A recent SEI survey of more than 200 independent financial advisors revealed that cutting expenses – especially by reducing staff – is a last resort for many advisors as they attempt to restore firm profitability. According to the SEI Advisor Network Quick Poll “How Are You Restoring Firm’s Revenue,” only 14.9% of respondents cited expense reduction as their primary strategy for restoring revenue, while only 1% said they are reducing staff.
Instead, advisors are focused on building business through client acquisition efforts, primarily driven by referrals and developing new alliances with centers of influence. Over half of the poll respondents (51.6%) ranked new client acquisition as their number one strategy for restoring revenues. Additionally, 23.6% said establishing formal center of influence relationships was their primary strategy.
The poll also gathered insights specifically related to client acquisition techniques. When asked what new business development strategies or tactics advisors were using for the first time or had only used minimally before, 43.9% stated they were specifically asking clients for referrals. Only a small percentage said they were exploring traditional advertising (5.3%) or direct marketing (10.7%) to increase client acquisition.
In analyzing client acquisition success, 37.2% of advisors attributed the success of new client acquisition to service-related issues with their previous advisor. In addition, 18.6% felt that the primary reason their prospects became clients was because they had decided they no longer wanted to manage their investments themselves.
“The current environment has forced us to devote more energy to proactively growing our business,” says Rich Donnelley, president of Donnelley Wealth Advisors, Inc., San Diego, California. “Now’s the time to explore unconventional methods, as well as to consider the strategies and tactics we always thought we should be using, but haven’t had the time or need to focus on in the past.”
“You’ve got to be assertive to grow in this climate,” says Keith Heichel, CFP of Pinnacle Wealth Planning Services, Mansfield, Ohio. “You can’t assume your existing clients will automatically refer you new business without asking, however clients have been more than willing when I’ve approached them. Those years of making service a priority have definitely paid off.”
“Given the service-related issues some advisors are facing, they still need to consider how efficient business management can reduce expenses without reducing capacity,” says Stephen Onofrio, senior managing director, SEI Advisor Network. “Focusing on growth is still the most critical concern, but having a client acquisition ‘process’ that integrates an advisor’s front office with their back office is also key.”
L.D.