Executive Summary
Traditionally in the financial services world, services offering "lead generation" for advisors were typically used to deliver prospects who might want to buy a particular financial services product - not necessarily people who were looking for advice. For consumers who wanted to actually find a real advisor, the primary option was to seek one out through the financial planning membership associations.
In recent years, though, there has been a dramatic rise in the number of platforms providing prospective clients for financial planners, following a wide range of business models, from a "registry" of qualified planners to choose from, to companies that give away some basic planning for free in the hopes of drawing some prospects in to go deeper, to advisor review sites.
While many remain skeptical about the value of such services, the reality is that the process of "sales" - converting a prospective client into an actual client - is very specific to an individual firm and its advisors, but the process of "prospecting" to find prospective clients is a marketing function that really is much more conducive to size and scale. Thus, while not all the companies competing in this space will be winners - many will likely be gone in a few years - it appears that outsourcing prospecting may be an emerging trend as yet another way for some financial planning firms to get more efficient and grow, especially for firms that don't yet have the size and scale to effectively market themselves.
Lead Generation For Financial Planners
For many years, the primary provider of "financial planning leads" has been the membership associations, as both NAPFA and the FPA have had consumer-oriented "Find A Planner" services that deliver prospects interested in financial planning to members. More recently, the CFP Board itself has also ramped up its efforts with their new "Let's Make A Plan" website tied to the new public awareness campaign for the CFP marks and funded with an increase in the re-certification fee.
To the extent that any other services provided prospective clients to financial advisors, they tended to be focused on particular products that advisors might deliver, rather than seeking out prospects who were interested in advice.
However, in recent years, a number of third-party services are coming forth to deliver a similar value proposition to advisors as the membership organizations: finding prospective clients who are interested in financial advice. This new trend is not surprising given that getting new clients has significant economic value to an advisory firm, and therefore would certainly be something on which a business could be based, but is certainly a shift that may change how some advisors generate new clients in the future.
Different Methods For Financial Advisor Lead Generation
Unfortunately, there is not necessarily a clear "best practices" approach for generating financial planning leads, and consequently the firms that have cropped up so far use a wide range of tactics.
Some function as a "registry" - trying to connect consumers to advisors who have registered with the site and have either been implicitly or explicitly screened, such as Paladin Registry or Vestorly, and the recent AdviceIQ; the emerging (and subsequently shut down) new Charles Goldman/Steve Lockshin start-up Advizent also has expressed an intention to use a similar model, where (RIA) advisors will be rigorously screened before being allowed onto the platform. Arguably, this is similar to the underlying model using by the membership associations as well, which implicitly suggest that advisors in their membership organization are uniquely qualified to deliver effective financial advice.
Other services try to lead with an initial value benefit for prospects, and allow the advisor to follow up to try to convert the individual to an ongoing client, such as My New Financial Advisor with their Free Retirement Report or the Advisor Marketing Tool from BoulevardR. The idea is to get the client interested in some initial advice and basic guidance, and then seek out an advisor to take it to the next level.
Another approach for trying to connect consumers with advisors by establishing a third-party service to provide ratings and reviews of advisors, which is the model start-up Tippybob was implementing. This model is perhaps the least certain - will enough advisors have enough of their clients provide reviews on the site to reach a critical mass of reviews that makes it a relevant decision-making tool for the public? Ultimately, it was not successful for Tippybob, which shut down within a year or two. Nonetheless, given the success of "review sites" in a wide range of other industries, expect to see more advisor review sites cropping up in the coming years.
Can Advisors Really Outsource Prospecting For Clients?
The rise of these various services raises the fundamental question - can you really outsource prospecting for clients? Some planners I've spoken with have suggested this is impossible - clients do business with people they know and trust, and there's no way to start building trust if some third-party service delivers people to you.
Yet the reality is that there's a difference between "prospecting" and "sales" - prospecting is the activity you do to meet potential new clients, while sales is the part where you try to convert a prospective client into an actual client (regardless of whether you "sell" a financial product, or financial advice as a service). Thus, having your prospective done by a third party service doesn't eliminate the "sales" part of the process; for better or for worse, you still have to take the prospects and turn them into clients. What it does - or is intended to do - is deliver a stream of qualified prospective clients to you so that all you have to do is actually convince them to become your client and pay you for what you do.
Thus, the key value proposition for these lead generation/prospecting services is their ability to deliver a steady stream of prospective clients, and that those individuals actually be qualified prospects for your services (i.e., people who fit your target market, have the financial wherewithal to do business with you, and desire your services). And while these services are difficult to deliver on, they're not impossible; in point of fact, marketing is an activity that is particularly effective with size and scale, implying that a service trying to reach the public to deliver hundreds or thousands of prospective clients to advisors really may be more cost effective than each advisor doing it individually.
Accordingly, it's notable that marketing and the delivery of potential prospects to advisors is also becoming part of the value proposition for many emerging turnkey financial planning platforms (TFPPs), from the Garrett Planning Network to mega-RIAs like Edelman Financial Group (which leverages the marketing value of Ric Edelman's books and media activity to provide a regular stream of prospective clients to the firm's advisors) and our own XY Planning Network.
In the near term, expect to see competition heat up further in this space, with both the rise of TFPPs that include marketing as part of their value proposition, and third-party platforms. In point of fact, the competition has already gotten underway, as some firms in this space report that the cost of financial-planning-related search terms through Google and other search engines have risen dramatically in recent years. This will put pressure on the membership associations like FPA and NAPFA in particular, which have traditionally offered this "for free" as a membership benefit but haven't necessarily invested into the technology and marketing the way a for-profit entity might; on the other hand, given how difficult it is to succeed in this space, it's quite likely some of these newer companies will not be around at all in 3 years.
Nonetheless, the bottom line is that the process of finding new prospective clients is a significant challenge for many advisory firms, yet is something with great economic value and that is conducive to scale and marketing leverage. Consequently, while there may be individual firms that are winners and losers, I anticipate this trend will be here to stay.
So what do you think? Would you ever outsource your prospecting in this manner? Do you think this is an effective way for a financial planning firm to get marketing scale? Would you rather get marketing through a TFPP or outsource to a standalone third-party service? Do you think this is a viable business model?
