#FASuccess Ep 201: Building A Scalable Advisor Marketing Engine That Eliminates Reliance On Rainmakers Or Referrals, With John Wernz

What You’ll Learn In This Podcast Episode

• How John Views Marketing In The Financial Services Industry [06:18]
• The History Of Wealth Enhancement Group And What It Looks Like Today [15:21]
• How John’s Firm Uses Direct Marketing And Analytics To Target And Acquire Their Clients [19:47]
• The Direct Mail Firms That John Works With To Generate His Marketing Data And The Technology That He Uses To Manage That Data [35:23]
• How John Measures The ROI Of Their Client Acquisition Process [46:49]
• How John Calculates Their Cost Per Client To Determine Their Media Efficiency Ratio [58:20]
• How Wealth Enhancement Group Uses Firm Acquisitions To Increase Their New Channels For Marketing [01:06:43]
• What Wealth Enhancement Group’s Current Marketing Channels Look Like [01:16:55]
• What Surprised John The Most And The Low Point In His Journey [01:25:51]
• The Advice That John Would Have Given Himself 10 Years Ago And The Marketing Advice That John Would Give Newer Or Small Advisory Firms [01:33:38]
• What Comes Next For John And How He Defines ‘Success’ For Himself [01:39:42]

Resources Featured In This Episode:

• John Wernz
• John Wernz - Twitter
• Wealth Enhancement Group
• Fisher Investments
• Equifax for Business
• Paradysz Matera/PMX
• Salesforce
• Salesforce Marketing Cloud
• Hubspot
• SmartAsset SmartAdvisor
• Zoe Financial
• Wealth Enhancement Group Seeks to Compete With Top Aggregators Through Tech
• Wealth Enhancement Group Acquires $440M New York RIA
• Harvard Business Review: The Trouble With CMOs
• McKinsey & Company: Modern marketing: What it is, what it isn’t, and how to do it

Full Transcript:

Michael: Welcome, John Wernz to the "Financial Advisor Success" podcast.

John: It's an honor to be here. Thank you, Michael.

Michael: I'm really excited about the discussion today. And talking about advisor marketing, we have these kinds of rules of thumb and sayings in the industry. Yes, advisory firms grow through referrals – the best way to grow is through referrals. If your firm is not growing enough, you just need to learn to ask for referrals more often. And I'll admit I have always had trouble with this. If you look at any industry benchmarking study, it's pretty consistent. The average advisory firm spends maybe 2% of revenue on marketing. And if you drill down, usually the 2% of revenue is like a client appreciation event, which is actually mostly for your existing clients and not even really that marketing-related, except maybe you bring a rich friend along as a potential referral. We basically spend no money on marketing.

I've always looked at this and said like, is that because it's not a good deal to spend money on marketing because referrals are a best practice and you don't need to spend a lot on referrals to get them? Or is it just that because the industry basically spends nothing on marketing, of course, our number one growth channel is referrals, because there's essentially nothing left if you don't spend any money on marketing?

And I know you live in a world, in a firm, that spends a lot of money on marketing and has driven a lot of growth from it. I'm excited to talk today about what happens when you start flipping this equation around and actually think about spending very significant amounts of money on marketing, and the kind of ROI that you can get when you're actually willing to invest into and spend significant amounts of money on marketing to grow a firm.

John: I mean, it is an age-old puzzle in our business. And one of the reasons, as a marketer, I've loved being in financial services is I do think marketing is underleveraged. And it seems like when marketing is really well done, people are blown away, maybe even more than in other industries. So, for that reason, marketers and financial services – if you can get in the right situation and get in a situation where the firm understands and is willing to invest – I'd argue it's one of the best industries to be a part of.

Michael: So, I feel like you just put together – like that is the most amazing pitch for anybody in marketing, not in financial services, who is considering coming in. So just to be clear what John said, your bar in our industry will be lower than any other industry.

John: You look at healthcare. Marketing in healthcare is amazing. The depth of what you'll see from startup to giant firm and how advanced it is. It's another highly regulated industry as a parallel. It's just miles ahead of financial services. So yeah, I've liked being in financial services, because I consider myself a marketer at heart, sometimes even more than a financial services member. But yeah, it's just when you do it well in financial services, people just seem to be blown away, they almost don't believe it.

Michael: So, talk to us a little bit, then about – we're going to drill down into more details of what you've done and what you've built in your firm over time. My guess, at a starting point – just as someone that, as you've said, comes to this as a marketer first and financial services second. Like, I'm a marketer, this just happens to be the industry I've landed in. How do you look at and think about marketing in the financial services industry as a marketer?

How John Views Marketing In The Financial Services Industry [06:18]

John: If you look at it really broadly, and some people ask, why do you think there hasn't been as much dedicated investment in marketing? I think a lot of it is structural to the industry; that this was an industry comprised really of either really large firms. So, somebody like Ameriprise. And Ameriprise has a bunch of advisors, but most of them aren't really corporate employees. They're out there kind of like the lone wolf. And so, Ameriprise, years ago, they ran a Superbowl ad with Tommy Lee Jones on a pickup truck. And I remember looking at that saying, "Sure they're a big firm, they need to expand the brand. And that's smart." But there's no way there was an ROI to that ad. I don't see it.

And on the other end of the spectrum you always have mom and pop shops that do great work and can do really good work, but where's the time for them to do investment? The industry and the landscape does seem to be changing enough that a lot of these fast-growth companies in the middle of the RIAs are becoming big enough and scaling enough to actually have dedicated marketing to have the investment in marketing and to see that it's possible.

So I think as you're seeing that change in the landscape, marketing is becoming a larger and larger part of financial services. And that's great, because really, our core financial services, if you go back to the brand, are to help people. And that is at the heart of the industry. And so if we can do that more, to me, especially in the RIA market, I just think it's really powerful.

Michael: You make an interesting point there that this sort of seems to be emerging around RIAs in particular, and it strikes me there are some unique things about RIAs and the evolution of RIAs relative to so much of the rest of the financial services industry. That on the one hand, they sort of hit the sweet spot between the two ends of the spectrum that you just defined. You get the mega-firms of independent advisors where, sure, you can do some broad-based branding. So maybe when the advisor has that on their business card, the consumer is seeing the name before and it's kind of familiar, but when you're a central brand marketing for independent advisors who are only loosely affiliated to your platform, it's kind of hard to really drive the direct ROI from the marketing because you only get a piece of the advisors business and sort of the classic like broker-dealer override model. The advisor may or may not stay with you in the long run. So the client may or may not stay, and the advisor may or may not stay even if the client stays with the advisor, because the advisor could go to another BD. And so it's really hard to justify the costs of centralized marketing when you've got a very decentralized independent adviser model.

And at the other end of the spectrum, as you said, there's sort of the mom and pop shops, the classic solo independent advisor, and solo independent advisors, overall, that are still sort of mathematically the majority of the advisor headcount and drive a lot of the industry. But, as you know, the one thing they don't have is a bunch of time and capital to invest into marketing. So we tend to do it by our own sheer willpower. Go out there, network, meet people, develop some referrals, try to build some center of influence relationships, get enough to get your critical mass of clients that you can make your income. But we don't exactly have the scale and resources to invest in build-up marketing. And so, RIAs have evolved, or at least a subset of larger RIAs have seemed to have evolved to this midpoint large enough to make the investments employee-based enough for the firm to get an ROI on its marketing investments. And, lo and behold, suddenly, there's some mid- to large-sized RIAs that are actually starting to spend a lot on marketing.

John: I strongly agree. And you see, it's funny. Some of the firms that shoot up, they had something work. So you'll see a firm, they had a great – and I learn a lot from your podcasts. They had a great seminar model; they had a great AM radio model; they had a great... And they found these niches, which are hard to find and don't always work. They can be different by market and by setup and by talent, but a lot of times those singular channels will fade out. And then those firms will stall.

And so, the ones who have done it or who have continued are the ones who believe in multichannel. Yeah, if I wake up tomorrow, I have an AM radio strategy. I'm a CMO. That doesn't inspire a lot of confidence for the next 10 years. And I love AM radio. And Wealth Enhancement Group, in its early years in the '90s grew on AM radio, and we still do it. But if that was the focus of my plan, I would be highly uncomfortable. But you'll still find a lot of firms out there that are still dependent on that one channel and have not made the investment to diversify across channels.

Michael: Except, the irony to me is, I also feel like I see a lot of advisors that, they go to the opposite extreme. Well, I don't want to put all my eggs in one marketing basket, so I'm going to have a broad multichannel marketing strategy from the start. And it doesn't seem to necessarily carry a lot of momentum for them either.

John: Right. There needs to be enough specialization and investment to make any channel work. If all the channels were easy, we'd all do them, right? Everyone would have them all working and they're not. They all require some operational changes, learning, and investment to get them to the point where it's a positive ROI or a positive payback.

So, I know the strategy that I was very lucky to walk into at Wealth Enhancement Group almost 11 years ago was this desire to say if someone has the tool in their toolbox, we want it in ours as well. And so, if you're hearing that someone is making something work that we're not making work, we're going to fight like heck to make sure that it's fully evaluated and that we add it to our channel.

And for us, that was a lot of the key to our geographic growth. And as we touch on acquisitions later, one of the goals was to go into a new market. You don't want to have AM radio only. Maybe it's a bad AM radio market, maybe it's already taken, maybe there's an exclusive. You want to have 10 different channels from cutting-edge digital and affiliate marketing, to working with custodians and different referral programs to direct mail. If you don't have the whole basket, your confidence level can't be as high that you can continue organic growth beyond your one breakthrough thing that happened in your market.

Michael: And so as a marketer at a large firm, you had said if we see someone who's making something work, we're going to evaluate it and figure out if we should add it to our channels as well. So is that, literally, a part of the process for you is looking at what people are doing in advisor marketing, if you see someone that seems to be doing something that's getting some volume and scale, then you might look and say, "Hey, I think we're going to try that as well," except, because of your size and resources it's not like, "Hey, I'm going to try this for two hours on the side on Tuesdays," it's like, "Hey, we might hire a couple of full-time staff members and go at this with several hundred thousand dollars of resources to start and scale it from there if it goes well?"

John: Right. Wealth Enhancement Group has over 30 people in their marketing departments. Then we have it segmented by different channels or focuses from digital to direct to affiliate. And so each person is responsible, or manager is responsible, for optimizing that area of their little business of direct marketing or marketing acquisition. So if their part of the job of management is to feed them the ideas of what they're seeing or what they're hearing of what other firms are saying so that they can go out there and go, “Wow, I think we're going to need to test these two things I'm hearing or seeing enough to believe.” And again, you can easily be tricked. Just because a firm is doing it doesn't mean it's working. That's one of the great old marketing tricks is, oh, they're on TV so it must be working. Well, maybe. Certainly, yes, there are many firms who like to spend money and it might not be working. So, once you vet that, absolutely, that is driving the annual planning for, should we add this test, should we add this, and what are the highest odds of it? And at the end of the day, we're trying to run a marketing portfolio.

And if something's not performing or things die – we used to do a ton of direct response newspapers. And you've seen other firms do large full-scale ads. And we did it for years, especially in the early-2010s, and had great results from it. And I had really built out a creative methodology and an offer methodology and a media buying methodology that it was really producing well for the firm. It just slowly faded over all those years. And print is still used, but it's become a fraction of the marketing spend when it used to be 15%, 20% of the marketing spend was in print and now it's still too – we still test it every year and look for new options but it has not beat out the other channels in our mix.

Michael: So, talk to us a little bit more about the firm itself. You've mentioned a few times Wealth Enhancement Group. But for advisors who aren't familiar, can you just talk a little bit about Wealth Enhancement Group's scope, where you are, and who you serve? Paint a little bit of a picture for us of Wealth Enhancement Group.

The History Of Wealth Enhancement Group And What It Looks Like Today [15:21]

John: So Wealth Enhancement Group was formed in Minneapolis, Minnesota in the mid-1990s. We had four key partners. And it really still drives the foundation of our firm, as we're now approaching and exceeding 500 people. Back when we were 10 people, we had 1 great communicator, his name is Bruce Helmer. He's still a member of the firm and is still one of our leading presenters. And he had a radio show. Came into this radio show and just had this wonderful way of communicating with clients. The other thing he did, which is still in our firm, which is not easy, is he made financial planning interesting. And it's much easier to, say, in marketing, do scare techniques, like the market is going to 5000, everyone call. But really, the firm was about education and getting people into how you can actually improve your financial situation through financial planning.

Another partner could sell anything. Just a great salesman. He actually still has a number of people working in the firm. The third partner was a legendary financial planner. And so he was really the one who brought this idea that we can bring financial planning to the masses. It's not just for multi-millionaires, it can be for the millionaire next door. It can be for people with... Whether you have 20 million or 500,000, we believe that we can help you with financial planning. And then the final person was the glue. And she really knew how to run an office and how to build a business. And those four people, those four original founders, still influence the business today and the structure and the dedication to marketing as its own area that one of our founders brought and the dedication of financial planning.

So Wealth Enhancement has grown from that time, and we're just approaching 20 billion. So the official number last released was 19.4. And so it's been a wild ride. I've been there for about 10 years and joined at an interesting time. So about 10 years ago, like a lot of firms, as I mentioned before, we had a differentiated marketing position and had this wonderful channel of AM radio shows throughout the Midwest, and were doing some good seminar work and some other things. But at that time, the CEO then, and still the CEO today, Jeff Dekko, had a vision. And his vision was really that direct marketing and digital marketing was the future of financial services. This was during the great recession, that was a good time to invest.

And I had spent the last 10 years before Wealth Enhancement Group running a direct response agency out of Minneapolis. And had worked from direct mail to digital to direct response to radio and TV and print and all these different areas. I had worked a lot with Fisher Investments. And Fisher, through all of their press, has done an amazing job of marketing over the years and continues to use a very measured approach to that. So I had substantial experience with Fisher over the decade before.

So when I was connected to Wealth Enhancement Group, it was just this wonderful fit of a firm that had already started this pivot into tracking and CRM and all of the areas responsible that you need to really run these measured marketing programs, but it was really at the beginning of that arc, and it was very much motivated to create this toolbox methodology. And so over the last 10 years, it's taken twists and turns that have continued to drive the fast growth and include acquisitions. We'll touch on that, I know, a little bit as we prep. But the acquisitions, they're a great strategy on their own, but they're really about getting size in the market so that you can drive organic marketing on top of it. So in other words, if you're going to open a de novo office in Kentucky and Louisville, it's hard. You're starting from scratch. You're about client one, client two, client three. It's hard to get enough scale to really invest in marketing on top of that. It's a long payback. And so we've used this amazing power of finding new talent markets to have these footholds and then been able to drop these organic programs that have worked in all different markets across the country.

Michael: Interesting. So, direct mail. We're talking literally, creating some mailers, getting some addresses in the target zip code, sending them out. And as you'd mentioned, you did this with Fisher Investments. I know for a lot of advisors, you still see Fisher Investments direct marketing because a lot of us actually live in the zip codes that get targeted because financial advising is also a pretty decent income career so we're often on the receiving end of it. But is it that kind of direct marketing, things that show up in my mailbox from Wealth Enhancement Group?

How John’s Firm Uses Direct Marketing And Analytics To Target And Acquire Their Clients [19:47]

John: Yeah, and that's where, as you think about it, that's a great case study in direct marketing because it is really where the nerdy side of marketing shines. So, if you think of how Wealth Enhancement Group has grown our direct marketing program, if you think of the analytics that go into the list. It's not just buying the "Wall Street Journal" or "Money Magazine" or a different thing. We've gotten into psychographics, demographics. And one that we've shared, and we've shared this pretty widely is, we did a full regression on all of our best customers to find all of their habits. What they do, what they drive, where they live, what they eat, what their behaviors are.

And the enormous amount of publicly available targeting data, both offline and online, and one of the things we found was that our clients index very high to be birdwatchers. And so we don't even know you can have all these things. Well, they're patient, they're retired, they're in the financial planning phase of their life. You can make up all these things. And actually, I don't know why, but I just know that if someone has in their million publicly available pieces of info birdwatching – in our regression analysis, that part of their list says the odds that they will be a good financial planning client go way up.

And so you're doing that through massive data dumps, massive analytics to figure that out.

Michael: How do you know that they're birdwatchers in the first place? Like, is there a field in your CRM system for birdwatching? How do you even get to that insight in the first place?

John: If you use some of the publicly available data sources, you can cross-reference everything. And they can produce... It's scary what is known on all of us.

Michael: So what are the publicly available data sources? I don't think that's a world most of us live in as financial advisors.

John: Yeah. So there's several that we've used. A couple are proprietary, and a couple we use through our agency that I'd be happy to share. But as you go deeper on them, it is shocking, again, what you can find out. We even did a test of what kind of car most of our clients drive. And guess what? We bought the list of buyers of that car, and the list worked with a different overlay on it. So the major credit houses – all of the data houses – will have that type of information. So it's shocking what is available on all of us. From what magazines you read or what websites you go to, to... It's in there. So I like to think of it as the good side of big data. I know sometimes big data is used for evil or used without permission. And that's obviously the highly concerning side of big data. But big data is used by almost every major marketer to figure out: who am I targeting?

Michael: Sorry, I'm just fascinated seeing how this works. So like, what would be one of the services that can sell me this kind of data or show me this kind of data?

John: So, any of the big credit houses would have almost all of this available data.

Michael: Okay, so I'm calling up TransUnion or Equifax or one of those and somewhere on their site there's a place that I can buy – we know them usually just known as good old-fashioned credit bureaus – but there's a place that I can go on there and say I want to buy marketing data on people?

John: Absolutely.

Michael: And so, how does that work? So I'm assuming they don't give me specific data? Or maybe they do. Do I give them my client list and then they take those names and apply it against theirs? Or do they give me stuff about my clients' names? Or they give me a giant database of human beings and I start running queries? How does this work?

John: So we've used several agencies to help us with this. We also have a lot of it in-house in terms of how we can do things. Usually, you're starting to figure out who am I trying to target? Who are my best clients? And so you're doing that. So we'll select a group. And it can be slightly different for us by geographic region or by geography, and by the office and what they're targeting. So we'll then take their best clients and back through it and bounce that off of a national and come back with, "Oh, my gosh, this is what they do." And it will become very clear.

So, years ago, this was one of the first times we did it, about eight years ago, it came back that – and this has changed in the habits – but a lot of our clients drove Buick SUVs. And so, if you think about eight years ago, that was a very popular kind of millionaire-next-door affluent car. And so we knew that targeting that type of car – we were working on this with a lot of our people and advisors in the field, and they would then send me pictures of their clients driving Buicks all the time. It had this weird parallel from, there's the data, and then it'd be like, “Oh, my gosh, I was out in the field, and look at them, my gosh, they're driving a Buick, and they're birdwatching and doing these things.”

So we would crunch that best client come back. And then yes, then you're buying the list of names – of actual names – who meet that. So you would say: people who have this estimated income, who have this estimated home value, but less than this estimated mortgage value – which means they should have investable assets – then have all of these behavioral characteristics that we've refined over years and years and years of testing. I have a friend who works for Ed Jones and he said, "I go knock on doors all day to figure that out." And we said, "Yeah, we use data to figure it out." To figure out of the 10 houses on the street and a good zip, there's still only one house that you want to be a financial planning client. And our goal is to figure out who that is and only spend money working on them for acquisition versus the other nine households, where they might live next door, but that guy is in debt, and he's got three boats and four cars. And his house looks beautiful, but he doesn't have the savings to be someone who's going to work on financial... He probably needs debt help, not financial planning.

Michael: So I want to make sure I understand this process and what it looks like. So I go into my advisor CRM, I create some segment for my top clients – my A clients – this group that I want to replicate. Which I know some of us have done already. And you're like, make a list of your 20 best clients and then start writing down their characteristics. So you're going to start with this list. Yours might be larger because, I don't even know. Obviously, you're bigger now. How many clients does WEG have? I think you said almost $20 billion, but like, how many clients is that?

John: I'll have to pull the updated number because it's been increasing so quickly. But obviously tens of thousands of clients.

John: Okay. So yeah, with our top 10 or 20 clients, you might do it with your top 1,000 or 2,000. So you pull a list of, okay, here are 2000 of our really good clients, like these are A clients, they're good fits, we like working with them, they value our services, they pay us good fees, all those sorts of general criteria. And so rather than like going back to your advisors and saying, "Okay, now make a list of their cars and their hobbies and such," you're going to take that list of names, you call up Equifax or one of the firms and say, "Hey, I got a list of 2000 names. I need to send it through your filters and then have you tell me what you know about them in some kind of report where I can see the patterns"?

John: Exactly. Yep. It helped me create a model of understanding these people.

Michael: Okay. And so out of curiosity, what does that cost? Or what's the neighborhood? I just have no framing? Is that like a $2,000 project? Is that like a $50,000 project? What does it cost to send your list of dozens or hundreds or a few thousand names into Equifax or TransUnion or one of them and have them come back with their list of "Here's what we've learned about your people"?

John: Yeah, it's $10,000, and definitely goes higher. And the interpretation of that data is obviously the trickiest part. But I would say, just to rough it out, between $10,000 and $25,000 for a full analysis of a client group.

Michael: Okay. So you send that off, you get it back; they take all the slightly creepy levels of marketing data that the marketing companies actually know about us, because this stuff gets aggregated, and you start seeing patterns. Thirty-seven percent of our people drive Buick SUVs, 27% of them are birdwatchers, which is a big deal because only about 2% of the general population are birdwatchers. Like, we have this uniquely high pull to them.

So you start creating a list of characteristics of what your ideal clients most likely look like. So, certain income levels, certain home values, because we can get that from public information. Then these bureaus also have the overlay data. Birdwatcher, drives Buick SUV, whatever it is. And so now, like, you go back to them and say, "Okay, instead of me giving you my client list so you can run your analysis, now I want you to give me a list of mailing addresses I can send a mailer to based on a list of characteristics I'm going to give you some of which are financial targeting, some of which are zip code targeting, and some of which are these demographic or psychographic or other variables that I found." Like birdwatchers who like Buick SUVs.

John: You nailed it. And that's where the joke... In a lot of marketing, there is a secret formula. You spend a lot of money figuring that out and then refining it. So the data tells you one thing, and then you go out and test it. And you're actually in the market running list A versus list B versus list C versus list D. And then you're still sometimes surprised at wow, list D won, I didn't think that was quite the targeting. But behaviorally, this is actually what's working. So it provides a very close approximation of what's going to work, and then you go test it in the real world through AB testing.

What's been great about it is what we've found for our profile of these clients is that they exist in every market. Now, they might exist in different numbers in every market, but there's plenty of them in every market. And what that means is that in San Francisco, we might be targeting 10% of the population wherein, in Minneapolis, it might be 22%. But 10% of a big city is still a huge number to go target. So, once you start to ratchet these in, you can find them in every market and replicate that success. And there might be subtle tweaks that occur by geography, but these people still have the same behaviors, the same psychographics, the same things no matter where they live.

Michael: And so the idea of this is because, at the end of the day, the next step is like I get a list of mailing addresses. And I'm assuming this is what? Another many thousands or tens of thousands of dollars now to go to them and say, "Okay, I want everybody in these 7 zip codes around Minneapolis who has a home value of at least X, a mortgage of less than Y, who rank highly on birdwatching or Buick SUVs," and they're going to give you back 8,172 names and mailing addresses, or whatever it is. And you're now stroking another check for however many thousands of dollars to get that mailing list.

John: Yeah. And so we usually – and it's pretty standard is you'll be using a direct mail house or a direct mail partner to do a lot of that. The analysis can be done either by yourself or with a partner. And then the mailing is definitely worked through by people who have expertise in this because as you get into nerdy direct mail, you have to de-dupe the list, and you have to make sure your clients aren't on it. And you have to make sure, do you want prospects on it or not? And did I mail to them two months ago, so I don't want to mail to them again? So when you're doing the mailing, you're definitely getting into some pretty big analytics to make sure that you're doing it in a way in which it's well-received in the market. We all fight so hard to get clients, the last thing you want to do is make them upset.

Michael: Right. And I guess, ultimately, the reason why we do all of this refining is because I pay a direct mail partner X dollars per address. Like, that's sort of the core unit. So it's not necessarily that I'm trying to only get people who are birdwatching-Buick drivers, it's that if 1 out of every 10 birdwatching-Buick drivers actually does business with me and only 1 out of 1000 random mailing addresses do things with me, why pay for thousands of mailing addresses that are having almost no likelihood of working with me except like a random shotgun approach when I could just target the birdwatching Buick SUV drivers that have an astronomically higher conversion rate with me because we figured out these happen to be the traits that work, which just means I might get 5X or 10X or 20X the ROI on my marketing spend because I got hyper-targeted to the people who actually seem to fit what I do?

John: Exactly. And in that way, not only are you defining a positive acquisition cost through that testing and through the rigor that can occur with this, the other part of it is you're defining the client. So, one of the things I've seen with firms that do a ton of referrals is you will often get... And we love referrals, sorry. Referrals are great, they're the most efficient, everyone should do them, we support them. This an ‘and’ not an ‘or’ conversation in terms of marketing and referrals. But when you get referrals, sometimes they're not always of the same ilk as what you already have. And they might have different needs, and they can stretch your firm.

One of the things about very targeted marketing is that we are seeking the client who will enjoy, appreciate, and stay with our firm. And we know what they want that. We're using messaging around tax planning, around estate planning, around investments, but it's very targeted messaging so that we're getting someone to raise their hand who, five years later, the advisor is going to say, "Oh, I love them as a client. They fit our model, they fit what we do." And if we can target it well enough at the front, and it's a challenge, trust me. I'm making it sound much easier than it is in terms of getting... But you're trying to get people through the funnel who exactly want your value proposition. And that leads to a more efficient business and happier advisors.

Michael: And that's because, like, birdwatching-Buick-drivers really like sophisticated tax planning? Or is this just because you're targeting birdwatching Buick drivers, and when you send your tax message – your tax base marketing to them because that happens to be the message that you use – if they're birdwatching-Buick-drivers and they like our tax messaging, the combination of the two probably means they're going to stick?

John: Yep, that's exactly it. So there are multiple follow-up points. But it starts at the beginning with identifying someone who has the characteristics of someone who will fit exactly what our firm offers. Because in our world, as a financial planning firm, if you get a bunch of "do-it-yourselfers" to raise their hand, it gets to be a really ugly pipeline. So now you have all these people coming in saying, "Can you time the market? Can you beat the market?" Maybe. We're not market timers. We think we have a great and really powerful investment strategy. But if that's what we generate all day, both through a list and through how you nurture that list, yeah, you're just going to get a messy pipeline and you're going to get upset advisors and not get the ROI you hope for.

Michael: So I know there are some direct mail firms in our industry that do local direct mail targeting for advisors to run your marketing system. Are you working with firms like that or are you working with firms outside the industry because you're coming at direct mail marketing in a very different way when you've said, "We took our big list, and we put it through Equifax, and they gave us all these criteria, and we've winnowed it down, and we're layering on all these different demographic and psychographic factors," that, honestly, I don't know if the average financial advisor direct marketing firm uses? Who do you use, or what kinds of firms live in this world that do this kind of work that you're talking about?

The Direct Mail Firms That John Works With To Generate His Marketing Data And The Technology That He Uses To Manage That Data [35:23]

John: We started within the kind of firms within the industry. And as we grew, we grew to, what I'll call, more national firms or some of the big power direct mail houses. But it's one of the reasons to work with someone who understands our industry from some of the direct mail firms is that they can jump you ahead in the strategy. They may already, even by talking to someone, be able to say, "Oh, I know who you're targeting. It's X, Y, and Z." And you see this in the seminar marketing, and you see this in direct mail, or in digital, where the profile that a lot of the firms are chasing out there. We're all pretty similar. We think we're different, but from the outside looking in, I would say, how different really are the RIAs? And we're quite different. But to a consumer, I think we're pretty similar.

Michael: And so, can you give me examples of just like, who are the direct mail firms that do this? I think for most of us who have never done this, we wouldn't even know where to start or where to look?

John: Sure, I'd be happy to share some in a link as well. We've used a firm named Paradysz Matera. And Paradysz Matera is one of the leading agencies in the country. They've been a great partner for us. For scale, they're probably not as good or not a fit for some of the smaller firms. They have a quite large client base across them. They work with a lot of nonprofits, a lot of direct marketers, a lot of other firms. But there are a number of firms within the market I know that specialize in it. Again, where I see some of the sophistication is with some of the seminar firms out there. And so I've seen a few out there that are doing a nice job on the seminar side.

Michael: So you get this list. You do this mailing. You're now like, I don't know, like another $5,000 or $10,000 or $20,000 in to just queue up this hyper-targeted mailing that you send out. What comes next? Is this a direct mailing? Like, "Hey, I just thought you might want to give us all of your life savings, we'd be happy to manage it for you." I mean, are you soliciting them directly off the direct mail? Or is this direct mail to come to a seminar we're doing or check out a webinar we're doing? Or we're hosting this other event you should come to? What do you actually do? What does the direct mail ask them to do that's getting them to become your clients?

John: So, we're always testing different offers, but I can bucket them into a couple of segments that we use often. So one is free information. And that's really when we're doing it to a cold list or a new list. So free guide marketing still works. And we try to do high-quality education – tax planning, estate planning, investment management – all the different areas that we may work in. So the response to that can often be a 'call for your free guide'. And if you're interested, talk to an advisor.

And that gives us a path where if some people respond and they say, "No, I'm really interested in the guide, but I'm not ready to meet with anyone yet." Obviously, we have many nurturing channels that will work to make sure that we stay engaged so that when the time is right, hopefully, they think of us. Some people are ready to jump right through the funnel and go to a meeting. And then we have an inside sales team that is really working all of the leads. And we're scoring these leads as they come in for likelihood to be good clients. We actually score the direct mail list.

And then when the leads come in, we're re-scoring them again to another degree to say, "How likely are they to become a client?" And that can be, what activities have they taken in our database? How much do we know about them externally? Have they responded to multiple areas? And you learn all kinds of interesting things, and they will then be scored. So our inside sales team knows, "Oh, this is a web lead that downloaded a guide two years ago, that's not very interesting," or "Oh, this is someone that has responded to three different tax pieces, clearly has a need, and has expressed interest on our website three different times." This is actually going to elevate to me giving them an outbound phone call to follow up on their inquiry. And so at that point, it's really about their job is qualifying and scheduling them to the final step of does it make sense to come meet with an advisor?

Michael: And what are you using to do all this scoring and tracking? Is this a CRM system? Is this specialized marketing software?

John: Yeah. So we've switched all of our background into Salesforce and Marketing Cloud. And we've gone through, I think, like many firms, a litany of different areas. And I can say when I joined nine years ago, it was a whiteboard and I wrote an Excel document that we looked at every week.

Michael: I say I hope it started in Excel. We have to learn on our spreadsheets.

John: And I still do love Excel. And I'm probably dating myself a little bit. And then it switched into a homegrown database, and then it switched into Microsoft CRM, and then it switched into HubSpot, and then it switched into Salesforce and Salesforce's version of their CRM, which is Marketing Cloud. And it's been a journey through that whole process and good implementations, long implementations through that. But I will say that we are definitely, as a firm, a large fan of what Salesforce has provided us. And it's like when you see the Salesforce demo and you see the exact graph of data you always wanted to know. And once you get your data in line with Salesforce, one of the things it forces you to do is to have a great data architecture. And you actually get that graph for the first time where you say I want to figure out X, Y, and Z, and you can do it yourself, but it goes much quicker. So we've definitely evolved from some external tools and vendors to try and bring most of that in-house through Salesforce.

Michael: And is that the way it can pull in all this different data is the thing that drove you to finish there?

John: Yes. And we may bounce certain things out to other data sources or partners, but then it always lives in Salesforce. So that's really our... Everyone says their CRM is their hub. But it is for marketing on the front-end very much our hub of how we know. And so, it's great because when an advisor takes a meeting and there's an appointment set, they can obviously see what has transpired in terms of conversations and scheduling and confirmations in those areas but they also have access for the curious advisor to see how we marketed to them. And not all advisors want to go to say, "Oh, they sent them three direct mail pieces. Two around tax, one was on estate planning. They responded to those, they did not respond to this one, and so I'm going to shape my conversation this way." But many advisors want to see that level of data and understand what it took to get them to agree to come in for an appointment with us.

Michael: And the reason you moved away even from platforms like HubSpot is just because HubSpot was HubSpot and your client interactions were still in the CRM like Salesforce and you wanted them all in one? Is that what pulled you away?

John: A little bit. Yes. And I would say HubSpot is a great tool. I would highly recommend HubSpot to people. Especially if you're dipping your toe into marketing automation and nurturing and managing that. I think HubSpot is a wonderful tool. It's actually still one of the blogs I still read. I've been an addicted HubSpot reader for 10 years. Of course, I know their marketing as a marketer, they're also marketing to us, but it's just great content. So, HubSpot was great. We just outgrew it. And with the size of our business, the number of different journeys and paths and product lines, and business models, we needed something that was just a little bit broader and that could handle a higher volume of different nurturing segments of paths. And so that made us make the decision in 2017 to switch all the way to Salesforce and Marketing Cloud. But Marketo is still a great marketing automation platform that's larger. So there's a number of competitive platforms in that area.

Michael: Yeah. I was going to ask why Marketing Cloud and not some of the other tools that integrate into them? I guess Marketo is out there. I'm trying to remember products out there. Like, was it ExactTarget that became Marketing Cloud or?

John: It was actually ExactTarget and Pardot are Marketing Cloud now. So...

Michael: Okay, that turned into Marketing Cloud. Okay.

John: ExactTarget was the B2C and Pardot was the B2B. And marketing financial services, because you're not selling a widget, you're not selling LASIK you're not selling a one-time thing. I've seen a lot of the marketing that's done when you're nurturing someone for a high-value or high long-term client relationship, it's actually has a lot of the characteristics of a B2B sale. That's not just blasting away and hoping someone responds. It's about nurturing and understanding and developing. And so we've skewed a little bit of our CRM towards the higher value, which is typically B2B. And that's where Marketing Cloud split because they had – they really were incorporating both. And so at the time, we made a decision, we've been very happy with the decision. It was, they gave us the bandwidth to really bounce between what would be a typical B2C or a B2B solution.

And it's kind of where Salesforce has taken over the world. It's gosh, they have so many options, you're not going to regret your decision, because they can go left and they can go right. And I would say that's absolutely proven true for us. The integration, being inside of it, has been, I would say, a little bit easier. But yeah, we would have considered an outside. That was not the determining factor. But it certainly is wonderful once you have your data and systems and it's something we'll always work on, and especially with some of the enhanced direction of where the company is going in the future. That's a lifeline project.

Michael: So help me understand a little bit more, like the things you drive off of these direct mail outreach. So one bucket is the free information. Call for your free guide, go to this website to download this thing. You're not necessarily going to convert them to business yet but like they show up, they have an interaction with WEG, it's a live human being who has responded to something you've done, you've got some opportunity to start following up with them from there. What else? What are the other buckets that you set up for?

John: So that is the main bucket. We also will do seminars and webinars that we'll approach both through direct mail and digitally. So pretty much everything we're talking about in direct mail also transfers to digital. Any kind of digital outreach will do. And so, seminars, in-person, obviously, post-COVID have taken a dramatic turn, but are still a good tactic for us and something we still enjoy doing, especially for people further in the funnel who need a little more face to face. And that has really worked well for us. And then, like many firms have shifted heavily towards webinars even before the COVID change earlier this year and have if anything accelerated that. You had a recent podcast of someone doing wonderful Facebook marketing into a webinar. And that's just a great channel as well. So there's just so many different ways to intersect.

So the most efficient way to use direct mail is to get them to raise their hand for interest or to go right for the jugular for a meeting or to invite them to an event. And depending on the ROI, we will switch the tactic of which one we're using more or less.

Michael: Okay. And so, talk to us then about how do you measure ROI and outcomes on all of this? Are there certain key metrics you look at along the way? Is there sort of a master metric or target or conversion rate or something? How do you measure marketing, particularly at this size and scale? I'm imagining it's pretty easy to do a lot of very wasteful marketing expenditures if you don't have a tight lens on how you're measuring it to make sure that you're getting a good ROI. What do you measure?

How John Measures The ROI Of Their Client Acquisition Process [46:49]

John: We measure everything, but again, I grew up even before the time all the hits record was a direct and digital marketer. So everything was results-based. Even I actually did some work in catalog marketing way back in the day where you knew on every page what product pulled and what didn't. And you would arrange the catalog in a way in which to maximize the throughput.

So, if you think of how we manage the funnel, every channel has a slightly different funnel. And what I'm saying by that is the cost per lead can be radically different by the channel. So, I've always been pained when people ask 'what is your average cost per lead' because you can have a $10 cost per lead in internet, $100 cost per lead in direct mail, and a $500 cost per lead in affiliate marketing, but you might have the same cost per client.

So, the funnels all work a little differently. Some attract people way up in the funnel who need a lot of nurturing, some are more towards the bottom. But it really starts with the cost per lead. We then do the cost per appointment. And we have cancel rates, show rates, all the different areas around that. Then there's the cost per client. And then the real measure that we use, it's a summary measure, we call it media efficiency ratio. And it's really, how much did I spend in media? So if I had a campaign that cost $100,000. And then how much did I bring in from that campaign in terms of AUM? And that's kind of our short one. And that's where we're making a lot of the decisions of, “Oh, the media efficiency ratio currently on our digital marketing programs are X and on direct mail it's Y. We're going to allocate more towards digital marketing because the incremental dollar is going to produce better so we're going to rebalance our spending in this market this way.”

And then, all of this is always predicated on, what is the lifetime value of that customer? So for people listening, I think it's really critical to say, what is your benchmark? What do I need to say, "This is a winning or a losing campaign," and really define that, put that stake in the sand? And it can be as simple as I need to break even in one year. So if I have a million-dollar client and I'm charging them a 1% management fee, then, okay, now I know what my breakeven is? Or two years or three years.

So we're lucky in this industry of financial planning to have clients that are pretty sticky. Wealth Enhancement Group has been 97% plus – retention rates – 98% plus, 99% for years and years and years and years because they do a great job as many do in this industry. So the value of that customer is gigantic if you're willing to spread it out.

Now, that doesn't mean you can just roll up a wheelbarrow of money and dump it down and spend it. But once you start having that return, for us, it's very easy to say, "I'm hitting this return, I'm willing to spend," or "I'm not hitting this return, we've got to shut this thing off."

And so, I know you said the 2% earlier, Michael, of do you spent 2% or 6%? We certainly target a percentage of revenue, but I would say it's more of a bottom-up of how much can I spend at this efficiency level? And if that number is 8% of revenue, then you should do it. And if you can prove it and test it and roll it out, and if it's 10% you should do it. There's cash flow and everything we all manage in our business, but it's exciting to have a bottom-up. And if the market is tough and things aren't working and it's 4%, then maybe that's the number. But I think that's the right way to approach once you have some marketing programs. How do you understand what to spend? And I like the top-down to get started, but then once you do it, once you've invested in it and have some baseline of results so you go, "I love doing these educational seminars," or, "I love this digital program that I'm doing through a third-party agency," or. "I love this area," then it's really about the bottom-up.

Michael: And I think it's such a powerful point that you make that all of this kind of comes back to a lifetime value of a client to the advisory firm. What I'm struck by is that our industry tends to spend so little time and effort and focus thinking about this. Despite how phenomenally high retention rates are. If I just sort of napkin-math this with, a million-dollar client at the proverbial 1% fee pays $10,000 a year if my firm has a 97% retention rate. So we have a 3% attrition rate. A 3% attrition rate means on average, a client turns over in 30-plus years. You lose 1/30th of your clients every year, that's how you get to a 3% attrition rate. So, if my million-dollar client retains for an average of 30 years, then I end out with $300,000 of cumulative revenue that that client is going to pay over their lifetime. It may even be higher, because AUM markets grow more than they spend, then that number may lift with markets over time. But Geez, even if you start there, you're talking about $300,000 of cumulative revenue.

Now, we only get to earn a profit on that. I don't get to keep all of it. I got to do the work to service the clients. So you take – call it a 30% benchmark profit margin for an advisory firm – you still get down to a number of... Like, cumulatively over their lifetime, a client may generate $90,000 of cumulative profit. Now, you got to show up with awesome services for all 30 years if you want to retain them. You've got to do a bunch of work to do that, and there is some risk. And obviously, we can get the time value of money discounting rates that apply to this as well.

But when you just think about it conceptually, an advisory firm might generate $90,000 of profit. And if we're spending an average of 2% of revenue, it means we spend on average $200 to get a client that might be worth $90,000 of cumulative profits.

John: We spend a little more than 200. But the analogy absolutely holds.

Michael: Yeah, in practice, I think that's why advisory firms, like we don't even get very much ROI on our marketing. We almost certainly end up referral based, because when you're spending an average of $200 per client to get growth, you don't get very much growth because it does usually cost you a little bit more than 200 bucks to actually convert someone into a client. But the thing that strikes me is, well, why aren't we spending a drastically higher number? Because like, $90,000 of lifetime client value in profits, why can we only get to 2% of revenue spent?

John: I think that's it. And it's getting through those hurdles to make the programs work. And it's no secret. That's why PE firms, I believe, are so interested in our space right now. Wealth Enhancement Group has been PE-firmed for well over a decade for the majority of our life, but you're seeing it obviously flooding in many different ways. And I think it's because those recurring business models are extremely popular and are extremely accretive. And so it's a great space to be for those firms, both for the firms that are for sale themselves or large enough to be considered by a private equity.

And on a side note, I'm a huge fan of private equity. We've had three different owners in my time, and they've all been extremely helpful. I know not everyone has had that experience, but three owners in we've had three extremely helpful partners. But also, that, in turn, drives the acquisition of firms that I think many firms are worth a lot more than they thought they were worth. And that's great for everyone involved. And so we're excited to see – valuations are up, and they probably should be. I think people are just recognizing the power of the model that we all participate in.

Michael: Yeah, because when I think about in that end, to set some benchmark rate, like, why don't we spend $10,000 to get 1, $1 million-client that will pay $10,000 a year, when the lifetime client value could be $90,000. And even if you want to apply a long-term discount rate, you're going to come up with a number a lot bigger than 10. Why wouldn't you spend $10,000 to get a client? And the answer, to some extent, is because advisory firms, like we're still under capital constraints in the first year. The $10,000 client may pay $10,000 of revenue, but I've got to do the work. And frankly, there's usually more work in year one. So I might generate little to no profit for the clients in year one.

And so, when you're spending $10,000 to get a client that might only drop $1,000 of profit to the bottom line in year one, if you try to spend too much on marketing, you'll be long-term profitable and short-term broke because it takes you years to actually get the ROI, even though, with a 30-year average or 10-year, you should get a fantastic ROI. It does take you years to make your money back, which to me then speaks to, now you start seeing why there's so much PE activity coming into the industry because if your only problem is, "Hey, I've got these clients where I can spend $10,000 and make 90,000, but I don't have enough cash in the bank to get to the break-even point." Like, if there's one thing that a PE firm knows how to solve. It's like, "Oh, you need cash in the bank so you can turn 10s into 90s? We got you. We got this."

John: Well, I don't think it's any shock then that Ken Fisher did this 10, 20 years ago. I mean, he's one of the richest Americans, 250 Americans. Well, he understood the model, and he had the pockets to fund it.

Now, what makes sense for most of us in the real world and, certainly, Wealth Enhancement Group, while it's, 'learn, grow, do it'. It's take a step, invest, confirm, take another step, invest. I would never say a firm should go from 0 to 10 million in marketing spend. You start with 2% and then you go, "Oh, that was a good year, and we're feeling better about it, I'm going to go to 3," and then maybe 3 goes to 5, and 5 goes to 6. You don't want to exponentially grow. You need your programs that can either work and scale and allow your business to work and scale over the years.

Michael: And forbid, you do it and it works. And now you actually have to service these clients. Onboard them, service them, and do the work. Because if you don't do that, well, you're going to make them upset. And if you make them upset, then they're not going to stick with you, and then the whole model falls back apart again. So.

John: This is a good problem. And I wish this problem happened every day. Too many leads, too much good marketing. I wish I told you that happened every day. It's a lot of hard work. A lot of days we're like, why isn't it working? But we had this as we grew Chicago. We acquired one of our first acquisitions in Chicago, in about 2015. And as they got on a roll of channels, so good at business development this group was that the office was like, "Oh, my gosh, we're going to have to grow so much to handle it all." And so, yeah, you're creating constraints from your own growth. Now, again, I wish that problem happened every day. That's a wonderful problem that we all wish we had. But when it happens, it's a lot of fun of like, we've got to turn these two things off because this thing isn't going so well. And while we're adding staff and we're actually acquiring a second firm in Chicago and growing like crazy, you can only do so much. Step growth is the way to go. And then I like to spend marketing budget. So I say that even from a point of a spender.

Michael: And so as you think about some of these metrics, are there actual metrics that you try to target as a rule of thumb, or just like as an actual business metric of like, what's a good cost per client for a firm like yours when you can do this with the size and scale that you guys have? Like, are you guys able to get million-dollar clients for $10,000 spends for $5,000 spends or $1,000 spends? What does this actually look like in practice as you get going the way that you do?

How John Calculates Their Cost Per Client To Determine Their Media Efficiency Ratio [58:20]

John: Yeah, and I can range it in. Certainly. And again, I have to be careful as it all depends on the average size of the client. If our average client is a million-plus on the way in, it's not 10 million, it's not 100,000, right? So your cost per client that you'd need to attain for a 100,000 client or a 10 million and ours, through marketing and other channels, can be in – the 1 to 2 million range is our average but varies a little by market, but we are trying to do... And I mentioned earlier, I hate rolling up the cost per lead, I'm going to do some really broad stroke. So, the cost per lead, an average of $100. So a really broad stroke on that. And so again, in some it's much lower, in some, it's much higher... But if you can do a cost per held appointment of $1,000 to $2,000, so you're in between there. And that's through a lot of nurturing and getting those people through depending on the program...

Michael: Because the cost per lead at this point is just like they showed signs of life. They called the number to get the guide; they went to the website to do the thing. Like, when we said we're doing a webinar, they entered their email address for the webinar. Like...

John: Net new names, right? Net new names. And so, if you get there... So then if you're at a couple of thousand qualified appointments who show up with their information to a senior advisor for an hour or two hours, and then you get a cost per client, our close rate, and something we share pretty openly and I don't think it's that different. By the way, marketing leads are much harder to close than referral leads. And this is something as the 16 acquisitions worth of hands we have to train them differently because they just don't know you as well. They don't have that...

Referrals are great. We love referrals. So if your referral close rate is 70%, 80%, marketing close rates are 30%, 40%, 50%, depending on where they go. And you're closing – of that 2,000, you're closing 40% of them. So now, all of a sudden, you're at 5,000 a client. And I will say at 5,000 a client, with the rough math we did, people are very happy. Long-term advisors are very happy, and how they're building their boats and life is good at that number.

Michael: Right. Which, as you said, the average client is $1 million or $2 million so we call all do the rough math on fee schedules of what this looks like. And it adds up pretty darn well.

John: Yeah. And so again, it depends. That's really rough, but that would help range it in terms of how that works. And we set those metrics then so we know when direct mail is performing at X, and digital is performing at Y, and emails at X and webinars at Z. And as you're just looking seminars at Z, you can tweak all of these different channels and compare them.

Michael: And so now, just because I'm fascinated by just your metrics around this. So you had said, you also look at this as an efficiency ratio relative to AUM, like spend relative to AUM. So like if I get a million-dollar client and it cost me $5,000 to get them, my efficiency ratio is 200. Am I thinking about that right?

John: Yeah. So you hear numbers of 1% or 2% thrown out around the industry. So if you're going to spend a million dollars in media, you're going to want to bring in 100 million in new assets. And for us, that would be a one... I did it the other way.

Michael: So yeah. So you would flip it around, but it's the same thing. So I guess, actually, like a million-dollar client per $5,000 spend ends out at a pretty good ratio for you guys?

John: Yeah. Absolutely. Absolutely. Yep. I mean, that's going to break even early in the second year, even with the way we did the background math, and it's going to work out really well. Yeah, so we'll have different... And the media efficiency ratio may change depending on the market, depending on the investment level, but as a marketer, for me – and there are a couple of great articles out there – give me clear boundaries and give me clear goals, and then I can report back. And so what's great is when you know that if you're hitting 1%, you're winning. And if you're hitting 2%, you should be nervous. And if you're hitting 5%, what the heck are you doing with our marketing budget?

Michael: Okay. Because this is a ratio where when you calculate that you want it lower because I'm going to divide my percentage in. So if my media efficiency ratio is 1% and for every million I spend, I should get 100 million of assets. My media ratio is half a percent, then if I divide a half percent and now I'm getting $200 million for every million dollars that I spent. So I want my ratio to be lower.

John: Lower means efficiency in the way we use it. So the lower the ratio, the more efficient that ratio is.

Michael: And so this now helps to connect back to what you were saying earlier where you're not necessarily trying to spend a particular percentage of revenue, it might be more like, hey, as long as this channel keeps producing at a 1% efficiency ratio, that's good enough to make our metrics move forward, we're just going to keep plowing more money into it at 1% efficiency ratio with the caveat, like, there's only so many people in the greater Minneapolis area that you can send these things to. So it's not like you can just keep doubling your marketing spend. At some point, you're just sending the same household weekly mailers and pissing them off.

And so, your marketing channels potentially get – even if it's working, and the math is great, you can't just always keep spending more there because at some point you saturate the channel, which is why you then have to go find new channels or new markets, and it gets you into now you know why WEG keeps buying firms in new metropolitan areas, because now like, "Oh, I got a marketing campaign. We know how to execute it, it tends to do 1% efficiency ratio. But we've hit everybody in the greater Minneapolis area. Good news, we just got a firm in Hartford, let's see how many people we can get around Hartford now."

John: Exactly. And what's been great about continuing to add new channels. To your point, we haven't ever had a decreasing, actually, growth rate in Minneapolis. So, even though Minnesota is our home market and where we've been for 20 years, it still continues to grow at an accelerating rate because we've been able to add new channels and keep the majority of the ones we have over there.

So yes, I would say that is exactly the model. And you hit fatigue when you have less new ideas than things that burn out. And that's fatigue when there are less new ideas. Whether it's custodial referrals or affiliate marketing or direct marketing or digital marketing. And I think what's exciting is Wealth Enhancement Group – and there was a nice piece done by Wealth Management last week that I know we emailed about before the call today and catching up. But just see Wealth Enhancement Group and they've brought in a number of critical new leaders because they are, I don't know, tripling down on what they believe they can do with digital and to see what they can do with big data and artificial intelligence.

So we're already, I would argue, one of the sharper firms in these areas through marketing and through the client lifecycle, but to us, there's just this great opportunity to take it to a whole other level that not many firms, if any, have done yet. And so, it's fun to see Wealth Enhancement Group is investing for what does it look like in five years, what does it look like in three years, and what does it look like in the long term, versus what are we just optimizing today?

Michael: And so, this helps to connect the dots for what you were talking about earlier. And so likewise, that's why it's not just appealing to a client or a firm from WEG's perspective, but to acquire one that has some size and mass in the market. Not necessarily because you need them to do their marketing and get their referrals, although I'm sure that's nice. But just, if you're going to then come in and say, Okay, we're ready to spend a million dollars in this market because at our current efficiency spend, this is likely to produce 100 million dollars, well, you can't spy a solo advisor with an assistant and then plow in a million dollars of marketing and bring in 100 million dollars of new clients because you're going to crush that poor person in new client flow. You need multiple advisors, and some infrastructure, and some team support, and the service support, and the rest that has to be there so that if you do a material marketing spend and you actually make the rain, they can handle the flow that comes from it.

How Wealth Enhancement Group Uses Firm Acquisitions To Increase Their New Channels For Marketing [01:06:43]

John: And that's been a key linchpin to our acquisition strategy. Firms join us for many reasons, and certainly, the operational support in the back office is a big one. But if you think longer term, it's not just about, hey, let us take some of the work off of you locally, whether it's financial planning, or just running your business or IT or having a great instance of Salesforce or all of these things, or a full-on accounting, let us pull that back so that you guys can spend more time. So these wonderful teams that join us all around the country, say, “Hey, yep, we're going to give you more time because both, you can go get referrals, we're going to free up for that, but we're also going to turn on these programs. And those are going to keep you really busy.” So we're going to re-engineer your P&L to be focused on growth versus running your business. We can efficiently help you run your business. And then we're going to plug into all these different areas to figure out what is the optimal mix for Pittsburgh? And what should Pittsburgh look like.

Michael: So re-engineer, your P&L. Which basically means like, "Hey, you may have some local infrastructure costs that we're going to save you on. You don't need another license to Salesforce, you don't need another license of Orion. You've got some local staff that we can actually do efficiently from the home office in Minneapolis and save you on those staffing costs. But we're not doing it because we're just trying to increase the margins to your firm, we're doing that because we're going to take those all those dollars and we're going to redeploy them into the marketing campaign that we know how to run very efficiently and make it work and make growth show up because we've now freed up the cash flow in your local location to do that and then we all get bigger as a process."

John: You go on and it seems like, “Oh, we have this great client person and she's one of the smartest people I've ever met, but she's running our portfolios all day.” Okay, well, we have a fully scaled investment department internally. How about you just make the allocations that work for your client? You work with the client all day instead of running the portfolios or the portfolio tool behind the scenes and focus on serving the clients who have better and working through our programs to find new ones versus this back office.

And when we acquire people, by the way, because of our growth rate, there are some people in a local office who say are a marketing person. So we have started to have a distributed marketing team. So we can certainly find something for this marketing person in Pittsburgh to do or figure out what their skill is, and well, I'm sure we need it. So it could be a copywriter or a designer or a digital expert. We're going to need that.

Michael: Right. Because, again, I think some firms, you hear about acquisitions and you hear about, I'm putting in air quotes, "cost synergies," which sometimes is essentially a euphemism for, "We're going to fire your staff because we can do it from our home office cheaper." And the math of that may be true, but it doesn't feel good as the selling firm owner to say you're going to come at my staff with a scalpel and start carving them out. But it's a little bit different in a context like yours, because, if the whole point is acquire to map our systematized growth engine onto your local firm, if there's one problem we're going to have if this works it's that we're going to start creating lots of clients and you're going to need more capacity to serve them which basically means more hands on deck. So the last thing you want is to actually cut down too much staffing out of a local office and then make it grow and not have enough staff to do it.

It sounds like in your context, it's more, your role may shift a little bit because we're shifting from some local operations to some distance-based operation so you can focus on clients and growth, but there will be roles, there will be things to do. And we actually have the centralized marketing systems, you just have to actually be able to close the clients and service the growth.

John: Yeah. Through 16 acquisitions, there's been almost 0 positions eliminated. Meaning it's not about, yeah, you're re-engineering the P&L, you're not slashing the P&L. There's a big difference. And we go on and say, you have good people you trust, we're going to need them. And it could mean that they work through the market department centrally, they could work in a client service role, they could join our investment team, they could work in your field office, they could turn into a salesperson. There are so many opportunities that we're bringing on great people. So if they already have great people, we're going to need them.

Michael: I'm just so fascinated though by this framing that, I feel like for almost all other firms out there, mergers and acquisitions usually fall into one of a couple of buckets. Like, “Hey, you got great profits. I would like to participate in them, so I'm going to buy your profit stream from you. You get a check as the selling exiting owner. I get to buy your profits in the future.” Just the classic merger acquisition, get bigger, buy profits, financial engineering.

We get some that are, “Hey, we're hoping one plus one equals three, usually, still from a profits-end. Like, you've got ops staff, we've got ops staff, if we merged together, we don't need that much ops staff. So we get cost synergies so we can run a more profitable firm with a better economies of scale by merging together.” Then, every now and then, I feel like you see sort of, I know, I'll call them 'growth multiplier deals'. Like a firm has great growth success, has been able to do it well. So someone comes in and buys them and they do a deal to say, “Hey, you've got this great growth engine, we're going to try to expand it and help you grow further and faster by giving you more resources.” And you get some of these growth multiplier deals.

I feel like what you're doing at WEG is very, very different than any of those. Because even growth multiplier deals I find are usually, like the seller has the growth engine, and the buyer wants to participate in it and fuel it. And yours is different because the buyer has the growth engine and just wants a seller that can participate in that growth process because at the end of the day, particularly in advice, it doesn't matter how great your centralized marketing is if there's no actual advisor that can do the last mile of advice and make sure the client is happy and well-served. You still need that last piece of the advice delivery process. And so, you have a mechanism where the buyer has the growth. They need sellers who can do the servicing and the great advice work, which is just very different than most other acquisitions I see in our industry right now.

John: We often joke that most of the best advisors aren't for hire. Like you can't go hire them. You can build them. And we certainly do build them internally and have a great development program as advisors, but they're not usually for hire. So how do you get the best talent in the industry? Well, you buy them. They merge in, and then this additive of having this talent, the scale in the market is unbelievable.

And most of these people that join our firm have already run... Our acquisitions are from 300 million to a couple billion, and even potentially larger. These are people who've already run a great practice. They're thinking, "Okay, I want growth." First of all, so people who are saying, “Well I'm looking for retirement or safety.” We may look at those, but back to the targeting of marketing, that's not who we're looking for. We're looking at the person says, “Oh, I'm doing really well, I've built a heck of a firm, I'm looking at that next level of systems growth, of operational growth, of marketing growth, and I really want to go for it. I really want to go for the jugular and I'm looking for a partner to help me do that. And I'm not done. And my staff is not done. And we're looking to continue on and do more than ever, and I'm looking to do more than ever.”

So yeah, we're definitely not looking for the retirement deal as our primary targeting of the firms that come on. The firms that come on are saying, “I think I could have built it in 10 years, but with you, I'm going to have it in 1.”

Michael: So, John, when you put all this together, what does the breakdown of organic and inorganic growth look like for a firm like yours? Obviously, the industry loves to do the headlines of the new acquisition. So we see the inorganic growth stuff when it occurs, but how much of your growth actually is the inorganic acquisitions versus just the organic growth of all these different marketing channels?

John: What I can share publicly is our organic growth as we finished last year was over 1.5 billion and a substantial amount of new assets coming in. And that does not include anything market-related or market increase. So those would be net new assets to the firm. And that number is certainly accelerating this year. Now...

Michael: Accelerating this year. So, despite COVID pandemic challenges, that has not been a slow down for the growth engines that you guys...

John: I would certainly say, like all firms, we've had to pivot and adjust. And we've certainly felt the effects of COVID. So I would love to know the firm that hasn't. But I would say that the firm is still bringing an amazing amount of assets. And in our basis, our geography is bigger. So we've done 11 acquisitions in the last 24 months. Our marketing programs have grown, our spending has grown. So the investment continues to ratchet up. So yeah, it continues to grow. And, well, maybe a little dent from COVID, it's still going to be a highly impressive year. And on top of that, I think we shared that it's exciting because I've actually stepped out of the role of the full-time CMO and they've brought in a new CMO. And it's something that we've done in partnership with WEG. And so it's just been a really fun time to see the firm continue to accelerate like this.

Michael: So what do the marketing channels look like at this point? You've talked a lot about direct mail, but you had said there are like 30 people in marketing departments segmented out by channel. So, what are all the different channels that a firm like yours looks at and tries and experiments with? What do you view as marketing channels that you put resources towards?

What Wealth Enhancement Group’s Current Marketing Channels Look Like [01:16:55]

John: So I'll do a quick laundry list, and I'm sure I'll miss one or two, but I'll do my best off the top of my head. So when you think of traditional marketing, we continue to use radio shows, AM radio, and some seminar marketing. Those, years ago, were 70% of our marketing mix and now it's a pretty small percentage. Direct mail has been a workhorse for a number of years and continues to produce quite well for us. The digital investment, and digital is such a broad word. So I mean, SEO, paid search, social media marketing, retargeting, all of the different areas, and including affiliate marketing through the web is by far our biggest channel and our fastest-growing channel and is where we're seeing the most growth. So it overtook direct mail a couple of years ago and is skyrocketing upwards. And so there's a number of channels under there from online webinars to all the ones I already mentioned. So you've got kind of a hodgepodge of things under the digital umbrella.

And then we participate in a number of the custodial referral programs. And those are specialized invite-only programs where you're brought in by some of the larger custodians, you pay a fee. But you are helping them with kind of advanced financial planning cases and support for their financial consultants around the country.

So, when you break it down, I like to think we have a lot of baker's dozens of individual channels where we're comparing and figuring out the profitability and where we should invest our time and resources.

Michael: I am still struck. And as you've noted, there is this shift from direct to digital that you guys are working on. But I'm sure there are still some people that are listening to this that are just thinking, really? Direct mail still? Really?

John: So, it's the same with seminars, and it was the same with newspapers – every year I'm happy it works one more year. And it continues to produce for us. I would say we have definitely refined our model. It might be tougher to start it, where we have a pretty advanced direct marketing approach and direct mail model that we've invested in the last 10 plus years, but we certainly want to go where media is going.

That said, we never throw out a working channel. So if seminars continue to work, after COVID, I don't know if they will, and I'm a little skeptical, but we'll certainly try them again. And if butts in seats continue to work that way, we'll definitely invest in it, and see if it works. But again, back to the beginning, if your strategy is AM radio, I'm nervous. That's not where I want my – the owner of the firm or PE firm or whoever holds like, "Yep, we're going to really nail it in AM radio in 10 years." That wouldn't be a good long-term plan to me.

Michael: So, as you look at this in the digital realm, is this digital replicating direct mail? Like, you used to do direct mail to get some information or participate in a seminar, and now you do digital targeting to get some information or participate in a webinar. So the same kind of funnel, the same kind of process. I guess digital probably even gives you more creepy ways to target hyperfocus because Facebook knows incredible things about us. But like the same mechanism just applied in the digital context?

John: Absolutely. So every digital channel is a little different when you lump them all together. But from the advanced analytics you can do on search engine marketing, and long tail keywords, and retargeting, and how you're finding those people to email to webinar invites through social media and advertising on Facebook and LinkedIn and all different areas, a lot of embedded content marketing and affiliate marketing. So yeah, as advanced as digital is, and it should be at the top of everyone's list, it's still a little bit the wild, wild west and it's still moving so fast. And again, that's where it's been fun to see Wealth Enhancement Group really invest in the future of where we're going digitally. It's not like anyone has arrived. There are a lot of people doing well with it, including us, but boy, is there continued upside for the firm that gets it exactly right.

Michael: And are there particular areas that you're finding or the traction areas for you like, "Hey, good old-fashioned paid search actually works well," or, "SEO seems to be the magic," "Social media is the channel for you"? Or are you finding within the digital realm particular areas either are working or are like, yeah, that ain't it? We are not doing that anymore.

John: Yes. And we're learning and failing and winning at all of those all the time. So, SEO, to me, somewhat equates to referrals. And we do a lot of brand awareness marketing that drives our people to Wealth Enhancement Group. But you can only drive that in my world so far. Meaning you can expend so many investments there. But when you get into more of the paid side of it, into search engine management and search engine marketing and other areas, yes, there are still the secrets of how to do it. And we're learning every day.

One of our things in our model is that we definitely use external agencies. So even though we have 30 people, we want to do advanced analytics and advanced marketing that the 30 people, no matter how good we are as a group, and that roll up into the marketing team, we want to work with the best agencies in the country, and really have those cutting edge platforms out there.

The one that's taken off is affiliate marketing. And that can mean people like SmartAsset. And there are a number of competitors to SmartAsset, which has become much more popular in the last year. And I'm seeing the models really mature. And affiliate marketing for marketers, many people know, sometimes can have a little bit of a sketchy background. Meaning, oh, they're selling gross leads that have been resold 10 times, and why would I buy leads from an affiliate marketer who generates them themselves? There is a pretty good group of providers within affiliate marketing right now within financial services and...

Michael: So this is like the SmartAsset, SmartAdvisors, Zoe Financial, FeeOnlyNetwork, those kinds of groups where you pay them to be listed or you pay them per lead that you get and then you got to chase them down and turn them into business, but you're actually finding those really do turn into business?

John: Absolutely. And one of the reasons that they've worked for, I know, a number of larger firms is we're already set up to schedule the appointment to nurture that person to make the most out of every lead that comes in. So if you think of a mom and pop advisor, yep, they get the lead while the lead gets called by three people and they don't get back to me and I move on to the next thing because I'm busy. Well, we've got an outbound team that's going to work that lead and nurture that lead as competitively as anyone else. So I do think, while we might pay the same per lead to someone else, we're arbitraging the value of that lead by having a very defined chase platform for them that a smaller firm may not have. And so I'd encourage anyone who does affiliate marketing that it's definitely a competitive environment, and you have to see if you can optimize it.

Michael: Right. So as you said, you've got an inside sales team who takes leads as they come in. And it's like you have a person or several people whose sole job is when one of those lead inquiries shows up, you've got someone who's on the phone at that minute to do a turnaround and reach out to them. Whereas unfortunately, the average advisor is like, "Well, I had a lot of meetings today. So it was about five hours before I got back to my inbox and then I actually had to respond to a few client things first. So I just got back to them the following morning." And yeah, unfortunately, WEG and several others have already communicated with them three times at that point.

John: Exactly.

Michael: Just because you have the dedicated team to pursue.

John: So the firms that are having success are those that are the best that optimize them. Definitely seeing that. I made that comment that sometimes affiliate marketing, they're very high-quality in terms of the reputation of the firm, in terms of how they're driving them, in terms of what they're doing. So definitely within the marketing circles, some people have an aversion to it. I've seen it in financial services to be a really impressive group of companies.

Michael: Interesting.

John: One of the things just to add, it's a great place to start, but I don't like dependency. Meaning, what if SmartAsset changes their model tomorrow, and we have a great relationship with them? Or what if the referral program changes their model tomorrow? I think everything needs to be in balance, right? That's where you see a smaller firm where it's, well, I was working with SmartAsset and they changed their model, and now I don't anymore. And it's like, well, that may happen. Hopefully, it doesn't. But the diversification, especially where we love the direct and the digital, is we feel like we're calling our own shots to another degree. It doesn't mean we won't ignore affiliate or referral programs, it just means that we don't want full dependency. And that's not good for either partner when that happens.

Michael: So what surprised you the most about trying to build and scale marketing in our industry?

What Surprised John The Most And The Low Point In His Journey [01:25:51]

John: We've really had a couple of different phases. So I knew when I jumped in 10 years ago that there was a wonderful opportunity to do the direct in the digital area. And that's continued to go well and scale and change and evolve. And so that to me was kind of on the roadmap from day one. I would say the growth of the custodial referral programs around the country has been pretty impressive to me, and that a lot of firms that choose to participate or are invited to participate are able to drive really rapid growth with them. And that's definitely been surprising to me.

Michael: Surprising, just because like you didn't expect as a channel, you didn't think it would work as well as it does, or?

John: I didn't expect it to have quite the positive scale that it can have. Meaning, if you're in a number of markets and you have enough to really invest with them that you can really have a wonderful relationship with the different custodians in that area.

Michael: Investing with them just meaning like, having enough staffing on the ground to be able to handle the referrals and follow up on them and build the relationships with the local branches and all the stuff that goes with those programs?

John: Yeah, it's really a partnership in those areas. And then the last thing I would say is, I don't know when the explosion of big data, artificial intelligence, and digital stops. Again, as I referenced a couple of times, Wealth Enhancement Group is doing a huge another round of investment to even build this out. And I would argue we're doing pretty well. There's just so much potential there. And then we've always invested heavily, but it's like you're chasing the golden grail or the holy grail and it's getting better every year. And so I'm more excited that it's like the ceiling is higher or the roof is higher with digital than I thought it would ever be. And it seems to never end.

Michael: Interesting. And so for you guys, it's just about, you're now in the testing phase, in the iterating phase of just seeing what actually works and what can we put more dollars into to scale up?

John: Absolutely. And it seems like every year, two or three new channels pop up within digital. To be on top of them and to be an early adopter and to really optimize them, it's just fun. Every year I'm more interested because, no offense, I was doing direct mail 20 years ago, and I have a great appreciation for it, but I wouldn't say that I wake up every day to do direct mail again. It's kind of what's next? What's new? What's exciting? What's going to change all of our models?

Michael: So what was the low point on the journey for you?

John: In performance marketing, there are a lot of ups and downs. One of the most interesting ones is, this is going to date us a little bit in the geography, but there was the polar vortex number years ago. And it hit all marketing over the head. We had a three-month period where every metric we talked about before, response rates, and cost-pers, and all these things were just so incredibly suppressed. That I remember thinking like, wow, an environmental event can just bring everything down. And...

Michael: Is that just because at the end of the day, you do these marketing things to get them to a seminar and no one wanted to leave their house because of the polar vortex?

John: Yep. And again, at the time, we're now a national firm, but we were much more concentrated in the Midwest. It was like, yeah, everything just tanked. And I remember having to go to a board meeting where it's like, yep, everything is 20%, 30% low. And that's not a good feeling. And a number of the marketing staff that's still there today, but I remember those meetings where we were scratching our heads like, is it just the polar vortex or is it something else? Or did we lose our mojo or? You have those moments where you kind of get kicked in the gut and you think, do we still have it? Does it still work? And luckily, it came back. But at the time, you don't know exactly the cause and effect and you have to analyze it. And I remember having an entire quarter and you've got a lot of advisors in the country going, "Hey, talked about appointments, where are they?" And you hate to let them down. That's a great part of our team.

Michael: And again, because that's the interesting distinction for your firm. This centralized home office machine does the marketing and makes the leads. So your team generates inquiries and makes leads. Like, makes the phone ring. Obviously, we don't do a lot of it by phone anymore but makes the phone ring. If the phone rings, there's an inside sales team whose job is just to qualify the lead, answer basic questions, and if they're really interested, introduce them to an advisor in their local market. And then the advisor meets with them to actually do like the sales process and convince them to join the firm and become a client.

John: That's well said. And that's really the advisor, whose job is not easy. So they're going to take a lead of which 30% to 50% of these will close, but their job is to get them from, yep, I had two emails and a webinar and embedded ad, and then I read a few of your guides online and downloaded them and talked to this wonderful person and we called the new client team or the outbound sales center, and here I am. And so then the advisor takes it from there, and they have to get it all the way across the finish line to sign paperwork and they've transferred assets.

So that said, the advisor is doing a lot of their own, running on referrals and on other areas. So I view them as the pilot on referrals and marketing as the copilot We're giving different materials and journeys and ways we can support them. But on the marketing, which is the vast majority of our new assets, marketing is the pilot, meaning we're the ones who have the biggest variable of can we get the right people to come see our advisors. Because we have great advisors and we know their close rates and we know what they can do. So, while the advisor is doing a lot of the work, the variable is how many good people can we get to come sit down?

Michael: Right. So, as I think of this room, the advisor still has to understand how to sell themselves and the value of the firm, but they don't have to prospect. They don't have to go find people to sell to, they just have to be able to sit across from a qualified lead that marketing has put in front of them and still have the conversation necessary to establish trust and rapport and get the client to see the value and be willing to hire the firm and pay for its services.

John: And those are such different strengths. One strength is a rainmaker. And a rainmaker is the one you put them in a room, and they own the room. And you can't control them because they belong to three different country clubs and three different churches. That's a rainmaker. And those people also do very well in our system, because they can incrementally drive a lot of that business.

But there's a lot of people within our system, they're wonderful closers, but they're not rainmakers. They're not someone who's going to do that hustle. But if you get them in a one-on-one situation with somebody with a financial planning need, they light up. They light up about, "Oh, my gosh, can I help this person? Oh, my gosh, is this someone that we can benefit in our relationship, and we can give you things you haven't seen before in financial planning?" So yes, there's a whole group of our advisors who are – and they're amazing people, and closing is not easy either – but they're not going to join three churches, or synagogues, or whatever their faith is. They don't need to do that. They're going to take the leads, and just push them through the funnel really efficiently.

Michael: So now that you've gone down this road for 10-plus years in the financial services industry, what do you know now that you wish you could go back and tell you from 10 years ago when you were getting started?

The Advice That John Would Have Given Himself 10 Years Ago And The Marketing Advice That John Would Give Newer Or Small Advisory Firms [01:33:38]

John: Oh, boy, I didn't know anything. So if you think about... And especially, again, I consider myself a little bit more of a marketer than even in financial services alone. Well, the thing I didn't know is, well, I knew when I joined Wealth Enhancement Group that it was a high-quality firm with high-quality people that cared about its clients, which is true of many firms. I did not at the time understand that being in the RIA space was as conducive to growth and ripe for growth as it happened to be in the last decade. If you would have said that the growth path was this fast and that these possibilities were there I don't think any of us at Wealth Enhancement Group would have said, "Oh, yeah, we're going to grow from 1 billion to 20 billion in the next X number of years." And so we're still amazed and pleased and feel very fortunate to be in such a ripe space for all of us.

And then the other thing, it took us a while to figure out our acquisition model, as a firm. That model that you succinctly repeated back, and that we discussed, it was not apparent on day one. We've tried other things. We tried having individual salespeople in different markets and parachuting them in, and we tried different models for growth. And so what we've ended up here, we tried a lot of things that didn't work, and a lot of models that didn't work. And we're just thrilled that the current model we're on still seems to have a lot of legs, which is these partners in high-quality firms and then providing them efficiency and growth. I know that sounds simple, but that has not been easy to execute. And we've definitely learned a lot from that process.

Michael: And so this particular model of like centralized marketing inside sales to qualify leads and queue them up to an advisor, and then the advisor that doesn't necessarily have to do the prospecting, but still has to do the closing and learn to do the closing. That's not a happenstance model for you. That's like, we tried a lot of different things and this is the combination we're finding that's working for us.

John: Yes. And it's the only one that works. But yeah, when we decided to try organic growth in new markets and we hired salespeople, and the salespeople did fine, but you're just starting from scratch, starting de novo, starting with a one-person office or a five... It's really hard. And it's a lot of time until you get to scale. And so, while we were having success with it, it was like, my gosh, it's going to be 20 years until we're able to really scale these programs and hire enough people and get enough people on board. So the combo of acquiring like-minded, growth-minded financial planning firms with the organic marketing has really been the model that has taken off for us and has been sustainable and appears to have a lot of legs left, knock on wood.

Michael: So what advice would you give, I would say new or even just smaller advisory firms? At 20 billion under management, smaller is relative, and that could still be a billion-dollar firm, this 120th, where you guys are, a couple hundred million dollars and down. Like, for a first smaller firm that doesn't have the depth of team and resources that you guys have, what would you tell a smaller advisory firm to be thinking about or focusing on if they want to start going in this direction, but obviously, they are a long, long way from where you are?

John: I believe in bringing in someone with a marketing mindset and giving them clear boundaries. And as we talked about things like allowables and different programs, it's to bring in someone and tell them, "Here's the measure of success," and to give them enough power within the organization to make it happen. Meaning, can they actually work with a salesperson or two to help get them across the finish line? And how do you do it?

And again, we started with spreadsheets and whiteboards. So it's something we've all built, and we've all been there. And so if you can start day one with someone who's empowered, someone who has specific goals, and a way to track them. And I always say, one out of three things works in marketing. Actually, I'm pretty happy when one out of three works. So, you've got to have enough chances to make sure something clicks. So if they come in and they have one idea, they're going to do one thing, well, it's probably one out of three, it works, if even, depending on the knowledge base. But if you can test enough things, and you keep getting one out of three things to work over the long haul, you're going to be in a great spot.

And so, investing in that, making sure you're going to make a commitment to it. And the other thing is, can you actually measure it? I can't believe how many firms I talk to where it's, "Oh, I did that program. And I guess I did get 10 clients out of it. Oh, I guess it does look pretty good." Yeah, it actually looks great. It actually did a wonderful job there, you should do it again.

Michael: And that's where you get back to metrics, just start taking how much you spend on things and dividing it by your results. That's how you get to the cost per lead and the cost per appointment and the cost per client. Like, just start measuring that stuff and make sure you measure the inflow and make sure you measure the outcome. Divide B into A and you'll actually start getting a decent handle on what's really working for you.

John: Yeah. And to our other point, firms who understand the lifetime value of a client might be willing to pay more. And if you really look at it, of what is it worth over 5 years or 10 years, kind of a standard metric time to look at things, and back into what do you think it's worth and what you're willing to spend and what your cash flow allows, I think that's the way to really market it.

So, if you're going to run a marketing program where you need to break even in three months or six months, it's going to be pretty hard. And it would be pretty hard for us. And when we've been working on it really hard for 20 years, and I don't think we could meet those metrics. So I will say, the big firms, besides being really good marketers, they also really have metrics they understand and are achievable.

Michael: And so, what comes next for you? Yes, you had mentioned, and the news had kind of hit the industry trade press just shortly before we were queuing up to record this, that you're actually making a transition out of the CMO role at Wealth Enhancement Group after 10 years. So what comes next for you now?

What Comes Next For John And How He Defines ‘Success’ For Himself [01:39:42]

John: Well, it's been an interesting time and Wealth Enhancement Group has been just a wonderful home for me in the last 10 years, but a few personal and professional things just told me it was time for some reinvention. And I was looking for a change. And it's an incredibly hard decision because I'm still involved with Wealth Enhancement Group. I'm very fortunate to be consulting and advising them on a number of areas. And at times, it's hard to watch from a slight distance, even though I'm pretty heavily involved in the wonderful work that they're doing, because they've brought in just an amazing new chief marketing & digital officer named Utkarsh Patel, with just a background that just sings. And I've had the chance to support him and work with him, and great things are in their future.

So, for me, I identify more as a marketer, again, than financial services. So I'm looking at some smaller startups in a variety of industries where I can really support and drive their marketing growth. And the majority of those are outside of financial services with my continued partnership with Wealth Enhancement Group but define these young burgeoning businesses who have all the marketing opportunities, almost an arbitrage available in marketing, and that's what they're looking for. And so that's what I've been spending my time doing and plan to do going forward. And it's really exciting for me.

Michael: Very cool. So as we wrap up, this is a podcast about success. And one of the themes that always comes up is even just the word 'success' means different things to different people. And so you've had an amazing run at Wealth Enhancement Group over the past 10 years, 20X-ing, roughly, the firm from a billion to almost 20 billion, but how do you define success for yourself at this point,

John: So, I actually have created, and I'm a marketer – so you're going to get into cheesy stuff with marketers. I hope you're okay with that. But I actually did a mission statement for myself a year ago, and it was really about using marketing to support causes that I really believe in. And that can mean a lot of different things. And when I worked in the agency world and was doing direct marketing for firms, a lot of the firms I worked for, I just adored them and thought that they – and there was everything from makeup to LASIK to insurance to financial service. You name it, we were probably marketing it. But some of the firms I was like, "I don't really wake up to market this, or I don't really believe in it." And it's hard, as any salesperson or marketer knows when your heart is not in it. When you're not believing that you're making a difference in someone's life, the passion for sales and marketing goes way down.

And so, for me, Wealth Enhancement Group has been a wonderful home and continues to be because of the strength of financial planning and helping people's lives and everything that we believe in in our industry. There are a number of nonprofits I'm heavily involved with and a number of other startups. But 'success' to me means that I'm using my strength, which is marketing and organic marketing, to advance something that I really believe helps people, and that fits in alignment with what my values are personally.

Michael: Very cool. I love it. I think there's a fascinating combination that comes when you're marketing and selling something you truly actually believe in that improves the world. One of the challenges I've always seen for a lot of advisors is sometimes it's really hard to market and sell yourself because at the end of the day, we don't necessarily have our confidence in ourselves that what we're doing is really valuable yet or maybe we work for a company that we're not necessarily all that proud to be working with and representing, and it pauses us.

And one of the biggest breakthroughs I feel like I see routinely in the adviser community is when someone finally hits that right stride where they're confident in their value and they're proud of the firm that they're working for, whether it's as an employee, or they went and hung their own shingle, and you get all that in alignment. And suddenly, the marketing sales conversations become really easy when you really truly believe that the work you're doing is so positive and has a great impact. Like, why would you not want to tell everyone and put as many resources behind it as you could to tell everyone?

John: And we all have those stories of clients crying, and in the toughest times in their lives, being there for them. And those are the ones that make it worth it. That's what we all aspire to. And there are the numbers and the P&L, all the things we talked about, but at the end of the day, to me, that's like, did we help people? And I believe our industry is doing great things for people.

Michael: Amen. Well, thank you so much, John, for joining us on the "Financial Advisor Success" podcast.

John: I can't thank you enough for having me. And again, I'm a big fan. And thank you for as much as you cover marketing because I'm an avid listener as well. So not everyone in the industry does. So your interest in marketing helps advance all of us. And thank you for all the marketing guests you have on so frequently.

Michael: Absolutely. My pleasure. Thank you, John.