For most financial advisors, marketing is hard. It’s either not in your skill set or not something that interests you. As a result, you may ignore active marketing tactics and rely on referrals to passively roll in. That marketing strategy can work if you charge your fees based on a percentage of assets under management and the stock market continues to grow by double digits each year.
But are you ready for when marketing gets harder?
Recently, I’m seeing more complacency from financial advisors when it comes to marketing. One reason is that revenue is skyrocketing based on stock market performance alone. Financial advisors lack a sense of urgency to actively seek out new clients when revenue continues to grow on its own. A second reason is that some firms face staffing shortages and don’t have the time to dedicate to marketing.
During good financial times like these, I tell firms they should invest in their marketing to prepare for the next economic downturn. A downturn creates a lot of opportunity to pick up new clients because it is one of the rare times when the entire population faces a “money in motion” event at once.
It is also a time when advisor revenue suddenly shrinks due to lower AUM fees, and firms become anxious about replacing that revenue with new clients as quickly as possible. To be prepared for, and take advantage of, downtimes, you need to execute a marketing strategy consistently—and that means before the market drops.
While you should invest in your marketing in preparation for a downturn, you should also do it for another reason. Marketing will only get harder, and those who don’t take marketing seriously now will feel the effects the most. Let’s look at three reasons why marketing will get harder.
1. The Next Generation of Investors Is Relying Less on Financial Advisors
According to a recent Wall Street Journal article, “About 70% of households with a net worth of $500,000 or more headed by a person under 45 had an investing style that was either strongly or mostly self-directed in 2019, up from 57% in 2010.”
Anecdotally, I have seen this trend play out with some of the firms I work with that market to this demographic. Younger investors are interested in paying for one-time advice but want to manage their investments on their own and balk at paying AUM fees.
There is still a huge market of baby boomers who value delegating their finances to a financial advisor and are willing to pay AUM fees. But will this continue 10 or 20 years from now? Or will Gen Xers and millennials look to pay their financial advisors like they do their attorneys and accountants—on an hourly or project basis?
If this happens, advisors will have to attract a larger volume of clients each year than they currently do to maintain revenue. If it doesn’t happen, it is still possible there will be a smaller pool of investors willing to pay AUM fees that all firms will compete for. In either scenario, financial advisors will have to be better marketers than they are today.
2. Marketing Tactics Are Getting More Complex
Not worried about the longevity of the AUM model? There are other ways marketing is getting harder. Namely, marketing tactics are becoming more complex. When I started my marketing career in this industry 16 years ago, the RIA I worked for had a weekly radio show, hosted two weekly public workshops at a local restaurant, and did the occasional client appreciation event. It was a simple system that produced dozens of prospects weekly.
Not only are those tried-and-true methods saturated, but you now have so many other channels to master as well. To market your business today, you need to be an expert in search engine optimization, Google ads, social media, video marketing, webinars, podcasts, and marketing automation systems, just to name a few. And the bad news is, these channels are quickly getting saturated as well, so it is hard to stand out. The complexity of marketing will only speed up as artificial intelligence plays a bigger role in our everyday lives.
It’s hard for career marketers to keep up with all the trends and changes in their field. How are you supposed to compete when it’s your job to service clients, not be a marketing expert?
3. It’s Harder to Differentiate
Finally, it’s getting harder for firms to differentiate themselves from the competition. For a while, fee-only RIAs stood out to prospects because they were “independent” or “fiduciary.” Today, so many firms fall into these categories that they’re not differentiators in most geographic areas. Offering “comprehensive financial planning” used to be a differentiator too, but most financial advisors now claim to provide this service even if they don’t. To a prospect, most financial advisors look and sound the same, so to stand out, you have to be the better marketer.
What Can Be Done?
You might feel overwhelmed by the fact that marketing is going to get harder than it already is. But what can you do about it?
My first recommendation is to make your marketing a priority. Financial advisors have many different marketing approaches they can use, but the key is to implement your marketing consistently. Don’t let it slip when you get busy. When you execute your marketing in fits and starts, you may not be able to restart it quickly when you need clients again. You will be well-served to hire a consultant who can help you with the big-picture strategy before you start trying ad hoc tactics and technology.
My second recommendation is to carve out a niche for yourself. By specializing in solving the financial problems of a narrow set of clients, your marketing becomes more focused and effective. You have fewer competitors, you connect better with ideal clients, and you clearly stand out from other advisors. In other words, in a world where marketing is getting harder, your marketing gets easier.
About Kristen Luke
Kristen Luke is the President of Kaleido Creative Studio, a marketing agency specializing in helping RIAs promote their businesses to a niche through an expertise approach. Over the past 15 years, Kristen has consulted with hundreds of financial advisory firms and shared her marketing expertise via industry conferences and publications nationwide.