Author: extremeconsultinginc22

Fees Are Not Just About AUM Anymore As Advisors Get Creative

Fees Are Not Just About AUM Anymore As Advisors Get Creative

While the Assets Under Management (AUM) model continues to be the dominant advisory model, a growing number of alternative fee models are beginning to emerge as well. One recent study found that while nearly 88% of advisors still use AUM as part of their fee structure, a whopping 44% also used retainers, and 27% used hourly fees as well; in fact, barely 1/3rd of advisors now use an “AUM-only” model, as contrasted with an estimate of nearly 70% just 5 years ago. The drivers of the shift away from AUM-only appear multiple; in some cases, it’s because the AUM model is not always well aligned with the actual value the advisor provides (especially for advisors that charge based on assets under management and add value primarily with financial planning services), while in other cases it’s simply because charging based on assets limits advisors to only work with clients who have assets, and excludes the bulk of next generation clients who may have financial wherewithal to pay for advice but not via an AUM model. Leading alternatives now include: the hourly model (which isn’t just about serving the middle market, as there are also ultra-wealthy clients who simply prefer to pay their advisor by the hour, like most other professionals employed by ultra-HNW consumers); an AUM-plus-fee blended model that includes more “basic” financial planning advice services for a flat fee, or more complex and ongoing services for an ongoing AUM fee; the fixed-fee-only model, where fees are often set with a minimum, and a complexity-based factor is used to adjust the fee based on the anticipated number of hours involved; the “McDonald’s Menu” approach, which provides financial planning and investment management offerings in bundled packages that clients can choose from (e.g., a basic planning package for one dollar amount, a standard package for another, investment management for a separate AUM fee, and clients choose what they want from the menu of available services); a net-worth-and-income fee that is targeted for higher-income next generation clients who may have substantial income and a growing net worth but little in the way of liquid investment assets, who are served instead by a more holistic fee (e.g., 1% of income plus 0.5% of net worth); and an ultra-high-net-worth “super retainer” fee for more complex planning services for HNW clients, where the ongoing planning needs are inconsistent but can be very high value (e.g., assistance with a change in estate tax laws, or the sale of a business) when they do come along.

Goldman Sachs Buys Clarity Money PFM For $100M To Cross-Sell Bank Products

Goldman Sachs Buys Clarity Money PFM For $100M To Cross-Sell Bank Products

Last month, Goldman Sachs closed on its acquisition of Clarity Money, a newcomer in the Personal Financial Management (PFM) space that in the span of barely two years had managed to grab nearly 1 million(!) users with tools that were built specifically to help people better manage their cash flow (including identifying and helping to cancel wasteful recurring subscriptions, tracking spending relative to budget, and assisting with savings goals). The massive $100M purchase (for a 2-year-old company that reportedly wasn’t even close to turning a profit yet) will tuck Clarity Money up under Goldman Sachs’ new retail consumer banking platform Marcus – an appealing opportunity for Goldman, which effectively bought a 1-million-user prospect list, plus a prospect-generating machine, at a price of “just” $100 per user, to which Marcus can cross-sell its various personal loans, high-yield savings accounts, and other banking products. From the Goldman Sachs perspective, the deal is an appealing opportunity to continue to build its consumer brand with a novel PFM platform, albeit while monetizing it in the rather “traditional” way of cross-selling bank products to expand wallet share. From the broader industry perspective, it’s yet another reminder that while it may “pay” to distribute products to consumers (in the case of Marcus, or cross-sell advice and managed accounts in the case of Personal Capital), that creating compelling PFM solutions with a great user experience is the hot new way to attract new clients in the first place.

Why Top Producers Aren’t Happy

Why Top Producers Aren’t Happy

In the recent J.D. Power Ratings on financial advisor satisfaction (with their own broker-dealers), a surprising new trend has emerged: the top producers at broker-dealers (those with >$1M in GDC) are the least satisfied with their companies (and their ratings are declining), while “smaller” advisors (those with <$250k in production) are more satisfied (and their ratings are rising). Logically, one would expect the opposite – that broker-dealers would work hardest to keep their top producers satisfied, and simply “do what they can” to try to retain the rest. Bristow suggests, though, that the problem may be less of one where broker-dealers aren’t trying to serve their top producers, but simply that the top performers are the most entrepreneurial and independent-minded… and therefore the most likely to feel constrained in the broker-dealer environment, leading to lower job satisfaction. For instance, while large producers tend to concentrate in larger broker-dealers with more resources, the largest broker-dealers may have such sprawling infrastructures, that include layers of inflexible legacy platforms, that their solutions end out being even more of a bureaucratic maze for (top) advisors than smaller broker-dealers that may provide less support to smaller brokers but at least can deliver better on what they do promise. The rising burdens of compliance may also be complicating the matter, as increasing scrutiny on advice and how it’s delivered (e.g., the oversight requirements from the DoL’s fiduciary rule) are also putting more pressure on top producers who may feel their independence is slipping away as the broker-dealer caters its compliance to the “lowest common denominator” rep (notwithstanding how it constrains and frustrates their top advisors). And even efforts of broker-dealers to “digitize” and offer “robo” services may not be well received by their top producers, who don’t necessarily want to change their business models when what they’re doing is already working well for them. So what’s the alternative? Bristow suggests that broker-dealers need to focus more on winding down their legacy systems (so workflows can be consolidated), facilitate easier access to data (i.e., more advisor dashboards and tools that actually facilitate the advisor’s business), and focus technology on how to augment the client engagement rather than trying to displace advisors from the process.

Can AARP Save The DoL Fiduciary Rule?

This week, AARP (the mega advocacy organization for retirees) filed a motion with the 5th Circuit Court of Appeals asking for a full court review of the 3-judge decision to vacate the Department of Labor’s fiduciary rule. The request for an “en banc” review of all 17 judges in the 5th Circuit Appeals Court would have been one of the potential next-step options for the Department of Labor to defend its own rule, but with no apparent movement from the DoL as the April 30th deadline approaches to request a review (suggesting that the DoL may intend to abandon the case and allow the rule to be vacated), AARP has intervened and requested the court that it be allowed to take up a continued defense of the case on behalf of its 38 million members that it claims will be harmed without a more stringent standard for financial advice. In addition, the Attorney General’s offices in New York, California, and Oregon also filed similar petitions to be allowed to continue a defense of the review in front of the full Appeals Court, noting that since the 5th Circuit’s decision differs from the 10th Circuit Court of Appeals (which upheld the DoL’s fiduciary rule), there is a strong case to be made that the court differences need to be resolved. However, the question remains as to whether the Appeals Court will even allow the states or AARP to take up the defense of the case, both because it’s normally the government’s decision about which cases to defend (or not) and it’s not clear that AARP or the states would have legal standing to defend the matter, and because conceding to AARP in this situation would set a legal precedent for other advocacy groups to try to intervene in the court defense of other future regulation (a precedent that the judges may not be willing to set). And of course, lobbyists for the financial product manufacturing and distribution industry, including SIFMA and FSI, have indicated that they intend to fight and opposed any motion to intervene and try to save the fiduciary rule. Either way, we’ll know within a week whether the AARP or state attorney generals’ petitions will be accepted or not, as the deadline to open the review is April 30th.

What “Works” In Digital Marketing And Social Media Advertising For Financial Advisors

What “Works” In Digital Marketing And Social Media Advertising For Financial Advisors


As social media usage continues to grow amongst financial advisors and their prospective clients, advisors are growing increasingly interested in whether spending money on social media advertising can provide a good return on investment to amplify their digital marketing results. Because, as I’ve learned myself through many years of testing and experimenting with social media, while it can be a powerful tool, it can also be easy to waste money if not done properly.

In this week’s discussion, we explore how financial advisors can use digital marketing and social media to grow their business, and particularly why it’s important to have a clear understanding of what you are trying to accomplish in the first place (e.g., awareness, engagement, or acquisition) in order to get a good ROI on social media and other digital advertising!

When it comes to potentially spending on social media advertising, the first question to consider is what, exactly, you’re trying to accomplish. Because the reality is that digital marketing, like any kind of marketing, is actually a multi-step three-phase process: Awareness, Engagement, and Acquisition. The Awareness phase is simply about making people aware that your business exists in the first place. The people you reach are not necessarily ready to do business with you, but you want to make them aware that you exist. The Engagement phase is where you try to actually help a prospective client begin to know, like, and trust you… because as the famous saying in the marketing world goes, people need to engage with your brand 7 to 9 times before they’ll be ready to do business with you! The Acquisition phase is where you actually try and acquire a client, where you transition from marketing into the sales process, because the prospect is ready to do business, is interested in doing business with you… and now you just have to convince them to actually take that action.

These phases (Awareness, Engagement, and Acquisition) matter in a social media context, because they influence what you are trying to do through social media in the first place. For instance, if you broadcast useful content on Twitter or via Facebook, its very effective for building awareness, so it may make sense to spend some dollars to try to further build your audience. Particularly on Facebook – with their ad tools specifically built to help you target people who are not already following your page but would likely be interested in learning more about you with.

However, building awareness alone isn’t enough to actually get new clients, and no one will ask you to manage their life savings based on even the wittiest of 280-character tweets. You actually have to engage prospects in order to get them to know, like, and trust you enough to want to do business with you. On social media, engagement means doing something that prompts people to take a further action, from running a TweetChat on Twitter or asking a provocative question to stir conversation on Facebook… but the key is that you have to get them to do something. Which you might then pay to promote (e.g., a particularly popular tweet, a Facebook article or survey that you pay to boost), though these still aren’t necessarily big ad spends, because you may only be spending to promote to the audience you’ve already built.

The third part of the funnel is acquisition, where a different set of strategies are relevant. This is the domain where very targeted ads, that really invite people to actually hire you and do business with you, can work. But this still doesn’t mean just plastering ads out for the whole world to see. Your targeted messages should go to the people who are already engaged with you… such as paying to target a particular offer or invitation to do business with you sent to the already-engaged audience that has ‘Liked’ your Facebook page. But it’s not about asking people to ‘Like’ your Facebook page at this stage; you’re paying to an offer in front of them to take a next step towards actually becoming a client of yours!

Ultimately, though, the key point is to recognize that any digital marketing advertising you do has to align with what you’re trying to accomplish. There are lots of strategies which may or may not be effective – from keywords and organic search, to SEO and retargeting (all discussed in greater depth in today’s Office Hours below) – but the key is that you need to do more than just throw ads out into social media. Digital advertising can work great, but it’s almost never about sending out a magic ad or Tweet. You need to build awareness, find ways to engage your audience, and then prompt them to take action that allows you to acquire them as a client. If you don’t have a well thought out process, digital advertising will likely not provide the return on investment that you want!


What Is Your (Digital) Marketing Funnel – Awareness, Engagement, and Acquisition

The first thing to think about when you’re trying to decide whether you should spend either time or certainly dollars on social media and digital advertising is what exactly you’re trying to accomplish in the first place relative to bringing in business. Because the reality is that digital marketing, like any kind of marketing, is really a multi-step process. At a high level, I like to think about it in three phases: awareness, engagement, acquisition.

The awareness phase is simply about making people aware your business exists in the first place. They’re not necessarily ready to do business with you. You know, after all, as advisors we ask people to entrust decisions about their life savings to us. That’s not a decision people make lightly.

And so it’s not as though the first time they become aware of your service as a financial advisor, they’re just ready to hand over the keys to the kingdom and their life savings. As the saying goes, people do business with people they know, like, and trust, not people they’re just aware of because they heard mentioned once on social media. But of course, no one can get to know, like, and trust you until they’re at least aware you exist. So awareness is the first phase.

The second phase is about engagement. You can think of engagement as the phase where you’re trying to help them to actually begin to know and like and trust you. There’s a famous saying in the marketing world that people need to engage with your brand seven to nine times before they’ll be ready to do business with you. Because it takes time to get familiar and know and decide whether or not they’re going to like and trust you, particularly in a business like ours where, again, it’s such a high-stakes decision to decide to work with an advisor and delegate these major financial decisions, or at least engage them around these major financial decisions.

The third phase is about acquisition, where you actually try to acquire a client and turn someone who’s engaged with your marketing into someone who actually buys your services and decides to do business with you. And this is essentially where you transition from marketing into an actual sales process because the person is ready to do business with you and is interested in doing business with you, and now you just have to convince them to actually work with you. Why you? What do you cost? Is the value worthwhile?

Classically, these three marketing phases (awareness, engagement, and acquisition) get drawn like a funnel, where the wide part of the funnel at the top is for awareness, the middle part of the funnel is about engagement, and the bottom of the funnel is for acquisition. And the funnel analogy is a good one because the nature of a funnel is that it narrows as you go through the funnel.

And in the context of marketing, that means you’ll try to build awareness with lots of people, but you only engage with a subset of them, and then only a few of those where you actually necessarily have a shot at acquiring as clients and doing business with you, which really is just another form of the numbers game that many of us learn when we start out in the advisory world. I was trained in the 10-3-1 rule. You need to meet with 10 people to get 3 real prospects to get 1 client.

And why this matters is, when you think about investing time and effort, and especially dollars into digital advertising and social media, what’s best or what works actually depends a lot on what you’re trying to accomplish and where you are in that funnel. Are you just trying to acquire clients immediately? Are you trying to build engagement? Or are you just trying to develop awareness?

Using Social Media For Awareness

So what would you do if you want to build awareness? Social media is particularly good for this. Twitter, in particular, is a platform that’s really good at the awareness part of the funnel. Because if you broadcast useful content to Twitter, it tends to get retweeted and shared with others who become aware of what you’re providing there and follow you. And it’s not a filtered feed like Facebook is. If someone you follow retweets you, everybody they follow sees it. It goes straight out. And now you have more people aware of what you’re doing and amplify your content and the ways that you’re showing your expertise.

Now, the caveat is that Twitter is a short medium. For years, it was capped at 140 characters or letters for your entire tweet. Now they expanded it to 280, but that’s basically no more than two to three sentences at the most. And simply put, you’re not going to convince someone to give you their life savings based on the most brilliant three-sentence tweet. Believe me, I have something like 100,000 tweets now, I’ve not found one that does anything close to that. You can make people aware of you, you can build an audience, but Twitter alone isn’t going to get you any clients. Not for a service as complex as financial advice. So it’s a fine platform to be active on to build awareness, but you have to be prepared to move them to the engagement stage of the funnel.

And the same is largely true of platforms like Facebook, particularly if you have a Facebook company page and you’re sharing content there. People may see it, they may like it, they may share it, which all brings more potential audience in the Facebook feed to follow you going forward, but that’s still mostly awareness building. You’re not turning these people into clients because you said something witty on Facebook and they hit the like button. You’re making them aware that you exist, you may have some services to offer for them. It’s a starting point, but just that. And so in this context, you may decide to spend some dollars on those platforms, but understand that you’re doing it for audience building.

Now, I find that Twitter’s ad tools actually aren’t really very good, at least for me in our experience, for helping to build an audience. Because if your content is actually that good and relevant, it tends to get shared on Twitter and your audience finds you anyways.

Facebook is much better around building awareness because their ad tools are built very specifically to help you target people who are not already following your page and may not be aware of you but would be interested in learning more about you. Either because you use Facebook’s tools to really tightly refine a target audience of potential prospects who you will serve up with content or like ads or because you can even ask them to create what’s called a lookalike audience, which comprise of strangers who based on Facebook’s analytics appear to be similar to the audience of people who already like your Facebook page. It’s basically hiring Facebook and just saying, “Go find me prospects that look like the people who already follow my page,” which expands your audience reach of people that you might someday do business with.

Building Engagement To Move Prospects Through The Funnel

As I said earlier, building awareness alone isn’t enough to actually get new clients. Because the mere fact that they’re aware of you doesn’t mean that they know you and like you and trust you enough that they want to actually do business with you. To move them along that stage, you have to engage them somehow. And engaging them means doing something that prompts them to take a further action. Maybe you run a tweet chat on Twitter where you ask provocative questions, or you can do something similar on Facebook. Maybe you launch a new email campaign to your mailing list. Maybe you create some content on your website that demonstrates your expertise and you ask people to click through and read it. But the point here is that they have to move beyond just following you on a social media channel. You have to ask them to engage and do something more. That’s what makes this the engagement stage.

And this is an area where digital ad spending can become relevant again. Because maybe you have an especially popular tweet about engaging in a survey you made, so you pay to have it promoted. Or you might do the same thing on Facebook. Since Facebook controls the News Feed and not everyone sees everything that’s posted to Facebook, you can pay Facebook to have your post promoted in the feeds of the people who follow you. That’s how Facebook advertising works. So you might pay to boost an article or a survey or an ad that prompts them to come to your website and sign up for a mailing list or do something. These aren’t necessarily big ad spends, but it spends dollars to get your engagement opportunity in front of prospects on your social media channels.

But the key here is that you’re not paying for followers. That’s not awareness. You’re paying to get people to click and do something. That’s the engagement stage of the funnel. And you buy different types of ads and you get them to do different kinds of things of, “Hey, I just want you to like our page so you’re aware of us,” versus, “No, no, now I actually want you to click through and download our guide and join our mailing list.” That’s a deeper level of engagement. It’s a different kind of ad.

Driving Acquisition With (Re-)Targeted Messages

The third part of the funnel is about acquisition. So getting someone who’s decided they know, like, and trust you to actually do business with you. And here, it’s yet another different set of strategies that are relevant. This is the domain where you’re most likely to do very targeted ads that really invite people to actually hire you and do business with you. Now, it doesn’t necessarily help to plaster those ads out to the world because, again, you can take out a billboard on a highway too, but it doesn’t get you a lot of clients as a financial advisor. If they don’t have awareness of you and aren’t already engaged with you, they’re probably not going to do business with you because they saw a billboard or the digital equivalent of a billboard.

We actually tried this once as a big experiment in our firm. Spent many thousands of dollars on paid ads to invite consumers to come check out our website and hire us with their retirement planning, but we hadn’t done any prior awareness building, we hadn’t engaged them. We were basically just targeting cold strangers and saying, “Hey, check out our site. We’re a reputable financial advisor firm. Come do business with us.” And the end result was literally not one single quality lead. Not even just no clients, we didn’t even get a good lead. We got a bunch of traffic. You know, some people will click ads if you put ads in front of them, but they didn’t engage with it and they didn’t become clients because we had no connection to them.

Ideally, your targeted message is about actually acquiring clients, having people do business with you, and it’s best for that to go to the people who are already engaged with you. So in the context of social media channels, this might mean paying for social ads to put a particular offer in front of the people who already follow you on Facebook. “You follow us, you are aware of our brand, you like our content, you’ve been engaging with it, hey, now we have a special offer to work with us with this intro meeting.” And now you can send an ad to retarget those specific people. You’re not paying to like your page or just to see your content, you’re asking them to click a button to schedule a meeting with you or take some next step. But you can actually send this to people who have already started down this funnel with you because they’re already aware of you and they’re already engaging with you because you’ve built that initial audience. And you have to do the initial work earlier in the funnel or you don’t get the results at the bottom.

And so you really only want to go to people who are already engaging with your brand. This is where I find that, certainly for our firm, virtually all of our new clients come from in the digital marketing world. It’s about actually sending a message to people who are already engaged with you. Simply inviting them to take it to the next level by actually meeting with you to do business with you. This is also an area where a group of ad strategies called retargeting strategies can be particularly effective. And this works in both Facebook and Google with retargeting ads.

So a retargeting ad takes someone who has already visited your website (maybe they looked at your services page or your fees page or your contact page… you can tie it to specific pages), but they didn’t actually contact you or do anything. But you know that they were there visiting because you can track these things in the world of social media and digital advertising, so you can run ads on Google and Facebook that will only be seen by people who already went to those particular pages on your website. So you know they’re a little bit interested. They checked out your services page and your fees page.

So now they get an ad that says, “Hey, do you want to come and schedule a complimentary meeting?” You might not say, “Hey, you visited our website and do you want to come back?” You can just say, “Hey, do you want to schedule a complimentary meeting?” But I only put it in front of the people that I already know came to the website, who are the most likely to actually click on that ad and come back and say, “Wow, like, it’s kind of amazing, they were targeting me with an ad and I was just thinking about going back and working with them.” “Great. Glad our ad prompted you.” That’s the whole point of retargeting ads, to bring those people back, and, you know, the “re” part of retargeting is very deliberate. It’s about targeting people you’ve already touched once, to bring them back in to move to the next stage and to do business with you.

Reviewing Social Media and Digital Advertising (Paid) Strategies

So given all this discussion about paying for digital advertising and social media ads in terms of awareness, engagement, and acquisition, let me talk for a few minutes around just what we found works and not when it comes to all the different places you can spend money on digital advertising. When it comes to Facebook and other search engines like Bing, I found the best ROI by far is using retargeting ads for people who have already visited key pages of your website about your services. So you know they’re interested prospects. The retargeting ad simply prompts them and invites them to come back and schedule that complimentary meeting or something to that effect. But the key is that you’re retargeting people who already visited your website and expressed interest.

What doesn’t work very well on Google and the other search engines is just buying keywords. You know, paying to make your firm show up in the research results for “best financial advisor” or something like that because engaging those strategies frankly puts you up against some very large firms (try typing “best financial advisor” into Google, you’ll see some familiar large firm names that come up in those paid search results). And it’s really hard to compete and stand out against them.

I know in our industry we look at some firms, particularly in the independent side and say, “Oh, you know, they do some bad things as big brands. I’m a boutique independent that does these valuable services.” But for the stranger who doesn’t know much about the industry, a big name is a name that they trust (or at least that they’ve heard of), while it’s your firm name that they have no idea what you do, and they’re not clicking on your ads. They’re not going to come through. And even if they do, maybe they’ll check you out, but they’re not going to have any trust in your brand. Large firms generate brand trust (sometimes whether they deserve it or not). But all that marketing dollars they spend in the Super Bowl commercials and the rest, that stuff actually works. That’s why they do it. And so trying to just pay for basic AdWords on Google is really not effective. You can’t outspend pockets that are that much deeper than you.

Now, if you have some kind of really focused niche or specialization, you may have more luck and the keywords will probably be cheaper because they’re more specialized. But if that’s your strategy, it’ll probably be even easier to just write some articles on your website that share your niche expertise and let people find their way to you with normal searches, or what’s called organic search, where you don’t pay for it, they just Google the thing and you come up because you’ve already wrote the leading expert article on it. And, you know, whether that’s something like “best financial advisor for architects” because your niche is architects and you write that article, or even just trying to be “best financial advisor in town name,” whatever your town name is.

But if that’s your strategy, don’t pay for Google ads for keywords, hire an expert in search engine and optimization, it’s called SEO for short, to improve your local SEO so that when people type in, you know, “financial advisor” and the name of your town, you come up automatically. You’d be surprised how easy it is with very little basic SEO to rank near the top or number one in your town for financial advisor searches. Maybe not your whole metropolitan area but like your town, your suburb, your zip code, which could have thousands and thousands of people or tens of thousands or more, depending on where you live, you can generate a lot of client business just by making sure that when they type “financial advisor” and the name of your town, you come up at the top. And you don’t have to pay for ads for that, you just have to pay for someone to help you with search engine optimization so you get the results organically. So again, for Google, retargeting ads I think is where the value is. If you want search results, do SEO in your niche, not paid keywords.

When it comes to Facebook, Facebook by far is the most effective for targeting capabilities for ads, especially for strangers that might fit your target clientele. That’s why Facebook has a bajillion-dollar market cap that’s up bazillion percent over the past 10 years.

The caveat is that for Facebook, it really only works well when you have a clear target clientele in the first place. If you work with, you know, anybody who can fog a mirror and has enough money to be your client, it’s not very cost-effective to target everyone on Facebook. It’s almost 1.5 billion daily users. So the more niche or targeted or specialized you are, just in general, the more clearly you can really articulate exactly who your ideal client is, the better you will find that Facebook works for you. You can buy like ads for your page, you can boost the content to the people who like your page for engagement, and then you can re-target ads even further for acquisition to specific landing pages on your site.

And with 1.5 billion daily users on Facebook, retargeting ads also work really well. Where you take someone who comes to your website and you retarget them on Facebook. Because when they have got a quarter of the planet and the majority of Americans on Facebook, the odds are pretty good that most people who check out your website are probably on Facebook as well, which means if you retarget them there, they will see the ad.

In terms of Twitter, I find Twitter is still the best channel for distributing your expertise and content. Twitter gives people the most control over who they follow. If you follow someone on Twitter, you will see everything they share. Twitter doesn’t manage the feed the way that Facebook does. So if you create and distribute relevant content for your expertise, people who follow you on Twitter tend to be very loyal followers who engage with the content and share it with others. So it’s good to build awareness, it’s good to engage. It’s also very good actually for PR and reaching journalists because a lot of the journalists look for experts on Twitter as well.

But I found it’s a lousy place for spending dollars on advertising. Spending dollars on Twitter just doesn’t work very well because the people who want to find you for your expertise, at least in our industry, are probably going to find you anyways because you’re sharing expert content that’s getting retweeted and shared with people in their network. And so spending dollars to engage people in Twitter I find just does not work very well. Much more effective on Facebook than on Twitter.

And then there’s good old LinkedIn. Which if you look at industry surveys and social media adoption for advisors is the number one social media channel that advisors say they’re active on. But when it comes to LinkedIn, most advisors say they’re on LinkedIn because they have a profile there, and maybe once in a blue moon they log in and, like, read an article there. But they’re not doing anything on LinkedIn. And ironically, for so many of us that work with retirees, our target clients probably aren’t even on LinkedIn because they don’t have jobs to list on LinkedIn.

And so the advisors that I know that are the most successful on LinkedIn, they do it in two primary ways. Either one, they use it to network to other people they’re trying to reach in their target market and then use connections to ask for introductions, including through centers of influence because your retirees might not be in LinkedIn but the accountants you might generate referrals from might be on LinkedIn. And you can try to reach them there. Or number two, they use LinkedIn groups as a way to engage. Not necessarily build awareness but to engage in conversations with others in their target clientele group or community. All of which, though, you can actually do for free.

There is a LinkedIn Navigator platform you can pay for which isn’t cheap. And this is good if you want to be really proactive on outbound networking. Like, you know, search through your network to find the three executives at such-and-such company and then figure out who in your network is connected to them so you can intro your way to them. But if you don’t have a super clear target market and know exactly who you’re going after and what your path or strategy is to try to network your way through to them, I wouldn’t bother paying for LinkedIn Navigator. If you do anything, just engage in LinkedIn groups. Find groups that are relevant to the clients that you work with. They’re free anyways.

But if there’s a few things that you take away from this discussion it’s number one, paying for digital advertising and paying on social media channels can be a great way to target if you already know who your target clientele are. That’s where you can get hyper-targeted. Facebook in particular, or reach out exactly to who you want to get to on LinkedIn.

Number two, all of this stuff works better when you have a niche or expertise, where people can find their way to you. That’s what makes Google SEO work and spending ad dollars on likes and content distribution on Facebook in particular because it has such good targeting abilities once you know what your niche is and what kind of people you’re trying to target.

Anyone can do retargeting ads, though. That’s number three. Anyone can do retargeting ads on Facebook or Google for prospects who are already coming to your website and then you want to bring them back. Now, if you don’t have a good website in the first place and you’re not doing other marketing stuff to bring people to your website, retargeting ads are a moot point. You can’t retarget people if you’re not bringing people to target in the first place. But if you have a website that gets some engagement and some visitors and people are coming and checking you out but you’re trying to figure out how to make sure they come back so they actually engage with you and eventually become clients, retargeting ads can actually be effective.

And then number four, understand that digital advertising and social media is virtually never about sending that one magic tweet or message that gets someone to give you their life savings. In most cases, it’s about building awareness for yourself and then engaging with people over time to help them know you, like you, and trust you so that eventually you can do business with them. But if you want to acquire clients and engage them, you need to draw them into your website and engage them there. Not really on social media. I would encourage you to think of it, the website is the hub, and the social media is the spokes. So you can do a lot on the spokes, but if you don’t have a strong hub, the spokes don’t go anywhere useful and you’re not going to get results. I hope that helps a little as some food for thought.

This is Office Hours with Michael Kitces. We’re normally 1 p.m. East Coast time on Tuesdays, but I’m traveling all of this week for speaking engagements in Nashville yesterday, Connecticut here today and going to San Diego tomorrow. And was talking about social media and digital advertising, so I thought we’d share this segment as well. Thanks for joining us, everyone, and have a great day.

So what do you think? Do you use social media to reach prospective clients? What strategies work best for you? How do you differentiate between awareness, engagement, and acquisition through social media? Please share your thoughts in the comments below!

Millennial Investor Loyalty Hinges On Advisor Relationship, Not Technology

Millennial Investor Loyalty Hinges On Advisor Relationship, Not Technology

The latest 2018 edition of the J.D. Power Full Service Investor Satisfaction Study is out, and the company finds that Millennials are already the least loyal group of investors when it comes to engaging with the financial services industry… a deep concern for many firms, given that they stand to inherit a significant portion of the coming $30 trillion wealth transfer from Baby Boomers. Yet despite their known tech savviness, the J.D. Power research finds that the key to attracting and retaining Millennial investors – based on their massive consumer survey – is not about a firm’s digital and mobile device capabilities, but the frequency of communication from the firm’s financial advisors; in essence, good technology will impact satisfaction, but it’s the advisor connection that actually facilitates Millennial loyalty, as even 29% of highly-satisfied Millennials reported they’re still thinking about leaving their advisory firm in the coming year (compared to just 4% of similarly-satisfied investors in older generations), and the more Millennials relied on self-service technology alone the more likely they were to switch. In fact, amongst emerging affluent Millennials, 31% said they still want to have more contact with their advisors (compared to 7% of older investors), despite the fact they already contact their advisors an average of 4.5X per year (compared to just 3.6X per year amongst older generations). And notably, while Millennials are showing some receptivity to communication via new channels (e.g., social media, texting, and video), those channels still show limited usage (with only 5% to 10% adoption rates), as most Millennials are still at least partially engaging with their advisors in person (for which digital communication merely supplements the in-person relationship, rather than fully replacing it).

How BDs Are Changing As Planning Grows More Popular

How BDs Are Changing As Planning Grows More Popular

According to research in the latest issue of Cerulli Edge, the percentage of clients receiving comprehensive financial planning services has grown from a third to a half in just the past 5 years, driven by both competition from low-cost digital (i.e., robo) providers that are pushing financial advisors to deliver more value to justify their fees, and also the focus on advice and fiduciary issues thanks to the Department of Labor’s proposed rule. Notably, the trend is especially strong amongst younger advisors, and female advisors, with the latter aiming to deliver financial planning to a whopping 73% of their clients (as compared to only 57% for male advisors). Yet as advisors shift from products to advice, and from commissions to fees, it’s altering the expectations that advisors at broker-dealers have from their home offices. Although there are still substantial differences even within the broker-dealer channels, with only 17% of wirehouse advisors using planning fees, compared to 28% at retail bank broker-dealers, 30% at insurance broker-dealers, 38% at national or regional brokerages, and 45% at independent broker-dealers (as compared to 40% at independent RIAs), with an average fee of $1,223. Still, broker-dealers are experiencing more pressure for support from advisors to help, from providing staff resources to aid in the cumbersome data entry process for producing financial plans (for those who don’t shortcut the pain with a more collaborative planning process), to staffing up with specialist teams of CPAs and attorneys to help with more advanced planning scenarios.