How Advisors Can Increase Revenue and Boost Retention

When it comes to increasing revenue, a significant number of financial advisors are still focused on external strategies such as hosting bigger seminars, paying for expensive leads, hiring more staff or trying to offer more services. But this is an expensive way of doing business, and these activities often do little to consistently increase revenue or boost firm value.

Advisors make mistakes when they focus too often on numbers and too little on client relationships. Driving top-line revenue is important for current growth. Creating consistently higher profit within the right client mixture will favorably impact both current and long-term outcomes.

The firm must prioritize understanding the value it offers clients. Revenue generation activities are more effective when the firm can clearly articulate its market niche, mission and differentiation. When properly branded, a firm can confidently move forward in beneficial revenue generation efforts.

These five steps will increase revenue and prevent leakage.

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Find the Right Clients

Ideal, “right-fit” clients are those who fit the firm’s chosen niche, compensation strategy and service offering.

A qualified client referral has the lowest acquisition cost and highest conversion rate, but advisors often hesitate to ask for referrals.

Of course, most people congregate with others who share their interests, making warm introductions easier for advisors to initiate. Astute advisors may identify their ideal clients within their book of business.

Advisors can build a pool of like-minded clients by finding the commonalities among the group. Do they belong to the same country club, volunteer in similar civic groups or meet at a particular restaurant for breakfast? As the Venn diagram emerges, the advisor can join these groups and become a known regular in these circles. Their existing clients can now continually introduce them to new people with similar interests.

[Read: How Advisors Can Use Facebook Groups to Target Niche Client Segments.]

Identify Acquisition Opportunities

Networking with vetted centers of influence, or COIs, such as certified public accountants, attorneys or real estate agents, is another effective client acquisition strategy.

Advisors traditionally hesitate to use this strategy because of a lack of reciprocity from the COIs, who may not refer clients back to the advisor. For success with COIs, it is vital that you help them increase their client base.

The pandemic has made client appreciation events challenging, but it creates new opportunities to connect with your best clients while extending your influence with COIs. Invite your current clients to lunch at their favorite restaurant — and invite along a COI with whom you would match that client.

Fill out the table by asking the COI to invite a person they want to impress. People are willing to openly share in a smaller setting, and these new connections will warmly receive follow-up overtures, making an explicit referral from the COI unnecessary.

Say Goodbye to Clients Who Are a Poor Fit

As firms and their clients evolve, mismatches occur. These clients can be detrimental to a firm’s growth when their needs no longer generate enough revenue in the firm’s compensation model to justify providing services. Excessively demanding clients can be overwhelming and may cause the firm to lose valuable staff.

For good relationships that have simply outgrown their fit, transitioning to a different advisor is often a good deed for all parties. Rude clients may require a drastic separation from the relationship. After making the cut, the resources spent accommodating wrong-fit clients can now be deployed to more positive activities.

Be Thoughtful About Expenses

Expense management is not a matter of merely increasing or reducing costs. Rather, it is focusing on creating maximum value for each dollar spent. Some expenditures, such as branding, may seem like a luxury but prove to be a necessity to magnify your value to current and prospective clients.

“Scale” is a popular word in the financial industry. It has driven many boutique firms to outsource work to large account aggregation firms that offer significant back-office support, which can be an excellent value proposition to many advisors.

Other advisors, especially women and minorities, may prefer to achieve economies of scale while maintaining full equity control in a smaller footprint conducive to the relationship experience that many clients seek. Either road points directly to effective expense management.

Advisors also spend resources wisely when their time and expertise are allocated properly. New technology can be a superb expense if it significantly cuts down on the number of hours it would’ve taken to do the task manually. It was the wrong choice if the learning curve is too steep or the technology cannot be fully utilized.

A firm’s greatest ongoing expense is personnel, and advisors often hesitate in making their initial hires. However, if an advisor is routinely focused on tasks that could be delegated, a lack of personnel can hinder growth. Daily tasks that can be delegated include routine paperwork, email communications and telephone calls.

Finally, advisors waste significant resources by spreading themselves thin and offering more services than they can reliably deliver. Partnering with knowledgeable centers of influence can help you to create critical value for your clients, without incurring additional overhead costs or making costly mistakes.

Increase Client Retention

Profits can increase by 25% or more simply by increasing customer retention rates just 5%, according to research from Bain & Company. Not only do operating costs decline with loyal customers, but the relationship can become so strong that clients will pay a premium to avoid having to make a change.

Many advisors have heard the statistic that more than 70% of widowed women leave their family financial advisor when their spouse passes away. The widowed spouse is not only taking the entire current account out of the firm’s assets under management, but the advisor is also missing new inflows of insurance proceeds and accounts that had been held in other institutions. Deepening connections and increasing communication through behavioral coaching is an important investment for averting these devastating departures.

[Read: 5 Estate Planning Mistakes Advisors Make.]

Current clients are also an important springboard to a multigenerational practice. Retirees who are living on their benefits, or “post-retirees,” are considered detrimental to a firm’s valuation. But those clients need an advisor more than ever.

Senior clients may be drawing down their accounts in retirement, but they are also candidates for additional planning fees with estate and charitable concerns, as well as establishing a longevity map alongside their children. This next generation is often at its zenith in terms of professional income, asset accumulation and investment needs. A familiar introduction from their trusted parents can shorten the new client acquisition time substantially and prevent assets from moving to a different advisor when parents die.

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