Time to ‘freshen up’ your marketing? Make sure you appeal to Gen Xers!

2015 might normally have been deemed a year of respectable progress for advisory firms. After all, firms achieved an average revenue growth rate of 8%, according to the InvestmentNews 2016 Financial Performance Study of Advisory Firms. Yet, as we know, this growth rate represented a major decline from the 15% growth rate achieved in 2014, and the 18% growth rate of the previous year.

Although one year’s lackluster result might not signal a trend, this might be a good time for firms to “freshen up” their marketing efforts – much as someone might add a few new pieces to his or her wardrobe to spruce up their classic outfits.

One aspect of this refresh might be to expand where firms target new prospects. The study shows that of all new clients acquired by advisory firms, only 16% had been working with a bank or wirehouse, and 10% had been served by independent advisory firms. The vast majority of new clients – 74% – were previously self-directed investors. These investors represent the proverbial “low-hanging fruit” in the industry: people who have never worked with a professional advisor. As a consequence, continuing to attract mostly self-directed investors as new clients may bring additional growth declines, as this market sector may have become over-ripe. New wealth only grows at the rate of the economy, and we’ve seen just 2.5% GDP growth in the past couple of years, a trend that’s predicted to continue.

Marketing Malaise?

The InvestmentNews study found that, on average, firms invest only about 1.8% of gross revenue on marketing and business development. Most often, business development activity tends toward the traditional: having partners serve on nonprofit boards, holding networking events, or engaging in community initiatives. In fairness, there is a spark of modernity, with firms trying to reach prospects through email campaigns (34%), blogging (27%) and social media (45%). Yet, many aren’t quite sold on digital engagement – 48% of firms report only slight success with using social media, and another 13% said they’re not being successful at all. More generally, the study found no marketing methods that consistently earned a score of “extremely successful” or “very successful” from the firms that used them.

What’s driving this general sense of disappointment? One obvious factor is that firms have to really invest if they want to freshen up their brands to attract a new demographic and adopt new channels. Persistence in both tried-and-true approaches and new digital and social strategies is important. Which means, quite simply, that investing just 1.8% of gross revenue in marketing isn’t enough. With another record year in revenue and profits, firms should be investing 3% of revenues in their future success, on a recurring basis. Firms that communicate their brands the most clearly, target a new generation of clients, and expand their target channels beyond self-directed investors will be the ones most likely to achieve the growth rates they desire.

X Marks the Spot

Another reason for firms’ lackluster marketing results is that they often view target clients in a binary fashion, as either Boomers or Millennials. On the Boomer side, firms are attracted to the relatively large assets such clients possess. Yet, competition for these clients is fierce, even though this generation is moving into the distribution phase, and declining in numbers. On the Millennial side, firms are playing the long game – trying to engage with a generation that is surpassing the Boomers in sheer numbers, even though their individual assets are still small by comparison.

Why aren’t firms going after the lost ones, the middle children – the forlorn and forgotten Generation X? (Yes, you’ve guessed it – that’s my generation). The number of Generation Xers (those between the ages of 35 and 50 in 2015) will surpass the number of Boomers by 2028, according to U.S. Census Bureau projections. And while Millennials will remain an important demographic, the overlooked Gen-Xers may actually be a more lucrative and receptive target for the near future.

Case in point: In the aggregate, the members of Generation X have more than seven times the investable assets of Millennials, according to Pershing-sponsored research performed by Cerulli in 2015. This same research indicates that individual members of Generation X also have average investable assets that are more than four times those of their Millennial counterparts.

In shaping your Gen-X marketing strategy, take advantage of the techniques you use to reach Millennials and Boomers. Gen-Xers grew up during the digital revolution, so they’re likely to welcome your earnest attempts to engage them through emerging platforms. At the same time, they will appreciate the traditional marketing methods that created today’s successful business model, because they spent much of their lives in the world where the Internet existed only in Popular Science magazine.
Let’s Get With It

There is no reason why the 2015 growth rate reported in the InvestmentNews study has to presage a downward trend. Every firm has the opportunity to set growth targets, and to engage every person and professional resource necessary to achieve those targets. By creating a multifaceted, well-funded business development strategy, firms can more aptly attract the clients they want and achieve the positive trajectory they deserve. And, if they focus like a laser on a specific group, such as Generation Xers, so much the better.

Pershing provides a comprehensive array of practice management resources, programs and personalized support to help advisory firms manage and grow their business. You can engage with our consultants in multiple ways—receive guidance for implementing one of our advisor programs, attend a Pershing event or practice management forum, or take part online through our webcasts. You can learn more at pershing.com.

About the author

Gabriel Garcia is a Managing Director for Pershing Advisor Solutions, a BNY Mellon company, in the Relationship Management group. Mr. Garcia works with registered investment advisors (RIAs) interested in developing and growing their practices, helping them to manage business issues they face. He engages advisors to help them make informed decisions around maximizing Pershing’s resources and evolving their firms to become more scalable, profitable and productive. Mr. Garcia spent his previous 15 years with Charles Schwab & Co., where he held several leadership positions in sales, training and consulting. The last six years at Pershing have been spent working directly with RIAs and leading the relationship management and consulting team. Mr. Garcia has consulted with more than 100 firms ranging in AUM from $50M to $3B. He also is a frequent speaker at industry and national conferences. Mr. Garcia has 20 years of experience in financial services. Mr. Garcia earned a Bachelor of Science degree in Finance and Business Administration from Radford University.

Related Topics: Gen X, Marketing Strategies