Financial Marketing: Lifestyle Referrals | Lord Abbett
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Practice Management

Savvy financial firms understand that acquiring new clients is more than just getting one customer to give them a recommendation.

This Practice Management article is intended for financial advisors only (registered representatives of broker dealers or associated persons of Registered Investment Advisors).

It seemed as if John Thiel just could not land this one client. An officer of a firm about to go public, the potential client wouldn’t even consider meetings with Merrill Lynch Private Banking and Investment Groups, despite numerous overtures. Then Thiel and his team discovered the prospect had concerns about how his new wealth would affect his two adult daughters. Solution? The team invited the two women—without Dad—to a financial boot camp that the firm began offering several years before.

“They were so ecstatic, and he was so impressed by how their attitudes had changed, that he created a meaningful relationship with us,” says Thiel, the co-head of Private Wealth Management for Bank of America and head of Merrill Lynch Private Banking and Investment Group. “He was unable to get to them, but we could. And in a situation like that you’re forever grateful.”

To Thiel, that client was not coming through the door from a basic, traditional referral. Instead, his daughters laid the path in a whole new way. In fact, most firms would agree that viewing basic client referrals as an end game is an outmoded way to drive business growth.

The problem is that clients just don’t need financial advisors in the same way these days. In a matter of minutes, investors can invest in index funds, or get stock quotes with a simple click of the mouse.

They can source financial research and find the news that’s swaying the market. Anyone clever enough to make a lot of money can often manage that money on his own if he or she chooses to. So today, it’s incumbent on financial advisors to show investors why they’re needed. And a nod from a favorite uncle isn’t going to be enough anymore to bring that $10 million client in to sign.

“Twenty years ago a client was happy to find out the price of a stock, because they couldn’t get that,” Thiel says. “Now they know everything that’s going on, and there’s a ubiquity of information. Now, what they use us for has changed.”

And how they choose a firm has changed as well. True, happy clients will recommend their financial advisors to colleagues, friends and family. But instead of trying to acquire referrals as commodities, successful companies now convey why they’re the right partner for that client’s entire life, not just his assets.

Marilyn Plum recalls a client that came into her Lafayette, California, firm, Ballou Plum Wealth Advisors, who had a secure corporate position, but wanted to move to a nonprofit. She asked Plum and her partner Lynn Ballou to run through the numbers to see if she could actually handle this career transition since she would be losing a high salary.

“We found she could afford to take the leap,” Plum says. “And from that, she referred another family member to us.”

Sometimes, however, financial advisors will turn to non-financial services to help current clients and attract new ones as well. These concierge-like perks, growing very popular in the industry, may not be right for every investor. Indeed, they wouldn’t be cost-effective if offered to every investor. But for certain customers, and smaller firms, they can help set apart one financial advisor from another. Plus, these white-glove exclusive services can appear attractive to new prospects.

Doug Lockwood’s firm Harbor Lights Financial Group in Manasquan, New Jersey, ran a survey among his clients a few years back. But instead of asking them about the things they liked about their advisors, he asked about favorite sports teams, wines, and what stressed them the most. Their top answer to what created anxiety in their lives? Buying a car.

So Lockwood and his team hit every car dealer in Monmouth, New Jersey, found the ones that would treat their clients with white gloves and began doing the negotiating for them. And restaurants with impossible-to-book tables? No problem for Lockwood’s clients. He called them as well. And after 12 months, the firm saw a 100% growth in assets under management, including one investor who had just inherited a $7.8 million estate from his mother. That client came in after the firm helped lease a car for a close friend, Lockwood says.

“We found we could be doing things for our clients that were not necessarily about creating a financial plan,” says Lockwood, whose firm is affiliated with LPL Financial.

“This might not necessarily be financial planning driven but this is the stuff talked about at the dinner table,” Lockwood says. “Not whose mutual fund is doing better. I can’t imagine running a financial planning firm today without a service like this. If we all charge the same, what differentiates us?”

Sure, Bank of America Merrill Lynch’s Thiel might not be negotiating the best package on the latest Jaguar XJ for a client. But how about arranging a cooking demonstration with a top chef in San Francisco to attract a reluctant chief executive? Absolutely, especially if the other guests included high-net-worth business leaders who helped filet the veal and whip up lobster bisque in the same kitchen. One chief executive signed shortly after that particular event.

“All of them in the same room together, with that similar community, helps them feel they are in the right place and that they’re all of similar stature,” Thiel says. Since offering these kinds of events, the firm has reaped more than a 200% return on the investment. “This lifestyle service is a big part of client satisfaction,” he adds.

So too is being able to offer investors many different financial services all under one roof. With the number of mergers in the past few years, many Wall Street houses now have a wide array of products. A client that has investment needs may want to leverage debt for a public offering. Or a customer with complicated tax issues may want to understand the best way to divest a large stock holding without triggering onerous capital gains.

For some firms, client referrals can be as simple now as walking a client from one side of a building to another, or picking up the phone and dialing an internal extension.

At Bank of America Merrill Lynch, every new financial advisor is walked through the complete range of in-house services when they first come aboard. Then they’re handed the firm’s organizational chart and told that they—and their clients—have full access to all of the firm’s resources. To the company, broadening how many services are available is not merely as good as a new prospect that walks through the door—it’s better.

“We don’t even think of this as a referral,” says Michael Sullivan, head of the BofA/Merrill Lynch Global Client Coverage Group. “The entire industry has talked about referrals and cross-selling and those have failed because they see it as a beginning and an end. But that doesn’t focus on the client. We think of it as a business model.”

As an example, in 2009 a Global Corporate & Investment Banking (GCIB) professional reached out to Sullivan’s group to see if BofA/Merrill Lynch already had a relationship with a private technology company in California. Upon learning that the firm did have a connection with both senior management and the tech company’s board of directors through a financial advisor, the advisor introduced the tech company to her GCIB colleague. One year later, Bank of America Merrill Lynch served as joint underwriters on the company’s initial public offering.

Sullivan’s team also worked with an in-house financial advisor whose client was a private energy company based in the eastern part of the United States. The team had the advisor introduce the energy firm to the GCIB team that covered the energy and power industry, which led to Bank of America Merrill Lynch pitching themselves as underwriters for an initial public offering in June 2009. Less then a year later, the firm underwrote the IPO.

“The real story is to have a narrow and deep relationship with our clients,” Sullivan says. “We shifted away from client acquisition, to selectively adding the right client to the right channel. When you start to think about serving clients together under the same roof, you can build trust, alignment and deliver to clients what they need.”

Ameriprise has taken a similar approach since its purchase of H&R Block Financial Advisors in 2008. Ameriprise absorbed not just H&R Block’s 900 or so advisors, it also gained access to a network of thousands of tax professionals. After all, the 20 million taxpayers that H&R block sees every year is a great line on new assets.

“So now if you have a relationship with your CPA, but want some financial advice, such as questions on a Roth conversion, we can offer that to our clients,” says Dave Geschke, senior vice president of the Ameriprise Advisor Group and the former chief operating officer of H&R Block Financial Advisors. “Clients want to have more of that personal connection.”

Not every H&R Block customer is right for Ameriprise’s advisors, whose 2.5 million clients typically fall into the higher net worth area. But when there is a good fit, the firm wants to assure those clients that the hand-off from a certified public accountant to an advisor is being done with careful, and trusted, vetting. A client who feels pawned off on whoever’s available may well end up feeling like another commodity to the firm. And that’s a client who’s likely to shop for a new CPA, advisor—or both.

“For me, to refer that client, I want to make sure I know that person, and it’s someone I can trust,” says Geschke, who notes that since the integration of the two firms was completed last fall, this is the first tax season for the new venture. “It’s about building relationships,” he says.

Ballou Plum Wealth Advisors takes a similar approach. Plum and her co-partner hold a breakfast or lunch periodically with clients and invite their attorneys, CPAs and other professionals that may affect an investor’s life. While the client ends up feeling well cared for, Plum also develops relationships with other financial experts who then pitch referrals back to her firm.

And these more traditional routes, while not as colorful as a concierge service, are not to be ignored, says one expert.

Stephanie Bogan, president and CEO of Quantuvis, a national consulting firm, calls this practice “active marketing." And she says many advisors are particularly rusty in this area as the stock market’s activity in the first few years of the decade allowed them to just watch the money grow. Now, it’s a very different story.

“What worked in the past doesn’t today,” Bogan says. “Before, advisors were riding the wind. But no one wants to return to the days of dialing for dollars. For advisors who want to maintain double-digit growth, and can’t rely on the market, they have to try harder.”

To Bogan, the key is not waiting for calls to come in from referrals, but taking the initiative in driving referrals to a firm. She likes what Bank of America Merrill Lynch and Ameriprise are doing, but believes even small firms can also adopt this attitude and carry through on the action. It can start with something as simple as a thank-you note. “More than 50% of advisors don’t follow up with a phone call or a card,” she says. “They don’t go through even basic etiquette. People do things, and make decisions because it makes them feel good. And they don’t do things if they don’t feel good about it.”

One Midwest client of Quantuvis throws a client appreciation event every year at a local bakery with free apple pies and ice cream. And each time a client sends a referral to the firm, the advisory practice sends the client a giant apple pie. “Now that works because it fits their culture, their client base, and the advisor’s style,” Bogan says. “But any event can work. It just depends on the strategy and execution. It’s about instituting a ‘wow’ experience.”

At Bank of America Merrill Lynch, Thiel’s team is about to launch what it’s tagged the Old-Dog Boot Camp—a moniker that clients came up with, he’s quick to add. Given the market crash, and recent recession, investors came to the firm asking for some reeducation. Thiel says they saw their children and spouses attend these events, and walk away transformed, much like the daughters of the officer of that soon-to-go public firm. They realized they needed a refresher too, he says.

“We’re constantly monitoring what [clients are] looking for,” Thiel says. “As an industry, if we focus on the client, it’s going to help everybody.”  

Lauren Barack is a regular contributor to SourceMedia publications.



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