Essential insights a financial advisor needs to grow their practice

More than half of financial advisors find acquiring new clients a challenge, according to the latest Cerulli Edge—U.S. Advisor Edition. While the majority (80%) of clients are satisfied with their primary advisor, most unadvised investors do not believe they will receive enough value for a relationship to be worthwhile, Cerulli Associates said.

Unadvised investors often view advisor-client relationships as lacking transparency, and they perceive the associated costs as excessively high. Transparency is crucial, not only for maintaining good relationships with existing clients but also for attracting new ones, Cerulli added. “It’s an essential aspect of service for advisors,” said Noah Serianni, analyst at Cerulli.

“Consistency in communication, being upfront about any substantial changes to a client’s portfolio and being explicit about costs are important discussion points. For affluent investors, transparency is the most important factor when choosing an advisor, even more so than demographic or performance-based considerations.”

Challenges faced by advisors growing a practice

Acquiring new clients has long been a significant challenge for advisors. Competition, practice limitations, and trouble in offering services to scale all contribute to the struggle to attract clients, said Serianni. Also, many advisors are preoccupied with their current clients' needs and cannot prospect as much as they should, he added.

In addition, many investors avoid financial advisors due to their confidence in their own financial decisions and a perceived lack of transparency in advisor relationships, which limits the pool of prospects.

According to Cerulli, many unadvised advisors are unsure about the price of hiring an advisor and often perceive them as too expensive. There is also confusion among those who use advisors about how they are compensated; one in four advised clients do not understand their fee structure, and one in five believe they do not pay their advisor.

Acquiring and retaining clients

“Despite these concerns, most are willing to pay for advice,” said Serianni. “According to Cerulli, 59% of affluent respondents are willing to pay for financial advice, up from 45% in 2015. Increasing cost transparency will help advisors retain existing clients who value openness and honesty from their advisors while attracting new clients seeking someone they can trust.” Advisors who can address the trust and transparency disconnect will improve the likelihood of onboarding new clients.

In addition, developing a marketing strategy that articulates a firm’s value and fee options can help. “Increasing visibility helps drive unsolicited clients to contact firms directly, which is how nearly one in five clients begin their relationship with their primary advisor,” said Serianni. “Integrity and openness go a long way in the minds of hesitant investors, and advisors who prioritize and effectively market these aspects of their service will find success attracting and retaining clients.”

Also, advisors can gain new clients by increasing the time spent prospecting and expanding their marketing, Serianni added. “Advisors who improve their practice efficiency by upgrading their technology stack and automating or outsourcing their investment management functions can free up more time to focus on the organic growth of their book,” he said. “They can also lean on their broker/dealers for potential client referral programs, as referrals are the top source for advisors' new clients.”

6 steps to obtain referrals from satisfied clients

Referrals are the top source for new clients and growing an advisor's practice. Approaching a satisfied client for referrals is as much about timing and confidence as it is about the words that are chosen, said Bill Cates, president of Referral Coach International. Cates then shared the following “Approach Strategy,” which advisors can consider:

1. Set the scene: Start by acknowledging the positive experience your client has had with you, Cates said. “This reinforces their satisfaction and sets a positive tone for what's to come.”
2. Emphasize value: Remind them of the specific value you've provided, saying something like: "George, I'm so glad you're seeing great results from our work together."
3. Mission statement: Express your mission to help others in similar ways, stating: "I'm on a mission to ensure that others can benefit from this same level of financial clarity and security."
4. Ask openly and confidently: Use language that treats this request with importance but remains pressure-free: "George, I have an important question. “Who do you know that might also appreciate having someone like me in their corner?"
5. Suggest specifics: If appropriate, remind them of past conversations when they mentioned friends or family who might benefit from your services.
6. End on collaboration: Ensure that it's comfortable for clients by suggesting collaboration on how best to introduce you, Cates said.

“By structuring your conversation around these components, you're not only fostering trust but aligning your ask with genuine care and commitment,” he said.

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