Imagine you’re on a long flight. Suddenly the captain announces the plane has run out of fuel. All the passengers freak out, except for the man sitting next to you who just keeps watching his movie. You yell, “How can you stay so calm?” He shrugs and says, “The flight’s been fine so far.”
A lot of advisor businesses have been flying high on referrals for so long that they have forgotten to check whether their major engine of growth is still working. Now, new research from my firm suggests that with shifting generational preferences the referral machine is sputtering out and advisors who choose to complement referrals with digital marketing strategies are the ones who will manage to stay in flight.
The study, published in July, surveyed a sample of 1,107 consumers as part of a larger study of consumer trends. Only those who hired a financial advisor contributed to our conclusions. Here are the most eye-opening findings:
Digital marketing beats referrals—soundly. More of today’s consumers decide to hire a financial advisor based on marketing efforts than on referrals. In fact, the number of consumers who hire advisors based solely on referrals is now just 29%. This finding blows conventional wisdom out of the water. It shows how rapidly digital marketing has replaced referrals in finance, just as it has come to dominate consumer purchasing in every other sector.
The exception is consumers over 60—60% will hire an advisor only on referral. This sheds light on why the wealth industry has been slow to recognize this change. Referrals are way more important to prospects over 60, a demographic that is bread and butter for firms who rely on last-minute shoppers—people on the threshold of retirement who suddenly realize they need a plan. With the last of the baby boomers turning 60 this year, and only half as many in the 45 to 60 age group requiring referrals, this changes everything.
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Effective digital strategies are multifaceted. To capture the maximum number of new clients who don’t require referrals, you need a multifaceted digital strategy delivering a minimum of two to five, or more, interactions with your target across channels. According to our research, over 64% of the marketing strategy must be focused on digital engagement to be effective.
I see firms giving up on digital far too quickly because their inbox isn’t overflowing with qualified inquiries after a month. Digital doesn’t work that way—it builds over time. A prospect reads your article on LinkedIn, decides your social media presence makes your team look approachable, watches a recording of a client webinar you posted on YouTube, checks a Google review, and finally fills out a form on your website. In between, they may see you at a live event or talk to people in your professional network. It takes many touchpoints to convert, which is why you need a well thought out and consistently executed digital strategy to win.
There is no one-size-fits-all digital solution. Although our study found that 64% of consumers hired financial advisors through digital marketing interactions, there was no consensus in the survey data about which marketing tactics worked best—and I wouldn’t expect there to be. When businesses first dip into digital marketing, they want to know all about industry standard metrics and best practices. But a successful marketing plan isn’t copied from other firms. It’s built from the inside out, consistently tested, and constantly refined.
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Digital marketing engines are built from the ground up. Digital marketing starts at the core of your business: your vision, your values, your ideal target, your story, your purpose—everything that makes you unique. Learn to reorient your business away from its dependence on referrals and rainmakers and elevate every employee to a front line role in generating growth. Then support them with the marketing, coaching, and the accountability tools they need. Finally, you’ll be ready to worry about specific digital tactics, because you’ll know yourself and your clients well enough to create engaging and compelling interactions.
If you’re reliant on referrals, now is the time to build a new growth engine. The good news is our study shows digital marketing really can fuel your business to the next generation, and even accelerate your growth.
Megan Carpenter is the co-founder and CEO of Ficomm Partners. Based in Southern California, Ficomm is a consulting firm for RIAs and wealth management platforms that want to better leverage marketing as a key driver of organic growth.
