Do you struggle to attract new clients other than from referrals? There may be a reason for that struggle—it is hard for prospects to choose you. That may sound insulting, but I don’t mean it to be. Let’s take a look at some basic realities prospects face.
Reality #1: Most Financial Advisors Make the Same Claims
All financial advisors claim they are good at the most important services a prospective client is looking for, including comprehensive financial planning and investment management. Even if your competition isn’t effective at these services, they also need to keep their businesses running, so they will say what it takes to get clients. The truth is, you can’t stop financial advisors from saying they do what you do, even if they don’t.
Reality #2: Prospects Aren’t Qualified to Evaluate Financial Advisors
Most prospects aren’t qualified to evaluate whether a financial advisor is good or not. Have they worked with dozens of financial advisors in the past to know the difference? You hope not because that kind of track record means they will probably be a terrible client. Unless the prospect is in a field that requires them to interact with a lot of financial advisors—for example, CPAs—this is probably the first or second time they’ve had to evaluate and hire a financial advisor, meaning they don’t have the skills to do so.
Reality #3: Prospects Have Too Many Similar Choices
To a prospect, most independent financial advisors look the same. They all offer the same basic services (financial planning, investment management, retirement planning, etc.), work with the same typical client (high net worth, probably nearing retirement), for the same similar price (1% of AUM +/-).
They have so many similar options and don’t know how to make the right choice. They become so overwhelmed, they don’t make any decision in fear of making the wrong one, or they choose an advisor based on some factor other than being the most qualified (see reality #4).
Reality #4: When Prospects Can’t Evaluate Qualification, They Use Other Factors
When a prospect can’t evaluate you based on qualification (because how do they know if you are more qualified than the dozens or even hundreds of other advisors in their area?), they will resort to other factors. These factors include (1) the lowest price; (2) whether they like you more than the other advisors they meet with; (3) someone they know recommends you (this person is probably also not qualified to evaluate financial advisors); (4) they like your marketing the best; or (5) they choose an established (probably national) brand they think is a safe choice.
Again, It’s Hard for Prospects to Choose You
If you wonder why it is hard to get new clients, it is because it is hard for them to choose you. You must compete on factors that have nothing to do with how qualified you are or the services you provide.
Do you want to offer the lowest price? Probably not. Are you more likable than all the other advisors your prospect interviews? Who knows? Do you have the largest network in town of people who can refer business to you? Unlikely. Are you the best marketer in your area? My guess is definitely not! And do you have a well-known brand name with decades of history behind you? Not if you are a small, independent RIA.
Sure, you can try to compete on being independent, fee-only, or a fiduciary if those are still differentiating factors in your community (most places, they are not). Today, most advisors claim they put their clients’ interests first, which goes back to reality #1. And from most prospects’ point of view, those factors equate to minuscule differences anyway.
Compete on Qualification Instead
So how do you compete? You can lower your price, work on being more likable, expand your network, or spend more money to have the best marketing. Or you can change the playing field completely and compete for clients based on qualification. After all, most prospects would prefer to choose the advisor they knew is most qualified instead of just going off gut instinct.
How do you compete on qualification? The easiest answer is to specialize in a niche, a narrow segment of clients you serve exclusively.
When you work exclusively with a niche, such as business owners selling their business or employees with pension plans at the local utility company, it’s easier to make the claim you are the most qualified among a prospect’s choices.
When all you do every day is work with a niche, it’s logical for a prospect to assume you are more qualified to handle their niche-specific problems than a generalist firm would be. How could you not be?
The services a niche needs may not even be that different from what most people of similar wealth and income levels need. But when you point out their differences and how they need a specialist, they will evaluate all other advisors based on their level of experience in working with people like them.
The key is to narrow in on a niche where few companies can make the same claim as you. For example, many firms claim they work with business owners, so you can say you work with business owners who own agricultural businesses. You position yourself as an expert in the specific issues that ranch and farm owners face.
Marketing Doesn’t Have to Be Hard
Marketing is hard when you have a business in an industry where prospects can’t tell the difference between you and the competition. The solution is not to differentiate your firm in some minor way that prospects won’t even notice. The answer is to design your firm so that prospects can’t even compare you to other firms. There just aren’t other firms like you that exist. That’s when you have no competition!
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.