For Wealth Managers, Differentiation Is Job #1

A number of years ago, through a marketing relationship with Charles Schwab Advisor Services, I had face-to-face meetings and telephone interviews with a number of financial advisors around the country. Some were partners in well-established, multi-billion-dollar firms and others had just recently bolted from wirehouses and hung their shingles. But to a person, they all seemed to genuinely enjoy what they were doing. They were devoted to their clients, were proud that they were delivering real value to them, felt they were being fairly compensated for their efforts and were optimistic about the future. I was impressed.

We are currently working with several wealth management firms, and it’s clear that various factors have made the business more challenging. Fees are under pressure; cable channels and the Internet have given investors easy access to information they may quote as gospel; millennials, a demographic expected to inherit vast sums of money in the not too distant future, are hard to attract and rein in; and portfolio construction itself is being threatened by commoditization and the emergence of roboinvesting. And while the managers we work with are fee-based, the new DOL fiduciary rule governing retirement investing is nonetheless raising questions about marketing parameters going forward.

The DOL notwithstanding, one thing remains true about good marketing, and that’s that it can help address some of the more common challenges advisors are facing today. The one we consider the most important to the success of progressive wealth management firms is differentiation – standing out.

Wealth managers are not all created equal.

These are the kind of questions we’ve encountered when working with our wealth management clients:

  • “What can we say and share about our firm to establish a discernible difference between ourselves and our competitors?”
  • “How can we position ourselves to strengthen our leverage with potential prospects?”
  • “How can we create a perception of difference?”

They understand that images of marble columns, couples on beaches and rowing sculls do not a differentiation make.

Here are some suggestions for any wealth management company that wants to try to distinguish itself in a crowded market.

Drill down to the point of leverage

In an environment in which competition for market share is more intense than ever and growth of the pool of prospects is reportedly near zero*, we believe financial advisory firms can gain an advantage by identifying their value proposition and promoting it actively.

Use internal and external research to arrive at a compelling platform that’s true to the brand.

Interviews with internal stakeholders, including firm leadership, portfolio managers and client service personnel, will help answer such questions as:

  • What are the attributes and strengths of the firm?
  • Do your current clients share common characteristics?
  • Can you describe the type of clients you’d like to be bringing in? How do they differ from your current base?
  • When a client chooses you rather than a competitor, what made the difference?

Interviews with current clients of the firm and centers of influence, typically accountants and lawyers the firm has a relationship with, will answers questions like:

  • In what ways does the firm provide value to you?
  • How did you first become aware of it?
  • What were the deciding factors that prompted you to choose it over other firms you may have been considering?
  • In what ways does the firm go “above and beyond” in its delivery of services?

Construct a positioning platform

Comparing and evaluating the responses that come from this kind of qualitative research makes it possible to craft a positioning platform that expresses the essence of the brand – what the firm stands for, what clients can expect from the relationship, how it provides added value.

The specific elements of the platform include a positioning statement, brand promise and messaging hierarchy, each of which is indispensable for good marketing.

Communicate your difference

For a wealth management firm, being able to communicate a meaningful difference can help it:

  • Create and expand mindshare
  • Compete more effectively
  • Reassure and retain current clients
  • Attract new clients by giving them reasons to believe they’ve found an advisor with a unique purpose and distinct point of view

This is the province of an authentic brand.

* The problems investment managers face are compounded by the fact that the number of new clients who are up for grabs is shrinking. Michael Kitces, who writes a lot about financial planning, summarized the situation this way. “While AUM and revenues are up, the ‘growth’ is increasingly coming from just the tailwind of market returns. Once those returns are backed out, the underlying net organic growth rates are rapidly approaching zero.”