The "somewhat-encouraging note" at the end of a characteristically exhaustive study by The Kitces Report on financial advisor marketing revolves around the high cost of planners' time.
Since marketing "consistently ranks among advisors' least-enjoyed responsibilities," they "can take comfort in the fact that while stronger growth does require the practice to market more, scaling this marketing efficiently requires the cost burden to shift such that the advisor doesn't need to spend as much time marketing," according to the conclusion of the survey of advisory practices by planning entrepreneur and writer Michael Kitces' research outlet and its
"Or, stated more simply, one of the paradoxes of marketing success is that the firms that market most effectively are often the ones in which the advisor markets less (and the firm markets more on their behalf)!"
The 10 charts below display just a few of the most interesting data points from the study. They point to many lessons for the owners of registered investment advisory firms or other advisory practices, as well as other wealth management industry professionals.
The survey focused on which marketing methods advisors are using the most, which ones are the most effective investments and why. The relative low cost and high success rates of online advisor directories and customer reviews and Kitces' oft-stated thesis that advisors must develop their own client niches stood out as two of the biggest findings. But the study covered more than two dozen types of industry marketing, including referrals, social media, networking and traditional advertising.
"The stakes are high when it comes to whether firms get their marketing right," the study said. "Firms that fail to do so often quickly find that, rather than the cost required to acquire new clients and revenue scaling efficiently as they grow, those costs regularly 'anti-scale' — rising as a share of revenue instead of falling lower in a traditional scaling business. Indeed, the rising cost of acquiring these new clients and revenue organically as firms grow often eventually balloons to the point that growing inorganically through mergers and acquisitions (M&A) becomes more economically attractive than traditional advisor marketing."
For advisors and other professionals who are well-acquaintated with the inflationary trends in the economy in recent years, the lesson that the relative costs of marketing are falling could bring some measure of satisfaction. Between this year's survey of more than 500 financial advisors and the last by The Kitces Report two years ago, the typical cost of client acquisition (or, "CAC" to use industry parlance), tumbled by a third to $2,551 per incoming customer.
But Kitces' team delved even further into the metrics by calculating the "revenue acquisition cost" per dollar of marketing investment (or, "RAC," which the report defines as "the amount a practice must spend to generate each additional dollar of new client revenue." That number has dropped 36% in the past two years to 70 cents, which means that advisory practices are reeling in enough organic growth from their marketing to absorb its cost in less than nine months. So the "marketing remains far more cost-effective than acquiring clients inorganically through M&A transactions often valued at 2.5x–3.5x revenue," the report said.
Online reviews may be an overlooked opportunity
Based on those metrics, the albeit larger share of just 13% of advisory practices that incorporate third-party review sites like Google, Yelp, Wealthtender and WiserAdvisor in some of their marketing suggests "many advisors may be overlooking a meaningful growth opportunity by failing to establish even a basic presence on these platforms," the report said.
Only a quarter of the advisory practices that don't use them are growing faster than their peers, compared to 29% of the ones that have started collecting reviews and built a business profile on Google and a third of the firms that show them on their websites. That latter group spends only 13 cents for each incoming dollar of revenue for their efforts, while the ones that are doing a bare minimum invested 86 cents in revenue acquisition cost. Regardless, the adoption of that method has only risen by 5 percentage points from 2024.
None of that data came as a surprise to Wealthtender CEO Brian Thorp, who said in an interview that large firms' compliance policies, state-level regulation and even an "imposter syndrome" fear of negative reviews are holding the industry back from catching up to the potential of a tool that became widely available after the SEC's 2022 marketing rule.
But he predicted that more large firms and smaller advisory practices will start ramping up their embrace of online reviews. For example, his firm and one of Kitces' other companies, fee-only financial planning services firm XY Planning Network,
"Would you hire a doctor, lawyer or even a plumber without reading their reviews?" he said, noting that prospective clients who get a recommendation from a friend will likely be checking them as well. "They appreciate the referral they receive from somebody they trust, but they want to see if other people agree with their opinion. … It's just a gamechanger."
What are the most popular ways of marketing, and do they work?
Across it and every marketing tactic in the report, these are the 10 most commonly used among advisory practices in the survey: client referrals (88%), centers-of-influence referrals (64%), in-person networking (46%), social media (36%), search-engine optimization (32%), newsletters (31%), client appreciation events (30%), blogging (27%), seminars (23%) and online advisor directories (18%).
At least 58% of the firms drew at least one new client from their marketing last year, with the outliers among the largest firms' most costly efforts creating an average acquisition cost of $16,925 and a revenue acquisition cost of $2.01. These are the revenue acquisition cost per dollar of the 10 most popular marketing methods: client referrals ($0.34), centers-of-influence referrals ($0.72), in-person networking ($1.45), social media ($4.88), search-engine optimization ($0.45), newsletters ($4.14), client appreciation events ($4.54), blogging ($1.64), seminars ($1.76) and online advisor directories ($0.28).
"Just as limiting excessive work hours and administrative burdens is critical to advisor productivity and well-being, a central takeaway of this report is that sustaining cost-effective organic growth as firms grow and scale requires keeping advisor marketing time under control," the report said. "What distinguishes the most efficient firms is not that they market less, but that they become progressively less reliant on (increasingly expensive) advisor time as they grow."
Scroll down the page for 10 charts with key takeaways for financial advisors from a Sept. 15 research paper by The Kitces Report called, "
Notes: The Kitces Report compiled the below data through a survey this past March and April of 506 financial advisors who were employed at advisory practices based in the U.S. before this year through outreach on its "Nerd's Eye View" blog mailing list, social media and on Kitces.com, as well as through a collaboration with financialexpertsnetwork.com. After excluding the 15% of respondents who said that their advisory practices are not actively growing, the report described advisory practices as "high-growth" compared to peers when they ranked in the top third of respondents of comparable size in organic growth. And the report asked respondents to share their revenue growth from marketing efforts in the previous year, net of market appreciation, inflows or higher fees from existing customers and M&A deals.
"Because this survey drew mostly from Kitces.com readers, the sample represents a unique segment of the financial advisor community," the report said. "Kitces.com readers tend to be more advice- and planning-centric than the broader industry, which has a greater share of professionals focused primarily on standalone asset management or investment and insurance product sales."
Smaller firms spend proportionally more on marketing
The typical advisor deployed just 5 out of the 26 different types of marketing investments identified in the report, as "advisors were effective in moving away from tactics with lower success rates," it said. But they spent a large amount on marketing, with the average firm investing 7% of their annual revenue and netting an 8% bump from incoming business and 10% in terms of new clients.
"And amongst practices achieving standout growth rates relative to their level of revenue, growth was substantially higher still, reaching 29% in organic revenue growth and 16% in client growth," the report said.
Bigger firms spend more time and money to win bigger clients
The value of advisors' time is likely acting as one more factor among the many driving industry consolidation, the report said. That's because "the anti-scaling" nature of marketing investments means that the high cost of the hours out of advisors' days continually adds to the cost of winning new client relationships.
"This phenomenon forces advisory firms to serve increasingly affluent clientele as they grow (to ensure they generate enough revenue to recover their acquisition costs), which further undermines their marketing outcomes, as pursuing higher-dollar clients increases client acquisition costs even further!" the report said. "The end result is that the anti-scaling nature of advisor time costs can drive the cost of acquiring clients organically to levels comparable to acquiring them inorganically through M&A, if firms cannot figure out how to restructure their growth engines as they shift from solo practitioner founder-led firms into multi-advisor ensembles."
For high-growth firms, referrals aren't the end-all, be-all of organic growth
Advisory practices use referrals from clients (88%) and centers of influence (64%) at the two highest rates of any marketing method, according to the report. But those two investments represent a big "distinguishing characteristic" between the high-growth advisory firms and their slower-expanding peers, with the former receiving only a third of their incoming new client revenue from either type of referral and the latter generating 80% out of them.
"High-growth firms tend to be less reliant on referrals and more reliant on tactics over which they have greater control (rather than growth being fundamentally reliant on actions taken by clients)," the report said. "One reason high-growth firms are less likely to rely on referrals is that, over time, clients gradually exhaust the pool of people within their networks who are likely to become prospective clients. In addition, after a decade or more of serving the same client base, many of the most obvious referral opportunities have already been tapped."
Estate attorneys and CPAs are the most popular centers of influence, but far from the only ones
"Among advisors using COIs, the typical practice receives the majority of its referrals from just two sources: CPAs (used by 89% of advisors utilizing COIs) and estate planning attorneys (79%)," the report said. "However, the type of COI that most clearly distinguishes high-growth firms is the use of target market-specific COIs (e.g., an influential doctor in a hospital the advisor is targeting as their niche, etc.), with 37% of high-growth practices using them vs 21% of others."
Referral quantity doesn't always mean quality
Not surprisingly, advisory practices that receive referrals from custodians were most likely to receive them through Charles Schwab and Fidelity Investments. CPAs, former employees, clients and attorneys represented the most common traditional paid solicitors of client leads, while Harness Wealth, Datalign and Wealthramp were the most frequently cited digital ones.
"Advisors considering traditional or digital solicitors, however, will want to account for the time needed to build the relationships to generate referrals, and to educate the solicitor to ensure they receive quality referrals," the report said.
High-growth firms use third-party review sites and online advisor directories
Online directories maintained by the CFP Board, the National Association of Personal Financial Advisors, the Fee-Only Network and XY Planning represent the most cost-effective marketing investment covered by the report. And that is "primarily because the subscription fees are modest relative to the revenue of even a single client, and more importantly, they require relatively little advisor time," the report said. But third-party review sites also "exhibit an impressively low" price compared to their return in revenue.
"Despite tending to generate less profitable clients, these tactics do so extremely efficiently," the report said. "Perhaps because of this efficiency, high-growth firms are substantially more likely than other firms to utilize both tactics, and their modest upfront cost also makes them a popular way for newer Stage 1 practices to accelerate their growth (before they're large enough to generate clients from tactics like existing-client referrals)."
Some firms that use third-party review sites are taking a hands-off approach at this point
More than half of advisors who said they use third-party review sites such as reviews on Google, Wealthtender, Yelp or WiserAdvisor in their marketing "proactively encourage clients to leave reviews," with Google the most common outlet for them, by far, according to the report. Regardless, only 16% of clients among the median participating firm actually followed through and left a review of the firm.
"Beyond encouraging reviews, advisors must also decide whether to incorporate reviews or ratings into their own websites," the report said. "Among advisors using third-party review platforms, 34% incorporate reviews or testimonials on their practice's website, while just 18% display ratings. Interestingly, high-growth firms are slightly less likely to display testimonials (25% versus 29%), but nearly twice as likely to display ratings (13% versus 7%)."
Where advisors spend their valuable time networking
Since "one of the core challenges of advisory firms is how to build trust with prospective clients," successful networking "is all about continual presence to establish relationships and build trust — setting the stage for action when the prospective client is ready," according to the report. So it's no wonder that in-person networking represented the third most common marketing strategy used by the advisory practices.
"Because of the indirect nature of networking, advisors must choose their marketing 'location' well," the report said. "Advisors are more likely to resonate with prospects if the advisor is speaking to topics and issues that are relevant to them."
Financial advisor LinkedIn is hot, X (formerly Twitter) is not
Due to its high reliance on advisors' time, social media carries "exceptionally poor economics" to the point that it is "the least efficient of all marketing tactics," the report said. "Our data reveals that reducing advisor time by at least partially offloading these tasks to centralized support makes this tactic more cost-efficient. Completely outsourcing social media marketing creates the lowest RAC by far ($0.45), compared to $4.17 for partially outsourced and $1.77 for entirely self-sufficient strategy), suggesting that there is a sweet spot between using an external team's expertise and the firm's voice and priorities — ideally, the two parties can keep each other grounded to ensure greater overall success."
Where firms are spending their advertising dollars
Even though only around half of the advisory practices said they had gained a client last year from advertising or sponsorships, they "remain a remarkably highly efficient means of acquiring new revenue," according to the report. "While advertising may not be particularly effective at generating large numbers of high-value clients, its relatively low demands on advisor time allow it to remain a cost-effective contributor to growth in practices' target markets (even if that's just being more visible in their local community through local sponsorships)."
