FA Magazine May 2023 | Page 18

When prospects do show up to a meeting , 78 % of them become clients . This is a very high rate of success !
is often code for no training at all .
We want to refute three common business development misconceptions here .
Closing Skills Versus Lead Generation
When we talk with firm founders about business development training , they inevitably talk about their “ closing skills ”— how they persuade prospects to become clients . Closing includes concepts such as overcoming objections , removing obstacles and negotiating . Our data , however , would suggest that G2s have a different problem : lead generation , or finding consumers who want to talk to them in the first place .
According to the 2019 survey , advisory firms close only about 17 % of the leads they generate . Fifty-seven percent of firms don ’ t even track those leads , so they aren ’ t sure what their success rate is in converting prospects into clientele . In fact , 40 % of the leads never even follow up by calling or coming to a meeting .
On the other hand , when prospects do show up to a meeting , 78 % of them become clients . This is a very high rate of success ! And here is the biggest surprise — in those few cases where we can track the closing ratios of founders versus younger advisors , there is no material difference . G2 can close .
This means the founders ’ advantage is not in closing but in their ability to generate leads in the first place — especially among prospects willing to engage and follow up . Apparently , once a prospect comes to an exploration meeting , they are yours to lose . This makes sense . In a 2021 survey of 1,000 high-income consumers we conducted , nearly a third said they considered only one firm when they hired their advisor . Another third of the clients met with two firms . That means closing skills aren ’ t paramount . Lead generation is .
Marketing As An Investment
Another problem is that advisory founders often see marketing as an expense , not an investment .
The fastest growing firms we work with have one thing in common — they tend to systematically generate “ institutional ” leads , which means clients are attracted to the firm , not a person . And for firms to build their reputations , they require a heavy investment in marketing that few of them are willing to make . Overall , firms spend just 1.6 % of their revenue on marketing . Larger firms spend a bit more — a breathtaking 1.7 %, according to the Ensemble Practice ’ s “ 2022 Financial Performance Survey .”
This survey suggests that about half of a firm ’ s marketing budget is spent on the marketing staff , which is frequently a single person . The rest of the budget is spent on client appreciation ( which takes up roughly 25 %) and client events ( which use 15 %). Sponsorships and charity are also popular uses of marketing funds . Interestingly , only 6 % of the budget goes to content development and publishing or other types of outreach .
If a firm lacks a strategy for brand building , the only reputations that emerge from the firm are those created by the individuals networking for it . That ’ s an effective but very slow process . Reputations tend to grow slowly , and it ’ s only later in someone ’ s career that their name more quickly gets around . That ’ s why founders love networking ( it ’ s very effective when everyone knows who you are ) and why younger professionals hate it ( you get only cold shoulders when nobody knows your name ).
Philip has witnessed this firsthand . Twenty years ago , if he ever generated a lead it was because of the reputation of his firm , Moss Adams . Today he can more easily knock on a door with his own business cards , but back then he actually had to introduce himself by saying , “ Hi ! I am with Moss Adams . … By the way , my name is Philip .” To build a firm brand , you need consistent marketing investment . As they say in Bulgaria , “ You can ’ t fish without bait !”
Asking For Leads Instead Of Generating Them
Most founders say their G2 advisors should be asking for referrals . Our research suggests younger advisors would rather be digging ditches with a fork and knife .
In our 2021 consumer survey ( which was called “ How Consumers Choose ”) we found that only 12 % of all advisory referrals were generated by the advisor asking the ( embarrassing ) question , “ Do you know anyone we should work with ?”
There are very strong opinions on this topic . A generation of advisors has been taught to ask for referrals and include those requests in their email signatures . But we are skeptical of this approach .
Relationships are like bank accounts , with deposits and withdrawals . You get a “ deposit ” if you offer people great service , consistency and unexpected instances of staff going “ above and beyond .” The balance is built over the years . But when you “ ask ” for referral , you ’ ll experience a very large withdrawal ( and if your balance is low , you will go into overdraft ). Very experienced advisors , including firm founders , may have a high enough balance to withstand it , but young advisors do not yet .
These misconceptions about prospecting led the consultant Stephen Wershing to write an excellent book called Stop Asking for Referrals . Julie Littlechild , a well-