Online reviews and brand identity matter more to today’s potential clients than old-fashioned referrals, according to a surey by Ficomm Partners, an Irvine, Calif.-based communications company that serves RIAs and wealth management firms.
Over the next five to 10 years, the survey of 1,107 consumers found, referrals will matter far less to prospective clients than “effective digital marketing.” It referred to this phenomenon as “an upcoming ‘referral cliff’” that could imperil advisory business owners unless they diversify their lead sources in online media.
“Our survey serves a dual purpose,” said Meg Carpenter, CEO and cofounder of Ficomm Partners, in an email. It’s intended to provide “actionable insights to advisory firms,” she continued, and to contribute “thought leadership that elevates the industry's standard of client care. … Our aim is to empower advisory firms with knowledge that helps them thrive in a competitive landscape.”
Prospective clients under age 44 are “used to researching and making purchases digitally and tend to rely on social [media] proof such as online reviews and clearly defined digital brands,” she explained in a prepared statement.
For older clients, it’s a different story. Respondents age 60 and over said they would only hire an advisor based on referrals. But across all age levels, just 29% of those who responded said they require a referral to choose an advisor.
For those under age 44, only 17% of respondents said they required a referral before they would hie an advisor. At the same time, 57% of those under 44 had hired financial advisors based on digital marketing.
“This change in referral behavior among under-60 buyers indicates that the effectiveness of referrals as a lone strategy for organic growth will plummet,” the report cautioned.
By now, most advisory firms have an Internet presence and often a social media feed; the research indicated that 64% of effective marketing tactics today are digital. Yet the report also warned that no single digital channel is effective by itself. Instead, the researchers recommend a mix of digital channels to “generate enough touchpoints” with prospective clients. Specifically, a minimum of two digital interactions with a potential client is required, on average, before a commitment is made. Ideally, five or more digital interactions is better, the report found.
“The question isn’t ‘Is your firm engaging in digital marketing?’” said Mary Kate Gulick, Ficomm’s chief marketing officer, in a press release. “It’s ‘Do you have an integrated, multi-channel digital marketing strategy?’ And if the answer is no, it will be challenging to meet your organic growth goals in the coming years.”
The report recommended five steps that advisors should take now to make sure they are well-positioned to remain competitive in the long run, and appealing to the next generation of clients.
First, work on generating online reviews. It’s OK to ask satisfied clients to post a few words, the report said. Second, make sure that at every contact point with a potential client there is a consistent message or brand identity about how your firm can make life better for the client. Third, maintain a multichannel presence online. Fourth, equip each advisor to be a “brand ambassador.” Finally, measure the success of the overall strategy over time, not the effectiveness of any one channel, the report said.
“Successful adoption of these strategies isn't exclusive to age demographics,” Carpenter emphasized in an email. “Across the advisory industry, we see numerous advisors of varying ages effectively leveraging social [media], implementing multichannel marketing, and refining their messaging. This demonstrates that these steps are not only reasonable but entirely feasible for advisors of all ages.”
“Referrals will remain an important lead source,” the report said, “but [they] can no longer be the exclusive way that leads come into the business. Advisors who want to remain competitive will need to implement an integrated, multi-tactic digital marketing strategy.”
The key lies in advisors “thinking about growth channels in addition to referrals,” added Carpenter, “and embracing these strategies with a client-centric approach that resonates with today's diverse consumer base.”