisor new to the industry definitely needs one. The advisor seeking a dominant position in the industry certainly needs one. But how many advisors are there like Kapouch and Gasber who have worked hard and are now free to coast?

A lot I would say. That's not based on a scientific study, just on my many years in the industry being an advisor myself and observing and talking with other advisors. I've watched many hundreds, if not thousands, of advisors in my professional associations learn the ropes and go on to establish thriving firms. Should they feel bad that they do so little to market or that they don't even have a marketing plan?

Maybe all the hoopla around marketing is based on the fact that a large segment of the industry still doesn't do real financial planning. After all, it takes more work to attract clients to a process that just doesn't stand up to the competition.

Says Gasber of his 21st century change of business models: "About the time I transitioned from a commission-based to a fee-only business, I also began to emphasize financial planning as the primary service with investment management as an important, but secondary service. During all my commission-based years, I doubt that I received more than a couple of referrals. I started getting regular referrals every year when I started offering fee-based investment management. Since going fee-only, the rate of referrals has skyrocketed."

Maybe, when you offer what people really want, they'll simply find you without too much intervention on your part.

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