By the Financial Planning Association
In a recent FPA study, sponsored by Transamerica, we explored the value of eleven different marketing methods. Respondents indicated which marketing methods they use and how effective they think they are. As in the 2007 survey, referrals and additional business from current clients were clearly in the top tier.
Other responses fell into a second or third tier, with perceived effectiveness trailing off markedly. Tier two is composed of methods that involve personal contact but are not necessarily based on an established relationship. Tier three consists of techniques that are more often associated with mass marketing rather than personal one-to-one marketing.
The most commonly untried methods are direct mail (not used by 53 percent of respondents), seminars (41 percent have not used), radio advertising (71 percent have not used), print advertising (55 percent have not used), e-mail (51 have not used) and worksite prospecting (55 percent have not used).
The frequency of the "have not used" response roughly correlates with higher delivery expense. Asking for and receiving referrals and going to existing clients have minimal incremental cost for independent advisors. Marketing activities beyond those in tier one entail an up-front commitment of resources (time and/or money) by the independent advisor, and consequently invite less use.
A trend is beginning to emerge. From year-to-year, the independent advisor channel is reporting the same or marginally lower levels of effectiveness for almost all marketing methods. Between 2007 and 2008, more effective ratings for the top tier dropped for two of the three categories. Only the existing clients were rated at the same level. There was also a small drop for all methods in the second tier.
A reinforcing pattern emerges when contrasting responses to other less fragmented channels. Financial planners report a lower effectiveness rating across the board for all marketing methods with the exception of acquiring new business from existing clients. This may speak to the smaller practices typical of the financial planner distribution channel, which makes marketing methods that require some degree of scale more economically difficult to use.
It remains to be seen how effectively these differing approaches will compete in the retirement income and planning marketplace. Advisors who successfully scale up with technology and support to serve the same or a greater number of clients more effectively are likely to be the "winners." This approach is not without risk. Scaling up, even modestly, carries with it additional complexity, overhead, and risks that a smaller, more targeted, one-to-one approach does not.
Marketing Methods |
||
| In your personal experience, how effective are each of the following methods of acquiring retirement income planning clients? | ||
|
Less Effective* |
More Effective |
|
Tier One |
||
| Existing Clients-Referrals |
10% |
90% |
| Existing Clients-Reaching Retirement |
8% |
92% |
| Referrals-Professional Network |
32% |
68% |
Tier Two |
||
| Community Involvement |
65% |
35% |
| Seminars |
75% |
25% |
| Work Site |
77% |
23% |
Tier Three |
||
| Web Site |
80% |
20% |
|
88% |
12% |
|
| Print Ads |
90% |
10% |
| Direct Mail |
95% |
6% |
| Radio Ads |
96% |
4% |
| Note: Numbers have been rounded and may not total exactly 100 percent. | ||
| *Includes both "have not used" and "less effective" | ||
| Source: "2008 Financial Planner Attitudes and Perceptions about the Retirement Income Distribution Market," produced by FPA and DSG and sponsored by Transamerica | ||
The FPA Research Group is more than an impressive gateway providing various ways to help advance the financial planning profession; it is also a way for you to share your opinions, gain research insights and receive chances to win free FPA conference registrations. For more information, visit www.FPAResearch.com/enroll
