[The Institute for Innovation Development recently talked to Graig Norden, Founder & President of Freewheel Marketing - a financial services marketing technology consultant and research firm - about their major new study entitled "Marketing Technology's Role in Growing Assets Under Management." The study led to the firm being selected as a finalist for WealthManagement.com’s thought leadership award among tech providers. We discuss how the research findings demonstrate the dearth of marketing tech in financial services, its proven efficacy in growing assets, and recommended tactics for advisory firms to flourish in today's higher tech landscape.]
Hortz: What was the impetus for this study? Tell us about your methodology, proprietary algorithm, and what exactly your Freewheel Score represents?
Norden: Our expertise is marketing technology and the study itself sought to demonstrate that the firms leveraging client-facing marketing tech tools will grow AUM faster than their contemporaries, all else equal. An important consideration here is that the study itself was not a survey, because surveys invariably have all sorts of biases. Instead we made the top independent advisors and asset managers unknowing participants by scraping data off of their websites. This is possible because any type of marketing technology requires that you put a snippet of code on your website. That’s how it measures whatever it’s seeking to measure – clicks, opens, submissions, etc. So we found ourselves sitting on a wealth of data and then created an algorithm to rank the universe top to bottom by their use of such tools. The resulting Freewheel Score assigned to each firm is a holistic view of each manager’s use of digital marketing tools.
Hortz: A very interesting and heartening discovery from your study is that the fastest-growing RIA firms have a Freewheel Score that is 28% higher than that of larger RIA groups, yet their median AUM is 78% lower. So there is not just hope, but great success already for smaller firms to be able to compete in this new marketing landscape. Can you tell us more about this?
Norden: Most people would reasonably assume that digital tools are a luxury for the big shops. However, in applying our scoring model to FA Magazine’s list of fastest-growing RIAs, we found a number of tiny shops that are opening the doors with the idea that technology will be a more integral part of their success. And, as you you’ve pointed out, there’s much evidence to suggest that it’s been accretive towards asset growth.
This is fascinating because we think that it’s going to create an enormous amount of pressure on mid-sized firms. Whereas large RIAs will likely find it easier to buy their way out of trouble or reallocate resources, mid-sized firms have a comparatively more difficult time doing so. Since many of these firms have scaled their businesses by throwing bodies at the problem, there’s an overstaffing issue that makes it difficult to pivot even if there is recognition of the need to do so.
For small firms, this presents a competitive advantage in some respects. For one thing, it’s cheaper to throw technology at the problem than it is to throw bodies. And for another, if you lay this sort of foundation, you’re acting in line with all of the demographic trends that suggest that investors – institutional investors and high net worth included – are expecting their financial relationships to grow increasingly digitized.
Hortz: What recommendations for advisors embarking on their digital journey have you derived from your research?
Norden: As with anything, you have to start with a strategy before you start fiddling around with tactics. I talk to a lot of advisors or asset managers who have a convoluted assortment of internal and external professionals that are working independently on various tactics – SEO, social media, video, etc. Those tactics are all worthy of consideration, but individually their success in helping to raise assets is dubious. However, as part of a deliberate strategy that integrates the various tactics, a firm can make the data actionable across operations, marketing, and sales. I’ve seen Morgan Stanley and McKinsey refer to this as a “data lake.” We think that as the use of technology grows more ubiquitous, this will be the gold standard.
Hortz: What are the major reasons that firms are struggling to adopt and implement their digital strategies?