I was reading a new study from LPL Financial, “Cultivating the Next Generation” about how important it is for Financial Advisors to include children of current clients in their outreach efforts. In many cases, these children don’t have enough assets to make it worthwhile to the advisor, but as the piece points out, they probably will at some point, and you’ll be making your current client happy. So why don’t 50% of Advisors do it? Shortsightedness, I guess. The solution? Influencing the influencers.
When I was in charge of marketing retirement solutions at Morgan Stanley, we knew that all our marketing efforts were aimed at two different targets. First, we had to convince the FA that they should pay attention to whatever product we were marketing, and then to pass that information along to their client. A classic B-to-B-to-C model – with a twist. We were dealing not so much with indifference, but with outright reluctance. Advisors were more interested in shorter-sell activities like recommending equity transactions. Retirement, while important, was a long-sell and sometimes complicated. So we not only had to understand what levers we needed to press with our investor clients, but what we needed to do to convince the advisors.
One year, we did some research and realized that if all eligible clients contributed the annual maximum to their IRA accounts, we were looking at an aggregate increase in AUM well into the billions. But on a client-by-client basis, it was small potatoes – too small in fact for FAs to even get paid a commission. So we had ourselves a dilemma – how to convince FAs to market IRAs to their clients when they weren’t getting paid a cent to do it. Now, I should stop to say that almost all FAs really do have their client’s best interests at heart, but also like to be paid.
We came up with a solution that brought a huge increase in retirement assets and had our FAs thanking us in the process. You can read about it in this case study, but in a nutshell, we reached out directly to clients with a letter – over the FA’s digitized signature – encouraging clients to use the handy-dandy attached coupon to make their annual contribution. You can read the case study to see how it went, but here’s the upshot – we increased contributions from $1.7 million to $49 million. In one year.
What’s the lesson, and how does it apply to the generational investing dilemma in the LPL article? It’s basic marketing – understand what motivates your audience; determine their needs; solve their problem and make it incredibly easy to act.