Advisors need to step up their digital marketing initiatives fast and stop depending solely on referrals to grow their businesses, according to the findings of a new research study by Ficomm Partners.
Over the next five to 10 years, referrals will matter much less to financial advice prospects than effective digital marketing, the 2024 Consumer Insights Study—Digital Marketing in Wealth Management showed.
The research insights showed there will be an upcoming “referral cliff” for advisors, according to Ficomm.
What Ficomm sees as the main problem for advisory firms is that they “haven’t invested the time or capital to build digital marketing ecosystems that consumers will respond to, and they’re still relying solely on referrals as a core source of organic growth,” the report said.
“As consumer preferences and marketing technology continue to evolve, the advantage will go to those firms that thought ahead and built early enough to optimize their multi-channel digital marketing capabilities before the referral cliff,” according to the report.
Of the 1,107 financial advice buyers surveyed for the study, just 29% said they required a referral to choose an advisor, Ficomm said.
One major driver for that shift is the age of potential advisor clients. For respondents over age 60, 60% said they will only hire an advisor based on a referral.
Among the age range nearing retirement over the next five years, 45% of respondents said they hired their advisor based on digital marketing, according to Ficomm.
Among those under 44 who had hired a financial advisor, just 17% said they required a referral, while 57% of them said they selected an advisor based on digital marketing.
That shift in referral behavior among potential advisor clients under age 60 indicated that the effectiveness of referrals as the only strategy for organic growth will plummet, Ficomm said.
“The survey results align with what we have heard anecdotally,” according to Meg Carpenter, Ficomm Partners CEO.
“As these cohorts age, their habits won’t change,” she predicted. “They’re used to researching and making purchases digitally and tend to rely on social proof such as online reviews and clearly defined digital brands.”
The survey’s findings also showed that no single digital channel was better than another, according to Ficomm. Instead, a combination of digital channels is needed to “generate enough touchpoints to move a prospect into the funnel,” Ficomm said in a release.
For Mary Kate Gulick, Ficomm CMO, “The question isn’t ‘Is your firm engaging in digital marketing?’” she said. The question is actually ‘Do you have an integrated, multi-channel digital marketing strategy?’”
If the answer is no, it will be “challenging to meet your organic growth goals in the coming years,” according to Gulick.
The research showed 64% of effective marketing tactics were digital.
The research also showed 64% of effective marketing tactics were digital, Ficomm said. At least two digital interactions were needed before the consumer took action, with the ideal number of interactions being five or more, the firm said.
Ficomm’s prediction: Digital marketing’s value will only continue to grow for financial advisors, while referrals will remain an important lead source but will no longer be the exclusive way in which leads are generated for an advisory business.
Jeff Berman, Contributing Editor & Reporter at Wealth Solutions Report, can be reached at jberman@wealthsolutionsreport.com.
