For many advisory firms, deliberately focusing on attracting newprospects and converting them to clients is a function that is alltoo convenient to ignore. Just 43% of the firms surveyed in ourlatest FAInsight Study of Advisory Firms cited marketing and businessdevelopment activity as a primary factor in driving their pastgrowth.

To be fair, firms may often have the will to be better marketersbut lack the necessary skills. For others, however, their lack ofemphasis on marketing and business development is a point of pride,with shareholders believing these activities to be less essentialgiven their firms’ ability to deliver superior client service.

Even the best servicing firms, however, can benefit from moreproactive marketing initiatives. An effective marketing andbusiness development function is an increasingly critical componentfor business success and vital for achieving sustainablegrowth.

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Expanding demand for objective financial guidance andappreciating security markets have figured prominently in fuelingadvisory firm growth in recent years. These fertile conditions,however, provide little incentive for firms to establish truemarketing expertise. As a result, marketing is the mostunderdeveloped of all business capabilities for many firms. Ad hoc,under-resourced and disconnected marketing efforts all too oftencharacterize the typical firm's approach to new clientacquisition.

Likely at some point in the not so distant future, equitymarkets will fail to deliver double-digit returns, the appetite foradvice brought about by a tidal wave of baby boomers will pass, andobjective advice will no longer be the differentiator it once was.Where will future growth come from? We address the question here,in our fourth and final article highlighting findings from “The2014 FA Insight Study of Advisory Firms: Growth by Design.”

Change will be required

As was highlighted in our previous article, Strategizing like a statesman, just 13% ofGrowth by Design's participating firms felt their marketing planswere effective (see Figure 1, below). Half of all advisoryfirms had no marketing plan at all.

While less than half of firms cited their marketing and businessdevelopment capabilities as a primary factor in past growth, nearly70% of firms expect these capabilities to play a primary role infuture growth. Clearly, practices will need to change for firms tomake this shift. Fresh thinking with respect to marketing andbusiness development will be required for firms looking to do morethan mimic general market growth (or decline).

Marketing and business development drives sustainablegrowth

One group of firms parsed from our study results exemplifiesthis fresh thinking. The “sustainable-growth” firms are definedaccording to their ability to achieve strong growth withoutencountering any of the negative impacts. (For comparison, thosefirms that experienced significant growth but also encounterednegative growth-related side effects were deemed“growth-at-risk.”)

Not only did sustainable-growth firms grow better, but they grewfaster as well. The 19% median revenue growth in 2013 forsustainable-growth firms was nearly four percentage points higherthan their peer firms. Marketing and business development practiceswere a key differentiator behind the growth success for thesefirms. While 60% of sustainable-growth firms credited theirmarketing and business development effort as a key factor indriving recent growth, just 28% of growth-at-risk firms specifiedthe same.

To maximize return on their marketing and business developmentinvestment, sustainable-growth firms stress planning and oversight.They are more apt to have an individual dedicated to marketing ornew client growth, develop a marketing plan, and report that theirplan is effective in attracting new clients (see Figure 2,below).

Quality of effort supersedes quantity

Across our study, firms spent an average of 2.7% of totalrevenue on marketing collateral or activities (excluding costsassociated with a firm's marketing-related personnel). Client andprospect entertainment accounts for most of this outlay, followedby expenditures on advertising, seminars and newsletters.

Consistent with past study results, how firms spend theirmarketing dollars and what they spend it on is far more meaningfulthan the size of their budgets. This is certainly true for oursustainable-growth firms. We also found this to be true whenfiltering out a slightly different group of firms from our studydata—Standouts.

FA Insight defines Standout firms according to their success ingrowing revenue as well as generating income. By excelling in theseareas, Standouts demonstrate the ability to build and sustainenterprise value. As shown in Figure 3 (below), the shareof revenue that Standout firms dedicate to marketing issignificantly less than their peers across every developmentstage.

Whether a firm excels at building value or growing well,achieving a greater return from marketing and business developmentresources is a common characteristic for these firms. This is aresult of a greater propensity to do marketing planning and toassign accountability within the firm to ensure that the plan isimplemented effectively.

While just 32% of all firms have a position dedicated tomarketing or new client growth, this increases to 61% for theindustry's largest firms (Innovators). Typical responsibilities forthese roles include developing and executing the firm's marketingplan, managing the marketing budget, and reinforcing a culture ofmarketing and new client growth.

The greater structure that sustainable-growth firms place onmarketing and business development also extends to how theirprofessionals allocate time. For the sustainable growth firm,nearly one-fifth of the average professional's day (19%) is spenton business development activities. This is more than double the 9%of time spent by professionals with growth-at-risk firms.

Specific target markets enhanceeffectiveness

Allocating more time to business development does notnecessarily equate with business success if the firm's marketingplan lacks focus. An effective plan defines how a firm bestdelivers value, the target prospects most receptive to these valuedoutcomes, and the most effective marketing channels for attractingthem.

Level of investable assets dominates the ways in which firmsdefine their target market (see Figure 4, below). Clientage or life stage are also frequently utilized. This level ofprofiling, however, does little to narrow the firm's field ofprospects and enable marketing resources to beallocated.

Actively cultivate alternate prospectsources

Frequently by defaultc, referrals from existing clients are theprimary source of new clients for many firms (see Figure 5,below). For most firms, client referrals are often a passiveapproach to new business generation. This passive approach,combined with loose client acceptance criteria, can overwhelm afirm by creating a variety of challenges. Advisory firms clearlyhave a significant opportunity to gain the attention and engagementof target prospects through more proactive and innovativemeans.

Consistent with their more structured approach to marketing andbusiness development, it is not surprising that sustainable-growthfirms are much less reliant on client referrals for new business.Instead, sustainable-growth firms work proactively to establishboth informal and formal relationships with centers of influence,professional organizations and referral networks.

Summing up

Firms must do more in order to sustain growth that extendsbeyond what is provided by market tailwinds. Based on the operatingpractices of the hundreds of participating FA Insight study firms,the keys to marketing and business development success can besummarized as follows:

• Have a marketing plan and assign accountability. Set businessdevelopment goals and ensure their achievement by detailing whattypes of activities must take place. Assign individuals to overseethese activities.

• Recognize that quality of effort invested is far more importantthan quantity of effort. For example, the number of retirementplanning seminars a firm hosts is meaningless unless the eventsattract targeted prospects and an effective process is in place forconverting these prospects into clients.

• Specify your firm's target market in terms of who is mostreceptive to the valued outcomes you provide. Such definition willimprove marketing effectiveness as well as operational efficiencyonce target prospects are converted to clients.

• Proactively market through alternative channels. General marketgrowth and passive referrals from existing clients are not reliablegrowth sources.

Applying these basic lessons will help to set a course forachieving a new standard in business growth.

While this concludes our article series based on the 2014 Growthby Design study, findings from “The 2015 FA Insight Study: Peopleand Pay” will soon be available. Another record number of firmstook part in this year's study, and we look forward to sharing thehighlights gleaned from their input.

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