In my previous article, The Foundation of Organic Growth, we explored the core strategy for growing your wealth management business: establishing relationship primacy. Now, we’ll move further up the growth pyramid and dive into proven methods for acquiring new clients.
According to a recent Cerulli study, 55% of financial advisors reported new client acquisition as one of their top challenges. Developing effective and consistent strategies for client acquisition is crucial to the long-term success of any wealth management firm. For advisors who are not seeing the desired results, the definition of insanity comes to mind: "doing the same thing repeatedly and expecting different results." Let’s take a closer look at some alternative approaches that may lead to higher levels of new client relationships.
1. Become More Selective
Over the past 15 years, Red Rock has worked with thousands of financial advisors. Early in their careers, most wealth managers use simple criteria for client selection: someone who has a pulse and investable assets. However, as time goes on, this criteria typically evolves into “someone who meets my minimum requirements.” But the top wealth management firms take a more specific approach when choosing new clients, balancing growth with maintaining the ability to build deep, meaningful relationships. Here are three essential criteria for refining your client acquisition strategy:
Know Your Averages and Stick to Them
Understand your average asset size and revenue per client, and avoid taking on clients who fall below these averages. Acquiring new clients is costly and time-consuming. Michael Kitces’ research estimates that the average cost of acquiring a new client is $3,119. If the cost of acquisition and servicing outweighs the client’s lifetime value, it can reduce long-term profitability. Every new client should strengthen your averages, contributing to both revenue and profitability.
Understand Who You Serve Best
The most successful wealth management firms understand exactly who they serve best. One exercise we recommend to all advisors is to analyze your current clients to identify patterns—whether it’s shared professions, social, or religious affiliations. This will help you uncover a niche that aligns perfectly with your strengths and expertise. Focus on replicating the types of clients who have proven to be a great fit for your business.
Look Beyond the Numbers
While assets and revenue are critical, at some point, qualitative factors come into play when determining whether a new client is a good fit. Achieving financial security gives you the freedom to choose whom you work with. Therefore, do business with people you enjoy spending time with, as this will lead to more fulfilling relationships.
2. Stop Asking for Referrals
While it may seem counterintuitive, it’s time to rethink the way we approach referrals. We’ve all been taught that referrals are the best source of new client acquisition for wealth managers, and while that’s still true, Red Rock encourages you to shift your tactics for generating referrals. Asking for a referral means you’re placing the outcome in someone else’s hands. How many times have you requested a referral, only to hear, "Let me think about it"? Or received a name, but then struggled to follow up because the client never got around to it?
Here’s an effective way to take control of the conversation and create a more reliable pipeline:
Build a Prospecting Pipeline
Review your top 20-25 clients and ask, "Who do we know that they know?" Most clients interact with people of similar socioeconomic status, so it’s likely that their circle includes individuals who are a good fit for your services. Try to identify three potential prospects per client and prepare to reach out.
Do Your Homework
Social media is a powerful tool to learn more about potential prospects. By reviewing their profiles, you can gain insights into their interests and networks, giving you a solid foundation before making contact.
Share Your Prospecting Plan
Instead of directly asking for a referral, approach your client with something like this: "I recall you mentioned being friends with John Smith and his wife, Jane. I’m planning to reach out to them and wanted your advice on how I can most professionally approach them." In this scenario, your client can offer guidance, introduce you, or confirm that they’re happy with their current advisor. Either way, you’re taking charge of the conversation.
3. Embrace Quid Pro Quo
Forming strong professional partnerships is another highly effective way to acquire new clients. When executed properly, quid pro quo partnerships become the backbone of successful business relationships. The key to these partnerships is ensuring that all parties involved benefit—professionals, clients, and the partners themselves. However, in our experience at Red Rock Strategic Partners, there are three main challenges to building and maintaining successful professional partnerships:
Excessive One-Sidedness
A common complaint we hear from wealth managers is that their partnerships feel too one-sided. They give more than they receive. This imbalance often arises from a lack of clarity regarding the goals of the partnership. To address this, make sure you thoroughly understand your partners' value, establish common client profiles, and set realistic expectations for the relationship.
Defining the Partnership Path
Once you’ve agreed to work together, it’s crucial to define how you’ll collaborate. Too often, professional partnerships falter due to a lack of structure. By clearly aligning your services, creating a unified value proposition, and establishing concrete action steps and timelines, you can avoid this pitfall.
Strong Communication
One of our clients recently shared a great approach to partner communication: "They have my cell number, I have theirs, and we speak at least once a week." This simple but effective strategy helps ensure both parties are fully engaged and that the partnership remains on track. Strong communication is essential to sustaining these relationships over the long term.
Client acquisition is vital to the growth and success of any wealth management firm. By focusing on the clients you serve best, adopting a more proactive referral strategy, and leveraging your professional network, wealth managers can build a robust pipeline of prospective clients. The key to success lies in consistently delivering value, building trust, and positioning yourself in the places where your ideal clients are seeking help. With the right strategies in place, you can attract and convert prospects into loyal clients and achieve exponential organic growth.