Advisors may not know how to
market, but they are not alone.

    Over the last 24 years as a financial writer, I've worked with hundreds of advisors to try to communicate in writing about money management and complex financial ideas. The vast majority of my interactions with advisors have been intellectually rich and professionally rewarding. I love interviewing money managers, writing about financial planning and explaining in plain language Byzantine creations like intentionally defective grantor trusts.
    Covering some stories as a reporter has been pretty intense, however, like interviewing Michael Milken before he was sentenced to jail, covering Donald Trump when his empire was teetering, and enduring an attack on my character from a national custodian after my coverage of its advisor technology offerings. And then there was the time that my direct questions rubbed a mutual fund manager the wrong way and he threatened to throw me out of his office window from very high up in a skyscraper.
    But in all my years of covering financial matters, nothing has been more frustrating than trying to write marketing copy for advisors. Your business is your baby. If someone wrote a story about one of your kids, you would have strong opinions about it and want it to come out exactly right. Something so personal as your business is bound to be tough to write about.
    Again and again, the problem that comes up is that advisors often have no idea what attributes of their firms to market. You think you are picking mutual funds when, in fact, your clients think you are saving them time. You think you are providing financial plans when in reality you are providing peace of mind. In addition, most advisory firms can't tell you what they're doing that is different from what other advisory firms do, much less identify what's unique about their firm. So when a writer calls and asks how you help people, the answers usually fail to explain your competitive advantages.
    There are other issues that drive me crazy. For instance, an advisor begging the copywriter, "please just make my marketing copy sound like everyone else's. I don't want to sound different." (Honest, I have had advisors tell me this.) But the main issue is that advisors don't know how to differentiate their businesses from other firms or even that it is good to differentiate what you do from the rest of the pack. Which brings me to Jaynie L. Smith, president of Smart Advantage Inc. in Hollywood, Fla.
    I came across Jaynie's book, Creating Competitive Advantage (Doubleday, 2006), which she coauthored with William G. Flanagan, in an airport bookstore and got some great ideas from the book about how advisors can market more effectively. Here's what she told me when we spoke in mid-December.
    GLUCK: Wirehouses are encroaching on a key marketing differentiator for independent advisors. The Wall Street giants see that investors now demand independent, unbiased advice and are making an active effort to be able to market themselves as providing independent advice. For instance, Merrill Lynch's mutual fund arm was acquired a year ago by BlackRock Inc. Since Merrill owns 45% of BlackRock, it can bury in a prospectus that Merrill is selling funds in a related entity. That's much better than selling proprietary products. Till now, advisors could say, "We are the only source of independent, unbiased financial advice." Now, wirehouses are saying they can deliver independent advice. How do independent advisors market against that?
    SMITH: In any industry, when you are the only one doing something, your marketing materials should say, "We are the only firm that ..." or "We are one of the only firms doing this." If the Wall Street brokerages copy your model, then you can say, "We were the first to offer ..." So now you go to a timeline and say, "We have been offering financial services without selling in-house products for more than ten years."
Saying you've been doing something like this for ten years and telling people that these other firms can only say they have been doing it for six months is a competitive advantage. "This has been our practice. It's who we are and these other firms can't say they've been doing it for ten years because they just started it." That's an oversimplification, but independent advisors should emphasize that, while other wirehouses just began practicing this way, they have been doing it for many years.
    GLUCK: So when you get copied and can no longer say that you're the only one doing something, you should say, "We were the first." Does being first matter?
    SMITH: Well, not alone. But it does with a few other bullet points. Let's cover some of the other items and you'll see what I mean.
    GLUCK: OK, let's talk about price. In your book, you say that marketing on price is a mistake. For independent advisors, marketing on price can be good because they often offer their services at lower cost than competitors.
    SMITH: Most businesses, when they market on price, end up commoditizing themselves. You leapfrog your competitors to the bottom of the margin ladder, and you won't exist anymore. It's a dangerous differentiator because we can always continue to lower our price. It doesn't sell value.
We have a culture in the United States of letting price be the differentiator because we have been trained to buy on price and we have trained our customers to buy on price. Why? Because very few companies know how to clearly articulate competitive advantages. They don't know how to identify them within their own organization. And, when they do identify them, they do a poor or mediocre job of communicating them.
    GLUCK: While I understand that it's bad to market on price, there are some advisors who limit expenses by using index funds and ETFs. Is that marketing on price?
    SMITH: That's different, and it's OK. That's low cost. If you're saving your client time and money, be very specific about how much time and money you are saving them. You may even want to do a financial analysis of ETFs and index funds versus other types of portfolios. Extrapolate the average expenses for a typical actively managed portfolio and show that versus a low-cost portfolio. If you can say, we save clients 25% or 50% over what they would pay going to another advisory firm, that's good. When a customer understands exactly what they are buying, then price is not an issue. But when we are out there all saying the same thing, what I call the "blah, blah, blah" list, then you're hiding your competitive advantages.
    GLUCK: That's a great idea, provided it is vetted by your compliance officer. But let's push on. Please explain your blah, blah, blah list.
    SMITH: I've asked about 2,500 CEOs the following question: "What's your number one competitive advantage?" It's a simple question-why should I buy from you? Only five have given me the right answer. That's five out of 2,500! If your sales people or service people cannot answer the  "Why us?" question, then the next question from the people interested in buying your product or service can only be, "What's your price?" The notion of marketing based on your competitive advantages is a completely lost discipline, and I know that because I've asked 2,500 CEOs.
The answers I've gotten are what I call the blah, blah, blah list. Those are the answers I get again and again and again. Five days ago, I was in Memphis talking to a CEO group. I had 30 CEOs in the room. I asked the question, "Why should I buy from you?" It always staggers me, but I always get the same blah, blah, blah list.
GLUCK: What are those answers on the blah, blah, blah list?
    SMITH: Good customer service, good quality, good reputation, good results, good employees, knowledgeable staff.
    GLUCK: And you're saying that's not a good answer because everybody has that? You're saying those are vacuous statements, right?
    SMITH: That's right, and that's how people are trying to sell. With those kinds of answers, the only thing left for a buyer to ask is, "OK, that's what everyone else says, so what's your price?" If I am looking for a reason to buy from you and those are your answers, you haven't given me any reason to buy from you.
    Coincidentally, I personally had a financial advisor visit my office two weeks ago from one of the big firms, trying to sell me his services. It was a young man and he was bright. When I asked him, "Why should I use your services?" he kept telling me it was because he built relationships. I wanted to gag. Who doesn't build relationships in selling anything, for heaven's sake? A few months ago, I had a similar experience over the phone with a broker from another large firm. The salesperson basically asked me to turn my portfolio over to him. I let him do his sales pitch, and I'm sitting there yawning all the way through it. After about ten or 15 minutes, I flat out said, "Thank you very much, but I've waited 15 minutes to hear one reason why I should use your firm. You aren't telling me anything that every single financial advisor isn't telling me."
    GLUCK: When I've interviewed advisors to write their marketing copy and asked them what's different about what they do, I've actually had some of them say to me, "Nothing. I'm just like the next guy." What do you make of that?
    SMITH: That's sad. I had a similar experience in buying a car. I went to five car dealers and asked each, "Why should I buy this car? What's so different about your car?" Not one could tell me anything unique about the features of their cars. I told them that I drive a Volvo and asked for their safety ratings. They weren't able to tell me their advantages.
    GLUCK: Right. But what happens when you have an independent advisor who says that he or she is no different from other advisors? I've come across advisors who say, "I'm selling mutual funds and so is the rest of the advisor world. I'm no different."
    SMITH: They're waving the white flag and shouldn't be in business. If you don't have something that differentiates you, then you should go do something where you can differentiate yourself.
    GLUCK: Do you think it's simply that advisors are so busy with the day-to-day running of their businesses that they lose sight of what's different about themselves?
    SMITH: Unless you slice and dice what you do until you get it real clear in your own mind, your competitive advantages will not be readily apparent. I worked not too long ago with a small financial services firm that mostly sold insurance products. We researched what their customers wanted, and found that their customers wanted accuracy on quotes, and they wanted phone calls returned within an hour. As small as it was, the company began measuring how quickly staff returned calls. They began bending over backwards to make sure they returned all calls within an hour.
Instead of telling clients and prospects that, "We have good response time," the company now markets by saying, "We return 100% of our calls within an hour." My point is that it's that simple. Your competitive advantage may not be a true differentiator. But if you make that kind of statement it's competitive positioning. It gives you the illusion of having a competitive advantage. If you have one thing that people want-maybe you return phone calls quickly, maybe you allow them to have more control over their portfolios, maybe you provide more education about what you do-that's a competitive advantage.
    GLUCK: Funny you should say mention education as a competitive advantage. A lot of financial advisors are told to market in exactly the opposite way. They're told that clients don't want to be educated about personal finance. One school of thought among advisors that the way to market is by telling prospects and clients that you will do everything for them, and that they don't need to know about estate planning or taxation.
SMITH: I don't know if that make sense. Presumably, advisors are often working with entrepreneurs who own their own business. These tend to be high-control people. I'm like that. It's difficult for high-control people to turn our portfolios over to somebody we hardly know. High-control people want to be educated. They may not want to spend a lot of time on it, and just want you to give the quick and dirty. But that's just my take on it. To really know whether educating clients is a competitive advantage, you have to ask your clients and prospects.
    GLUCK: Your book says that there's often a dangerous disparity between what you think clients value and what they do, in fact, value. Explain that.
    SMITH: Small businesses often don't know what's most important to their clients. Truth is, it doesn't matter what I think is a competitive advantage or what the business owner thinks. What matters is what the clients think. The dangerous disparity is that you're out there selling A, B and C, you're out there telling people that you build relationships and to trust you, and they don't care about any of that. Your clients may value education and responsiveness, but you may not be talking about those things with prospects. Most businesses are out there selling A, B and C when customers are really interested in D, E and F. If we do the market research and we find out that D, E and F are important and start selling based on D, E and F, then we're going to close more sales. To know what your clients want and value, you have got to get independent research findings. What's so interesting is that business owners often don't know what they're clients think are their competitive advantages.
    GLUCK: So there's a disconnect?
    SMITH: A huge disconnect.
    GLUCK: So for a financial advisory firm to know its competitive advantage, it's going to start with asking its clients.
    SMITH: It absolutely starts with doing your market research, outside market research that's unbiased-not you doing it yourself.
    GLUCK: You can do client surveys or maybe focus groups? Right?
    SMITH: Focus groups are qualitative, not quantitative, and that does not work for the kind of information you need. Customer surveys are not easy to do correctly. If you don't know how to formulate the questions correctly-market research professionals go to school to learn this skill-you may not get the right information. When a company asks what's important to clients, price comes up first or second. When a market research firm asks the same question, price comes up fifth, sixth or seventh. That's because your clients may not tell the truth exactly in answering your survey. They're negotiating, so price comes back as being more important. You need to know how to write surveys to do this.
    GLUCK: How could independent advisors do this research?
    SMITH: I've designed a questionnaire to test 15 deliverables for any kind of company, whether it's financial services or manufacturing. We edit according to the industry. Then, we hand it off to a market research firm to call your clients.
    GLUCK: Advisors may not be able to give their clients' names out to an independent research firm because of privacy rules.
    SMITH: Then they could buy a list of high-net-worth individuals and call those people.
    GLUCK: It's done with a phone survey?
    SMITH: The research is done with telephone interviews. The research company makes the calls blind, meaning the individuals have no idea who's asking the questions, and that's what you want. That's how you get unbiased information.
    GLUCK: How many calls have to be made?
    SMITH: You probably need to collect completed surveys from 50 clients or other high-net-worth individuals for it to be valid statistically. You may need to make 1,000 phone calls to get that number of responses.  
    GLUCK: What do you ask about?
    SMITH: For an advisory firm, the attributes you want to ask about are things like quarterly meetings or reports, performance and returns, education and seminars, and response time.
    GLUCK: What's the cost of doing something like this?
    SMITH: The research firm is likely to charge about $5,000 or $6,000. But you could call the local university and see if a marketing student would like to make it a research project, and then it could be done for little or nothing. A graduate student would be best. You find out the hierarchy of buying criteria in a high-net-worth person's decision in hiring an advisory firm. You find out the things that are most important to your target market and match that against what your firm can deliver. If the research shows that one of the most important deliverables for an advisory firm is education but your firm is not good at that, then you go to the next attribute. You match your strengths with those attributes cited in the research, and those become your competitive advantages.
    GLUCK: Give me an example of how this works when you do it.
    SMITH: I can give you an example of an advisory firm I worked with several years ago. The firm had fallen into the blah, blah, blah marketing slump. We pulled all the partners and staff together and I led a full-day, competitive advantage drill-down. I asked them questions about their deliverables, such as, "If I buy financial services, what am I really buying? Besides investment results, what else am I buying?" I compiled a list of all their deliverables, everything I might get in an interaction with the firm.
    GLUCK: But then you need to implement that information. Right?
Then I helped the firm identify key statements it can make about the deliverables, with an eye toward finding measurable, factual items. In financial services, it's important to build confidence in the buying decision by removing risk. When you do that, you minimize price as an issue. These statements are a way of minimizing the risk of a buying decision. This firm was the fastest-growing money manager on one of the custodial platforms for three years in a row. The firm also had beaten the Standard & Poor's 500 for three years in a row. It was featured by the custodian, a nationally known firm, in its newsletter for advisors, and the CEO, he was elected to the custodian's advisory board-one of only ten members on that advisory board. Those were all nice differentiators, and not everyone could make those factual statements. Then, when the firm revamps its marketing materials and sales presentation, the three or four of these statements that are most important to its clients can be featured.
    GLUCK: So you're starting with the firm telling you what they think their deliverables are that they're providing the clients?
    SMITH: Right.
    GLUCK:  You said advisors should take the risk out of the prospect's buying decision. How does an advisor do that?
    SMITH: One of the statements an advisory firm can make is about its client retention rate. The firm I referenced before had a 98% client retention rate. That removes risk for people, when you tell them that 98% of clients stay. It tells clients that this firm must be doing something right.
    GLUCK: And what if your retention rate is 90%? Do you still use that?
    SMITH: Sure, anything in the 90s is good.
    GLUCK: Any other examples?
    SMITH: For small advisory firms, a powerful statement is that 75% of your business comes from referrals.
    GLUCK: So small advisors who can't afford a national ad campaign like the giant Wall Street firms can actually use that in their favor.
    SMITH: Yes, by saying they built their business on referrals.
    GLUCK: That's particularly true when you consider that most advisory firms are local businesses dependent on their reputation in the community.
    SMITH: If you picked up ten new clients last year and all ten came from referrals, that's 100%, and that's an impressive statement to make to people.
    GLUCK: Any other ideas about how small independent advisors can position themselves versus the big firms?
    SMITH: That you get the top guy here. If you're a small firm, this will work. If an investor goes to a large firm, some associate is often the one actually running your money. You may or may not ever see and speak with the leading thinker. That's a little scary. In big firms, you don't know who's running your money. Telling people that in your firm, because it is small, they know who's watching their account is a good idea.
    GLUCK: What are some of the other typical competitive advantages that you think an independent investment advisor might be able to cite?
    SMITH: Your certifications and the continuing education credit you are required to accumulate.
    GLUCK: A lot of advisors do have the same or similar continuing education requirements, CFPs and CPAs, for instance. But only a small minority of the total universe of advisors is a CFP or CPA. So you're saying that some facts in your marketing materials about your professional designations, education requirements and ethical guidelines make sense.
    SMITH: Absolutely. I say on my Web site that I have spent over 20,000 hours in one-to-one time with CEOs, and have been coaching CEOs for 18 years. That gives me credibility, and it removes risks if you're a CEO wanting to hire me. I didn't get invited back again and again and again because I'm bad. Right? So telling prospects how many hours you invest in your training and education is a good idea. Add it up and use numbers to build confidence.
    GLUCK: I guess an advisor could include in his marketing materials a statement about how many high-net-worth clients he serves, something like, "ABC Financial works with individuals and families with at least $1 million of investable assets and in 2006 was advisor to 11 clients with portfolios of more than $3 million." What are some of the other differentiators that an investment advisor may find?
    SMITH: Have you been quoted in journals? Are you published? Do you sit on any boards or are you an officer at a charitable group?

Andrew Gluck, a long-time writer and journalist, is CEO of Advisor Products Inc., a Westbury, N.Y., marketing company serving 1,500 advisory firms.