The Real Reason Garth Turner Blogs?

Here's a very interesting piece on the challenges financial companies face in an era of declining response from traditional lead generation techniques. http://advisoranalyst.com/advisor/tag/garth-turner/

A new approach to prospecting

Wednesday, May 4th, 2011

inShare 

Note:  First pub­lished in March 2009, this arti­cle was ranked first out of over 500 arti­cles pub­lished in 2009 by Hors​es​mouth​.com, the lead­ing online site for U.S. finan­cial advi­sors. It sets out some new think­ing on what it takes to attract new clients today – and is just as rel­e­vant in Jan­u­ary 2010 as it was in March of last year. 

Recent con­ver­sa­tions with investors and advi­sors have con­vinced me that we are in the midst of a sig­nif­i­cant shift in our busi­ness when it comes to attract­ing new clients – some­thing that will lead to the death of mass prospect­ing as we’ve his­tor­i­cally known it.

As an aside, this has lit­tle to do with the mar­ket decline of 2008 – and every­thing to do with the real­ity of a much more informed and skep­ti­cal con­sumer than in the past.

The last twenty years has seen a steady and pre­cip­i­tous decline in the response rates to all the tra­di­tional forms of mass prospect­ing. As a result, we are in the midst of a dra­matic – and in my view per­ma­nent – shift in what it will take to attract new clients going for­ward. 

The essence of this change is that the tra­di­tional divide between com­mu­ni­ca­tion to clients and com­mu­ni­ca­tion to prospects will dis­ap­pear – and advi­sors will have to start treat­ing prospects like clients from the moment they start talk­ing to them.

The past As recently as the six­ties, the 10−3−1 rule still pre­vailed in the insur­ance indus­try – if you spoke to 10 prospects, you got three appoint­ments and had a high like­li­hood of mak­ing at least one sale.

In the late eight­ies, mail drops offer­ing free research reports gar­nered return rates of 10% to 15% — if you mailed out 500 let­ters offer­ing a research report, you could expect 50 to 75 responses.

In the mid nineties, hotel rooms across Canada were packed with prospects attracted by news­pa­per ads offer­ing free sem­i­nars fea­tur­ing media celebri­ties such as Brian Costello, Jerry White and Garth Turner. Many advi­sors built their busi­nesses based on the turnout to those seminars. 

In the words of cult nov­el­ist S.E. Hin­ton, “that was then … this is now.”

The present

Even before the mar­ket events of last year, response rates to mass mar­ket­ing of all forms had seen a dra­matic decline.   A con­ver­sa­tion last spring with a Toronto advi­sor from one of the bank owned bro­ker­age firms drove this home. 

The future

My con­clu­sions are sim­ple: Every form of prospect­ing has always ulti­mately been a num­bers game — and always will be. That is true of focus­ing on refer­rals just as it is of mass adver­tis­ing.   The big change is in what those num­bers look like — the return on high trust activ­i­ties such as refer­rals has been sta­ble and in some cases improved, while the num­bers on mass prospect­ing have plummeted.

The bot­tom line: Drop­ping response rates will make the eco­nom­ics of mass prospect­ing less and less attractive.

One impor­tant impli­ca­tion of this is that the tra­di­tional divide between com­mu­ni­ca­tion to clients and com­mu­ni­ca­tion to prospects will disappear.

Given the grow­ing level of skep­ti­cism on the part of the invest­ing pub­lic, the most com­pelling com­mu­ni­ca­tion to prospects will not relate to prospect­ing break­fasts, lunches, din­ners and work­shops. It will not fea­ture spe­cial offers adver­tised in the paper or offered via direct mail. Nor will it focus on cold calls to busi­ness own­ers, offer­ing a second opin­ion on their situation.

It’s not that these approaches can’t work — any­thing within rea­son will work if you do enough of it. The prob­lem is that the response rate to any­thing that investors see as a “sales pitch” is already low and will only decline fur­ther. (Note that there is an excep­tion to declin­ing response rates if an advi­sor has built vis­i­bil­ity and cred­i­bil­ity in the prospect pop­u­la­tions he or she is targeting.

So if mass prospect­ing won’t work, what will?

The answer relates to the response when you ask investors who select a new advi­sor what the key fac­tor in their deci­sion was. 

The answer:  “I felt I could trust this advisor.”

That’s why high trust approaches based on refer­rals con­sis­tently show up as the most effec­tive prospect­ing approaches. Whether it be refer­rals from clients, pro­fes­sion­als or other parts of the finan­cial insti­tu­tion you work for, the rea­son refer­rals work is that they’re fun­da­men­tally a trans­fer of the trust that some­one has in you to a friend, col­league or client they work with. (And the more assets some­one has, the more crit­i­cal refer­rals tend to be.)

That’s why focused effort to become the trusted “advi­sor of choice” against a defined tar­get com­mu­nity will con­tinue to yield results.  (With­out push­ing this par­al­lel too far, this is why Bernie Madoff’s got so many of his assets from retired Jew­ish busi­ness­men in New York, Florida and South­ern Cal­i­for­nia — he built a posi­tion as the trusted, go to resource for this com­mu­nity and was the ben­e­fi­ciary of word of mouth among that group.)

Merg­ing client and prospect communication

And that’s why going for­ward suc­cess­ful advi­sors will not have sep­a­rate streams of com­mu­ni­ca­tion for prospects and clients, but will instead inte­grate the com­mu­ni­ca­tion to clients and prospects.

Rather than telling prospects that you’d like to send them an infor­ma­tion pack­age on your ser­vices, advi­sors will say: “I’d like to put you on the dis­tri­b­u­tion list for the mate­r­ial I send my clients, so that you can get the sense of the kind of com­mu­ni­ca­tion my clients receive.”

Rather than spend­ing money on brochures and audio and video busi­ness cards, advi­sors will focus on build­ing client friendly web­sites, packed with use­ful infor­ma­tion and resources for clients — and then invite prospects to browse their site, giv­ing them a sense of what life as a client would be like.

And rather than invit­ing prospects to spe­cial work­shops or lunches for prospec­tive clients (and have these prospects with their defenses up, wait­ing for the sales pitch), advi­sors will say: “I run a reg­u­lar series of sand­wich lunches in my board­room for inter­ested clients, talk­ing about what’s hap­pen­ing in mar­kets. If you’re inter­ested in sit­ting in, I’d be happy to have you join us.” 

Financial lead generation techniques have moved into the digital age; witness www.greaterfool.ca and its fawning but mostly clueless readership, and follow up "free" nationwide tours, ..it's where it's at in the 201x's