Results of the first annual S&P/FA advisor survey.

    Whether you are a manufacturer, retailer or financial advisor, marketing is what makes your business catch on. But over the years, many advisors, being analytical people at heart, have relegated marketing to a minor role behind crunching numbers for clients' financial plans and investment portfolios.

Now, that attitude seems to be undergoing a long-needed change. In a recent e-mail and Web survey of nearly 500 readers of Financial Advisor magazine by Standard & Poor's Corp., we found that nearly half of those polled spent more time and money on marketing last year over 2005. More than 40% say they now spend between 5% and 15% of their time on marketing, and a substantial number-13%-spend almost a third of their time getting the word out about their practices to clients and prospects.

That advisors appear to be increasing their marketing efforts is encouraging. Tiburon Strategic Advisors, the California-based consulting firm, has concluded that financial advisors need to touch their clients at least 28 times a year to achieve a high level of customer satisfaction. Increased contact with clients also yields increased revenues for advisors. Tiburon has found that advisors who spend more than 60% of their time focusing on clients earn more than five times as much as those who spend less than 30% of their time on client activities.

The 499 respondents to the First Annual Standard & Poor's/Financial Advisor magazine Advisor Survey, conducted by e-mail in January, revealed that advisors are deploying a wide range of methods to communicate with clients, including one-on-one meetings, direct mail, e-mail, seminars, golf outings and, for a few, radio shows. But advisors responding to the poll indicated that there is still a lot more outreach they could be doing to build their practices. Many, for example, say that they still lack e-mail addresses for the majority of their clientele-a distinct handicap for those days when you need to quickly reassure folks after markets turn choppy. And although many are putting more muscle into marketing, especially to their topmost clients, an overwhelming 77% of advisors still admit that they could do more.

Indeed, a majority of advisors-55%-say they communicate with the top 10% of their clients on a monthly basis, while 9% reach out as often as weekly. But the other 90% of clients are more likely to hear from their advisors just once a quarter, if not once a year. About half of the advisors we surveyed said they would like to get in touch with these smaller clients more frequently. But nearly as many do not, even though those clients may represent a source of asset growth. Why? "Procrastination," said a couple of advisors. "I am my only staff," said another. "I'm still building a team."

With half of the respondents to the survey revealing that they have lost at least some business to another advisor, it seems clear that every day you delay putting a broad marketing program into place may leave you at the mercy of competitors who want to increase their "wallet share" among your clients. On the other hand, we have observed a correlation between advisors who do put muscle into marketing and their asset and revenue growth.

Assets Are Up

Overall, just over half of the respondents told us their assets under management increased between 11% and 30% in 2006, with a sharp 29% saying their number of clients grew. Another 12.5% told us their assets increased between 31% and 50%, although with smaller growth in their client rolls. Very few saw assets and clients decline. And 49% of these advisors said they increased both the time and money they spent on marketing last year. Around a third said their time and money outlays were unchanged, but only 16% reported spending less time and 15% less money on marketing activities. About 42% of the respondents said they spend less than 5% of their revenues to market their practices.

That is roughly in line with Moss Adams LLC's 2006 Financial Performance Study of Advisor Firms, which found that financial planning, investment management and wealth management firms spend around 2% of revenues on business development and marketing, while investment advisory firms earmark 4.8% of revenues toward this area. The S&P/FA survey found, however, that nearly 41% of the advisors responding say they set aside 5% to 15% of revenues for marketing, and 10% say they spend more than 20%. How does this translate into actual spending? While 17% spend under $1,000 annually, nearly half spend $1,000 to $5,000-and almost 20% of those surveyed budget at least $10,000 annually to make their presence known.

Marketing spending and growth in assets under management also appear to go hand in hand, no matter how small or large a practice may be. Among those responding to the reader survey, 37% were small advisors with less than $10 million in assets under management. As you might expect, these smaller firms focus on growth; better than half of the advisors in this group spend more than 30% of their time and revenues in marketing their practices. In fact, half of these firms report spending more than $5,000 annually on marketing, with a quarter spending more than $10,000.

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