TORONTO (Reuters) - Every financial adviser faces the uphill battle of building a customer base through referrals, networking, cold-calling and marketing - and the memory of his early days of seeking clients still haunts Christopher Dewdney.
“The first years were very difficult,” recalls the Toronto financial adviser, who now has nine years under his belt.
Told to focus on his “natural market” of family, friends and fellow graduates, Dewdney found mostly impoverished ex-students like himself, with little money to invest. Marketing efforts cost money he was not making, and he lacked the credibility to get referrals.
“Everyone says referrals, referrals, referrals,” he said. “I get it, but when you are young and new at anything, it is very difficult to get a referral. Everyone wants somebody with experience, who is credible, who has done it and been successful.”
Joanne Ferguson has heard this lament from many young financial advisers in Canada, where only a minority of new entrants survive the first five years.
Ferguson, the president of coaching and consulting firm Advisor Pathways in Toronto, said advisers need to play to their strengths.
“Finding your comfort zone is really important,” said Ferguson. “You have to realize if you are a direct-approach person or an indirect-approach person.”
An adviser who likes the direct approach will be comfortable cold-calling potential clients, while an indirect approach might involve sending out letters and then following up with a call.
“You have to have a pipeline of at least 2,000 people that you can be reaching out to,” said Ferguson. “For you to get 200 or even 100 clients, you need that many people if you really are starting from scratch.”
Firms typically want advisers to bring in C$7 million to C$10 million in assets a year, she added.
To a new adviser, prospecting for new clients may seem an insurmountable task. But a few strategies can help.
First, find referrals, either from existing clients who recommend you to friends or family, or from fellow professionals who send their clients to you for help.
Susan St. Amand, an Ottawa financial planner and insurance specialist, is now a 23-year veteran. But when she started out, she knew she would not have credibility to win referrals from senior lawyers or other professionals. She started combing the new-hire announcements from law and accountancy firms, looking for people like her.
“I started seeking out allied professionals that were similar in their professional spectrum - age, years in the business,” said St. Amand, who is a member of Advocis, the Financial Advisors Association of Canada.
“They want the same as you. They are looking for new clients, looking to add value.”
The exchange of information would begin. She taught them about insurance and her expertise, so they understood how she could help their clients when they needed a financial adviser. For her part, she could then refer her clients to an accountant or a lawyer.
The relationship had to be based on mutual respect, and not simply a tit-for-tat referral game.
“You may run across people that want a referral relationship - if you refer me one I’ll refer you,” St. Amand said. “They are keeping score all the time. But you have to have confidence it all works out in the end, and keeping score just gets in the way and builds resentments.”
Referrals from clients do not work the way they did 10 or 15 years ago, said Dan Richards, president of Client Insights and author of the book “Getting Clients Keeping Clients: Essential Strategies for Tomorrow’s Financial Advisor.”
Increasingly skeptical clients no longer feel obligated to help when an adviser asks: “Can you recommend me to your friends?” But if they are satisfied with their adviser, they will give a referral when a friend needs one.
“One of the big misconceptions among advisers is that clients make referrals to help the adviser,” said Richards. “Almost always it is to help friends.”
For example, Richards recalls an adviser who helped his top 50 clients draw up a spreadsheet of all their accounts, contacts and other information that their family would need in case of emergency. When it was over, several mentioned friends and family members who would benefit from just such an exercise.
“Even though he made a conscious decision not to turn this into a sales pitch - didn’t raise the issue of referrals - he got them because clients perceived pure value,” Richards said.
Ferguson recommends finding a niche and attending events to build relationships or focus the aim of marketing.
“If you’re targeting doctors and surgeons, they don’t have a lot of time, but there are publications that they do read, or they have events you can be part of,” she said. “And a lot of it is word of mouth.”
Finally, both St. Amand and Dewdney said joining community organizations, corporate boards or charitable groups can build relationships and give advisers something positive to focus on.
“There is limited to no cost in doing that, and it is a great way to get into your community and try to build a business relationship going forward,” said Dewdney.
“But pick something you love. You don’t want to do something that is not near and dear to your heart. Don’t fake it, because people will know.”
Reporting by Andrea Hopkins; Editing by Frank McGurty and Lisa Von Ahn