Prospecting is the best marketing

For most advisers, many of the most popular marketing strategies are a big waste of time.

The fact is, be it a pure RIA, a hybrid or an IBD rep, most firms consist of an adviser and one or two support staff, and little else.

While these firms can be quite profitable, the vast majority are not growing because they aren’t adding new clients. The only real reason most firms have experienced any growth (or any increase in profits) at all is because of the bull market. And when a correction finally occurs? That lack of organic growth, and the corresponding drop in revenue, will emerge painfully front and center.

However, one thing these firms do have going for them is that it doesn’t take a lot of new clients to dramatically impact the bottom line.

To be sure, the almost nonexistent organic growth for most firms isn’t due to a lack of trying. The principals of some smaller firms enthusiastically engage in marketing, but it typically does very little to bring in new clients. They’ll hire consultants to help with search engine optimization, or SEO. They’ll hire a PR firm to get some quotes in the paper. They may even run some traditional or digital advertisements.

These marketing tactics can work great if you have a huge budget like Fisher Investments, but they don’t work so well on a small budget.

It’s hard work, and sometimes a little painful, but if an adviser is serious about growing, the best approach is good old-fashioned prospecting.

Thirty years ago, when I started in this industry, the No. 1 method of prospecting was cold calling. But the fact is that most consumers these days have their phone numbers on the “do not call” list, so it’s next to impossible to reach them.

But just because cold calling is difficult doesn’t mean that effective prospecting is out of reach.

One of the best, and certainly the least expensive, prospecting approaches is to educate existing clients on the types of people you can help and then ask the client to provide an introduction. For some reason, many advisers find this intimidating. But the reality is, if your clients perceive what you do as valuable, they’ll believe that by referring their friends to you, they are doing them, and not you, the favor.

Make sure to make it easy for your clients to make referrals. For example, ask the client to send their friend an email introduction and include you.

Another strategy that works is to become a superuser on LinkedIn. You may need to pay for some additional tools, such as Sales Navigator, but it’s a great way to see if you and a prospect you want to meet have any connections. You simply contact your mutual connection and ask for an introduction to the prospect.

Prospecting is obviously more work than writing a check to a marketing agency, but for firms that are well under a billion, it’s probably the most cost-effective way to grow your AUM.

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Scott Hanson is co-founder of Allworth Financial, formerly Hanson McClain Advisors, a fee-based RIA with $8 billion in AUM.