New business development for wealth managers is about relationships

Why do certain wealth managers enjoy remarkable growth? For many, success boils down to a single word: relationships. These relationships may play out and pay off in many ways, from client referrals to external partnerships. Even marketing messages can potentially figure into relationships when they set the tone for client interaction. Top-performing wealth managers have increased assets 21% annually on average over the last five years. Their success may offer a roadmap for other wealth management practices.

Strong relationships may help generate client referrals

The top-performing wealth management practices have generated new client referrals from existing clients more consistently than their counterparts. The Practice Innovation Index (PII) asked wealth managers, “In the last calendar year, what percentage of your current clients and strategic partners referred a prospect?” The referral rate for top performers was almost 18%, above the almost 14% average across all wealth managers surveyed.

Referrals in our view are a product of relationships. And we believe relationships are built on trust. In our experience, clients are unlikely to open their networks in the early stages of a relationship. But that may change with success and time. We have seen that satisfied clients are more loyal and more likely to recommend their wealth managers to others, often becoming powerful advocates for the practice. With access to a client’s network, you can likely better build yours. Cultivating strong client relationships may expand the pipeline of high-quality referrals to help drive asset growth, enhance credibility, and support long-term growth.

In recent years, wealth management practices that generated a higher percentage of client referrals were also among the fastest growing.¹ A focus on referrals may help drive the growth of assets under management (AUM). We believe success breeds success, with referrals creating a cycle of growth. We also believe further success helps existing clients and key centers of influence — referral sources — gain confidence.

Strategic relationships may help support organic growth

Alliances with CPAs, attorneys, estate planners, insurance specialists, and other specialized experts may help sustain growth. We have found that these professionals generally work with similar clients who themselves often require related services. Strong strategic relationships may lead to recommendations and new business as their clients navigate complex issues for which you might hold some expertise.

PII data shows that top-tier practices maintain 4.3 external partnerships, whereas their lower-performing counterparts maintain 2.0 external partnerships. The average is 2.8 across all respondents. These relationships likely expand a firm’s reach and give them a competitive edge, proving useful for sourcing new clients.

Developing partnerships with other professionals in our experience requires careful planning and cultivation. Setting up reciprocal referral relationships within a vetted network may take years and lack immediate results. But we have seen that reliable contacts tend to eventually refer quality prospects, which can potentially lead to long-term growth in the firm. And happy clients may someday open doors to still more referral opportunities.

Proactively expanding these strategic relationships may significantly help boost a practice’s visibility, strengthen credibility, and attract and retain high-value clients. In today’s competitive environment, we believe mutually beneficial partnerships are necessary for any practice to thrive and distinguish itself.

A value proposition may help set a relationship’s foundation

A clear, compelling, and consistent marketing message may help a firm stand out in a competitive landscape. PII data shows that wealth managers who effectively communicate their unique value proposition better position themselves to attract the right clients. More than 29% of top-quartile practices have a clear, compelling, and consistent marketing message, versus just 2% of those in the bottom quartile. This contrast highlights, in our view, the vital role of effective communication in attracting clients and establishing credibility.

We believe strong marketing differentiates a practice, communicating value to potential clients and reinforcing value to current clients. Among the first (and most repeated messages), it may set the tone for the client-financial professional relationship. It could be what caught their attention, kept them interested, and attracted their business. It may help set their expectations. Delivering on that message may inspire trust, just as failing to deliver could break it.

To deliver, we believe practices should seek expert guidance and resources. Marketing professionals and specialized agencies may leverage digital marketing tools in an effort to create an impact. Messaging that resonates with the target audience could strengthen a firm’s reputation and competitive positioning. Highlighting strong external partnerships and showcasing success stories of similar or like-minded may further demonstrate the breadth of resources and relevance to prospective clients. A compelling narrative may help set a foundation upon which a fruitful relationship can be built.

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