In an era marked by dynamic market shifts and investor behavior trends, the role of strategic financial advisor marketing has never been more pivotal. Effective marketing strategies can significantly impact new client acquisitions, retention rates, referrals, and overall business growth. Yet, smaller independent financial advisors cannot always afford the services of a full-time Chief Marketing Officer (CMO).
Fractional CMOs (FCMOs) are emerging as an innovative alternative to this challenge. These seasoned professionals provide strategic marketing leadership part-time, offering a unique blend of flexibility, expertise, and cost-effectiveness.
This blog explores why financial advisors should consider hiring a Fractional CMO, delving into the specific benefits they can provide, from establishing a compelling brand narrative to improving client communications and driving increased revenue using digital marketing. Read on as we navigate this promising, cost-effective approach for improving your marketing results.
This blog article will cover the following six FCMO topics for independent RIAs (Registered Investment Advisors; Financial Advisors):
- Are bigger RIAs better at marketing than smaller RIAs?
- Is marketing one too many hats for smaller financial advisors?
- Can smaller RIAs ignore marketing and still be successful?
- Can your firm afford a full-time CMO?
- What does an experienced FCMO cost?
- An FCMO is marketing; what about sales?
Let’s get started!
Are bigger RIAs better at marketing than smaller RIAs?
The assertion that bigger Registered Investment Advisors (RIAs) are better at marketing than their smaller counterparts is not necessarily a universal truth. However, there are some inherent advantages when firms have bigger marketing budgets.
Larger RIAs often have the financial capability to employ dedicated marketing teams and leverage advanced technologies, enabling them to deploy more sophisticated strategies and outreach programs.
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However, the efficacy of marketing initiatives is not exclusively determined by size and resources. It is also heavily influenced by the adaptability, creativity, and personal touch that smaller RIAs can offer. These boutique investment firms can often provide more personalized services and build stronger, long-term client relationships. They can focus their marketing on unique value propositions and not just scalable investment management services for the masses.
Notably, the digital era has significantly leveled the playing field. Digital marketing tools, social media platforms, and content marketing strategies are equally accessible to small and large AUM firms. These tools enable smaller RIAs to reach bigger audiences and compete with larger entities on a more equal footing.
While it is reasonable to assume that larger RIAs have certain inherent advantages due to their scale, it's the efficiency, strategic planning, and execution of marketing initiatives that ultimately determine their success. The rise of digital marketing tools has further equalized opportunities, allowing smaller RIAs to market their services on the Internet more effectively. Size can influence the tactics and resources available, but it does not unequivocally determine superiority in marketing results.
Is marketing one too many hats for smaller financial advisors?
It is not uncommon for smaller Registered Investment Advisors to feel stretched thin by the multiplicity of their roles. Their responsibilities are numerous, from financial planning and portfolio management to client service and administration. When marketing gets added to the mix, it can certainly seem like one hat too many.
While essential for growth, marketing is a multidimensional discipline that requires strategic thinking and tactical implementation. It's not simply about creating a catchy slogan or designing an appealing logo. It involves understanding consumer psychology, keeping pace with industry trends, and utilizing digital platforms in an optimal manner. For many smaller RIAs, this can be a daunting addition to their already hefty workloads.
Yet, delegating marketing responsibilities need not be viewed as an expensive luxury. It can be a strategic decision, allowing advisors to focus on their core competencies and ensure a consistent, high-quality service for their current clients. Outsourcing marketing, or even hiring a dedicated marketing professional, can lead to more effective marketing strategies and improved returns on investment.
Can smaller RIAs ignore marketing and still be successful?
Contrary to common belief, smaller Registered Investment Advisors can be successful without heavy reliance on marketing, provided they have well-established and profitable businesses. If an RIA already has a solid client base that generates sufficient income for the firm's owners, the need for proactive marketing diminishes. In such cases, the firm’s reputation, referrals, and market appreciation may be sufficient to sustain its operational health and profitability.
However, ignoring marketing can also be detrimental if the goal is organic growth. Marketing is pivotal for any RIA that seeks this type of growth. It's key for attracting new clients and expanding the firm's footprint in the competitive financial advisory market. Without marketing, firms risk being overshadowed by competitors, thereby stunting future growth opportunities.
Also, marketing doesn't only imply advertising or solicitation of new clients. It also means building a brand’s reputation, showcasing expertise, and fostering long-term relationships. Effective marketing strategies can go a long way in affirming an RIA's credibility and trustworthiness to existing and potential clients.
Smaller RIAs can succeed with lifestyle businesses that do not require organic growth to be successful. In fact, principals may have six-figure incomes with as little as $50 million of AUM - even less if they sell investment and insurance products for a commission. And their personal incomes will decline if they commit money to marketing. This decision ultimately boils down to the firm's strategic goals - whether it prefers to remain a boutique offering or expand into a larger advisory firm with greater future value.
Can your firm afford a full-time CMO?
Before hiring a full-time Chief Marketing Officer (CMO), it's essential to consider the financial implications. The CMO shapes your company’s marketing strategy and affects its overall business budget. In the financial service industry, the average salary of a full-time, high-quality CMO can range from $200,000 to over $400,000 annually, based on the size and geographical location of the company. Virtual full-time CMOs are rare.
In addition to salary, don't forget to account for benefits, taxes, bonuses, and stock options. These can add up to 30-40% on top of the base salary, which means the total cost of a higher-end CMO could exceed $500,000 annually. This figure is only an approximation, as these additional costs can vary significantly depending on the specific compensation package you offer.
The next question to consider is how many assets CMOs need to generate to justify their fully loaded cost. This depends on your business's profit margins and the effect a CMO can have on your company's growth. For instance, if your company operates at a 40% profit margin, CMOs may need to generate more than one million in revenue to cover their costs.
It is no surprise that hiring a full-time CMO is a significant investment. Therefore, it is important to weigh the cost against the potential increase in revenue and growth that the CMO can bring to your company. Remember that the true value of a CMO lies in its strategic vision and ability to drive sustainable growth, which can potentially be a game-changer for advisors’ businesses in the long term.
What does an experienced FCMO cost?
An experienced Fractional Chief Marketing Officer (FCMO) in the financial services industry can be a significant investment, but it is one that often pays big dividends. The average cost of hiring an experienced FCMO typically ranges from $2,500 to $10,000 monthly - a fraction of a full-time CMO’s expense.
An FCMO’s rate is often tied to their level of expertise, years of applicable experience, number of hours per month, and the scope of their responsibilities. And, of course, there are no additional expenses for the FCMO’s knowledge and services.
Many firms find it more cost-effective to hire a part-time FCMO for a small percentage of a full-time CMO’s salary, benefits, and other overhead. This cost structure offers businesses access to top-tier marketing talent at a fraction of the total cost.
The FCMO should help the firm substantially grow its asset base to justify this expense. In fact, the FCMO is expected to recommend strategic marketing tactics that attract more clients, thereby increasing the firm's assets under management (AUM).
Suffice it to say a part-time FCMO can be a smart investment choice for firms seeking organic growth at a reduced price point.
An FCMO is marketing; what about sales?
Financial advisors rely on their FCMOs and CMOs to drive new client growth and brand recognition in today’s evolving marketing environment. The emergence of the FCMO role has significantly transformed these marketing strategies, putting an increasing emphasis on digital marketing.
However, while the CMO and the broader marketing team are responsible for crafting and executing effective marketing campaigns, it is crucial to acknowledge the continued importance of sales and the role it plays within the organization.
A forward-looking CMO or FCMO is focused on leveraging various marketing channels, such as digital marketing, content creation, social media, and analytics, to enhance brand visibility and generate new leads. This team approach ensures that the company's message reaches the target audience effectively. However, the FCMO's primary objective is to generate visibility, traffic and leads. The FCMO is not the person who converts leads into revenue-producing clients.
Someone within the organization needs to be responsible for closing new business and producing additional revenue. This is where the salesperson or team comes into play. Sales professionals are trained in building relationships, closing new business, and getting signatures on service agreements.
The collaboration between the FCMO and the sales team is crucial for a company's success. In fact, the FCMO may also be involved in sales training and the production of collateral materials. That is, the marketing knowledge of the FCMO is integrated into the sales practices of professionals who are responsible for sales.
About Paladin
Paladin is a team of digital marketing professionals with more than 100 years of collective financial industry experience marketing our clients' services to individuals, institutions, and financial advisors. Paladin is a boutique agency that was founded in 2003 to provide game-changing digital marketing services to a limited number of firms and professionals in the financial service industry. Our services range from designing and developing custom websites to providing SEO, SEM, and Fractional CMO services.
Want more information about our digital marketing services? Email your request to Paladin’s CMO: Jack@PaladinDigitalMarketing.com
