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How Much Should Advisors Spend on Marketing?

By setting a deliberate marketing budget, you can better track expenses, evaluate results, and grow your firm. Here's how to get started.

How much do you plan to spend on your firm’s marketing in 2017? What percentage of total revenue does that number represent? If you’re like many advisors, you don’t have a planned marketing budget and aren’t sure if you’re spending too much or too little. By setting a deliberate budget toward your marketing plan, you can better track expenses, evaluate results, and grow your firm.

How Much Do Financial Advisors Spend on Marketing?

The 2010 Financial Advisor Magazine Insight Study of Advisory Firms showed the average advisor spending between 1.5% and 3.5% of gross annual revenue toward marketing. Research from The Oechsli Institute shows that more than half of “Elite Advisors” (advisors making over $1,000,000 in revenue per year) spend at least 4% on marketing. This means that the average elite advisor with $1 million in revenue would spend $40,000 annually on their marketing.

Experts recommend spending 3 to 7% of your total revenue on your marketing. Younger advisors or those who are growing their firm more aggressively will want to spend relatively more, while seasoned advisors with a large book looking for only a few more A+ clients may spend a lower percentage of revenue.

Defining and tracking your marketing budget is critical to growing your firm in a cost-effective manner. Many advisors move from one marketing gimmick to the next and forget to track their success. Recording your marketing budget and analyzing your success each year allows you to do more of what works and cut marketing efforts that aren’t converting.

Remember to First Market for Referrals

According to research by Financial Advisor Magazine, 48% of new clients came to advisors by client referrals in 2010. This doesn’t mean your marketing isn’t important; it means you need to design your marketing campaigns to help your existing clients refer business to you.

Create forwardable content. Content marketing is at the heart of marketing for referrals because it keeps you top of mind with both current clients and your network by reminding them over and over what you do, who you serve, and how you help. By creating truly valuable content that shares 90% of what you know, your network will be more likely to forward your emails to their friends, family, and coworkers.

Provide an incentive. Many top advisors offer a referral incentive, such as a $300 discount on a comprehensive financial plan for friends and family of existing clients. Even a $100 gift card for clients who refer business can go a long way towards strengthening your referability.

Reiterate what you do and how you help. At the end of each piece of content that you share with your network, be sure to clearly spell out what you do and how you help, and remind the recipient that most of your business comes from referrals. Then, offer an easy way for prospects to take the next step, such as an online phone call scheduler to ask a question.

Ask for referrals. Once a year, take the time to ask each client if there’s anyone they know who could benefit from your services. If no one comes to mind, the question will remain with them as they go about their lives and they’ll be more likely to refer someone in the future.

Create a Funnel

Embracing a specialization and creating a funnel makes your marketing significantly more cost effective and successful. By going after a specific group or demographic, you can invest in search engine optimization (SEO) for those keywords, content marketing that offers value to those prospects, and paid ads that convert at a higher rate.

For example, the SEO work for “financial advisor san ramon, ca” is significantly more expensive and competitive than “financial planning chevron employees.” Target a specific group to get the lowest price and the highest conversion rates for your SEO and pay-per-click marketing.

You should create a dedicated marketing funnel for each specific group you serve. A marketing funnel consists of bait, or content that gets the attention of prospects, as well as a reliable way to add prospects to your funnel for conversion.

A marketing funnel for those approaching retirement could consist of a free Social Security report and an offer for a customized Social Security analysis. An advisor may add prospects to their Social Security funnel by mailing the reports to all qualified prospects within their zip code.

A funnel for Chevron employees may consist of a webinar on “How to Maximize Your Chevron Benefits” and the advisor may add prospects to the funnel by using LinkedIn ads. Another example of bait could be a free financial plan to members of your hobby cycling group. You may advertise the offer using the group’s paid advertising channels.

A Sample Marketing Budget

For a financial advisor with $250,000 in revenue aiming to spend $12,500 on marketing, here’s a sample breakdown of how they might spend their budget:

  • Website: $1,000 per year
  • Search Engine Optimization (SEO): $750 per year
  • Content Marketing (custom content sent by email and social media): $4,000 per year
  • Local or Industry Publication Ads: $2,000 per year
  • Social Media and Google Pay-Per-Click Ads: $2,400 per year
  • Marketing Event(s): $2,350 per year

Track Every Dollar

Pay attention to the results for each dollar you spend in your marketing budget. If you’re spending on search engine optimization, be sure to track the traffic to your website before and after the SEO work and come up with a cost per additional website visitor.

If you’re advertising in the local newspaper but aren’t sure how many phone calls are coming from that particular effort, create an offer specific to that channel so you can determine which leads belong to that campaign. When you host a marketing event, follow up with each and every attendee and track your close rate (often around 50% for live events).

As you track and analyze the success of each marketing effort, you can adjust your plan to put your budget towards the most powerful channels. For example, if your $750 SEO Package only increased website traffic by 60 visits per month, that equates to about $1.04 per website visitor on an annual basis. If your Facebook ads drive traffic to your site for $0.90 per click, you may want to adjust your spending towards Facebook or ask for a discount from your SEO provided to make their services more competitive.

Setting a marketing budget can help you gain clarity and control over your marketing expenses and cut costs that aren’t paying off. Over time, as you hone your efforts, each dollar will better contribute to the future growth of your firm.  

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