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How Much Financial Advisors Should Spend on Marketing

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Financial advisors reviewing data to determine how much they should spend on marketing for their firm.

Marketing is an essential business expense if you hope to grow your advisory firm. Without a marketing plan, you may put yourself at a disadvantage when it comes to attracting new clients. But how much should you spend to promote your business? Your financial advisor marketing budget can depend on different factors, including the size of your firm and the marketing channels you plan to target.

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What Is a Typical Financial Advisor Marketing Budget?

The average advisor spent $17,400 on marketing in 2022, according to an in-depth survey conducted by Broadridge. That same survey found that registered investment advisors (RIAs) typically have a larger marketing budget, spending $27,800 annually versus the $9,700 spent by independent broker-dealers.

In terms of how that breaks down on an individual client basis, the firms surveyed onboarded an average of 23 new clients per year, spending $743 in marketing dollars to acquire each one. Overall, the per-client cost ranged from under $250 to more than $2,000 for the firms surveyed.

Looking ahead, 30% of advisors surveyed said they planned to increase their marketing budget. Just 2% of advisors said they’d decreased their marketing budget, while the remaining 68% said they planned to keep their spending at the same level.

Setting a Marketing Budget as a Financial Advisor

There are no hard and fast rules for deciding how much to allocate to marketing as an advisor. A common recommendation is to set your marketing budget as a percentage of annual revenue, typically ranging from 1% to 10%.

That means if your firm brings in $1 million in revenue annually, you should be budgeting anywhere from $10,000 to $100,000 for marketing activities. But there are a few things to consider here.

First, the percentage formula may work better for some firms than others. If you’re just getting your business started, you may have very little revenue to speak of just yet. In that case, you may be better off choosing a set dollar amount to spend based on what you can realistically afford to dedicate to marketing.

Second, think about the potential return on investment. There are diverse ways to market a financial advisor business and some tactics or strategies may produce better results than others. If your firm is still on the smaller side, you may need to be particularly careful about how you allocate your marketing spend if you’re working with a limited budget.

It’s also to your advantage to think about how you’ll track ROI, something that one in five advisors don’t do, according to the Broadridge survey. Having some metrics that you can use to track your marketing results is essential for identifying activities that have the most or least value for your business.

Keep in mind that it’s easy to get caught up with trying to spend all of your budget because you think you have to. Just because you’ve calculated that you need to spend $50,000 on marketing using the percentage of revenue formula doesn’t mean that doing so will guarantee results. It’s possible you could spend money needlessly on things that don’t work simply because you’ve convinced yourself that your budget should be a certain number.

One last thing to weigh is your pace for spending down your budget. It can be tempting to go all in on one or two things right away, but that could be a mistake if those things just aren’t working for you. Instead, you may consider spacing out spending so that you have time to test out different marketing strategies to determine which ones are most effective for your business.

What to Include in a Financial Advisor Marketing Budget

Two financial advisors deciding what to include in their marketing budget.

There are a variety of ways to market yourself as an advisor, many of which require some investment of money. If you’ve decided how much you can realistically spend on marketing, the next step is deciding how to allocate those dollars to both online and offline tactics.

Some of the most popular (and highest ROI) ways to market yourself online as an advisor include:

  • Building a following on social media
  • Running digital ads on Facebook, Google or LinkedIn
  • Having a professional website
  • Publishing SEO content on your blog or someone else’s
  • Local SEO
  • Being a guest on financial podcasts (or starting a podcast of your own)
  • Public relations outreach
  • Email marketing

Marketing offline may involve setting up a direct mail marketing campaign, participating in community events, or running print and TV ads on local channels.

Which marketing efforts are most effective for you can depend on how well you know your ideal client. You may craft a perfect marketing message, but it may have little value for your business if it’s not reaching the right people.

One of the first and most basic rules of financial advisor marketing is to know your client and your niche. Ask yourself the following:

  • Where does my ideal client tend to spend their time online?
  • What’s their preferred method for consuming content?
  • What type of messaging is most likely to resonate with them, based on their financial needs, challenges and goals?

You may have to do some research to determine where to target your messaging. One way to do that is by polling your existing clients to ask them about their marketing preferences and which social media channels they use most often. That can give you a starting point for shaping your marketing plan and budget.

Using Lead Generation Services to Market Your Business

Lead generation services can simplify marketing as an advisor by cutting out all the noise and allowing you to make a more direct connection with prospective clients. There’s a lot of debate, however, around whether it makes sense to allocate part of your marketing budget to lead generation as some services are better than others.

In terms of what you’ll pay for leads, it ultimately depends on the service that you’re using. What may be more helpful to weigh is how much revenue each new lead you acquire might generate if you’re able to convert them into a longstanding client.

The formula for calculating ROI on lead generation looks like this: Revenue – Cost / Cost x 100

So, if you generate $40,000 from leads that you spent $10,000 on, you’re getting a 300% return. What constitutes a good ROI for lead generation is subjective, as every advisor may view it differently. Setting specific goals or targets and tracking ROI consistently can give you a better idea of how much value you’re getting from lead generation.

Bottom Line

Two financial advisors discussing how they could use lead generation services to market their firm.

Setting a financial advisor marketing budget can give you a framework for deciding how much to spend, but it’s also important to consider which areas of focus are likely to offer the biggest payback. Remember that developing a marketing strategy is often an ongoing process as you may need to try out different methods to find a groove that works best for your business.

Tips for Growing Your Advisory Business

  • If you’re considering investing in lead generation, take time to research the options. For example, does the lead generation service you’re weighing provide you with the proper tools and support to follow up on new leads quickly? And will you only pay for the leads that you choose to follow up on? Those are some of the advantages of using SmartAdvisor to connect with prospective clients.
  • You may be focused on marketing your business online but don’t underestimate the power of offline marketing tactics. Referrals, for instance, can help you build a more sustainable business if your existing clients regularly recommend you to their friends, family members or coworkers. The key to generating more referrals is providing superior service to your existing clients and showing your appreciation by hosting special client events.

Photo credit: ©iStock.com/courtneyk, ©iStock.com/Worawee , ©iStock.com/VioletaStoimenova

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