Apple is one of the most closely followed companies in the nation for several reasons. In addition to designing and introducing products that define a market, Apple utilizes many techniques to increase its chances of success: partnering with other firms and exploring new lines of business, for example. Likewise, most advisors use different tactics and techniques to build their success and enhance their practices. Some are partnering with other firms while others are exploring new lines of business and adding new services and new staff members to support them.
In analyzing the way advisors managed their practices during 2009, Rydex|SGI AdvisorBenchmarking uncovered a few common characteristics that distinguished top firms from their fellow investment professionals (see sidebar on "Defining Top Firms").
While there is no magic formula to making an advisory practice an industry best, we identified five common characteristics that winning firms have in common:
- l proactive and effective communication
- l referrals
- l alternative investments usage
- l technology optimization and expense discipline
- l outsourcing
In this article, we will focus on proactive and effective communication and referrals. Next month, we'll discuss alternative investments usage; technology optimization and expense discipline; and outsourcing.
Top Practice No. 1: Proactive and Effective Communication
When it comes to communicating with clients, top advisory firms operate proactively, not reactively. They outpace their average counterparts in usage of every communication method, including e-mail, newsletters, client reviews and special occasion communication. They also spend more time in front of clients. That time and effort pays off. Those firms that spent more than 60% of their time in front of clients were eight times more profitable compared to those firms who spent 30% or less communicating to clients.
How to Duplicate Top Firms' Success: Communication
To achieve proactive and effective communication, advisors can take these pages from top advisors' playbooks:
- l Not all clients have the same communication preferences. While younger clients may prefer e-communication, older clients may prefer more traditional phone and in-person contact. But don't make assumptions–ask them.
- l In addition to remaining sensitive to your clients' ways to communicate, stay on top of these preferences so you'll know if they change.
- l Devote more time to your clients. No matter the news, it's essential that advisory firms be proactive about their communication with clients. Consider that more high-touch communication (face-to-face and phone calls, for instance) are more effective during times of stress. Lessen the reliance on e-mail unless it's preferred by clients. Set aside time each day to connect with clients.
- l Don't underestimate technology–an effective CRM system is an important tool in your client relationship.
Top Practice No. 2: Referrals
Market performance was not the only factor responsible for growth in advisor assets in 2009. New clients also resulted in increased assets. There has been a significant shift in how advisors gained new clients–overall, all firms were much more proactive in seeking active referrals from clients, with the average firm doubling the percentage of clients gained from actively seeking referrals to 21% in 2009 from just 12% in 2008.
