Clients are Comparison Shopping

In our last blog post, we observed that as time passes the differences between large firms and small firms is becoming more evident to clients.  And in a culture that “values getting more for less”, getting more for the same price may be an attractive offer for many prospective clients and an absolutely compelling value for those large firms that not only appear exceptional but in fact are exceptional.  But given all the studies suggesting advisors close new clients through referrals, one might assume clients do not engage in any meaningful comparison shopping and therefore the aforementioned differences may not be as impactful as one would otherwise expect.  As it turns out, new data out of Charles Schwab tells us that clients are not only comparison shopping but they are also engaging multiple advisors.  Game on!

We read articles from practice management consultants and coaches all the time about the importance of referrals to new business development.  This was confirmed once again by a third quarter 2011 ByAllAccounts survey on “Marketing and Business Development” that found the leading source of new clients was referrals and word-of-mouth.  In the fourth quarter of 2011, ByAllAccounts conducted a survey of Investors titled “Why Investors Hire and Fire Advisors” which found that clients identified advisors by referrals from friends or associates as well.

Knowing that both advisors and clients are finding one another via personal relationship and that the key criteria for selecting an advisor continues to focus on advisor-centric qualities like experience (#1) and ethics (#3), one might conclude that the expanding breadth and depth of the value proposition at large firms relative to smaller firms is still not terribly relevant.

But new data from Charles Schwab presented at the FPA National Conference in September 2011 tells a very different story.  Bernie Clark explained in his keynote presentation that potential clients now investigate 8-10 advisors before making a final selection AND that they are now selecting 2-3 advisors rather than just 1 to ensure they are benefiting from multiple sources of advice.  In other words, prospective clients are comparison shopping today AND the interview never ends since the winners are constantly being evaluated against 1 or 2 other advisors who also “won” the beauty contest.

With this new information, one would be naïve to believe that clients are not taking into consideration a more comprehensive review of each advisor.  Indeed, Bernie noted that winning business is now about the team and sources of competitive differentiation.  Using my own backyard as a point of reference, there are scores of financial advisors in close proximity to choose from and many will meet the basic advisor centric criteria of experience and ethics, which means that product-centric “investment philosophy” (#2) and “types of services” (#4) will play a greater role in advisor differentiation.  In fact, the greater depth and breadth of services at large firms can quickly become obvious points of differentiation when weighing what the client “gets” for the same price.

Moreover, if we consider Linda Stimac’s (Rainmaker DNA) supposition that we are in a new “Age of Uncertainty” that requires advisors to serve as Navigator for clients across a broad array of financial planning and investment issues, having the resources to address them all may be of particular importance to clients.

Pinnacle Advisor Solutions is a new division of Pinnacle Advisory Group that offers comprehensive, custom and private-label business solutions to emerging independent financial advisors who are committed to growing their firm profitably and developing the practice they always wanted. Designed by advisors for advisors, these solutions are proven in the field to (a) free advisor time to grow their firms, (b) produce alpha and reduce downside capture in volatile investment markets, (c) build equity in the business and (d) improve compliance.  In addition to more than twenty-years of experience growing its own firm to more than 700 families and over $1 billion AUM, these solutions incorporate more than a year of direct interviews with independent financial advisors.  (   

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