Cold Calling Vs. Networking
Few people enjoy doing cold-calling but does it still have its place in the financial services industry? Do financial advisors still use cold calling as a recruitment strategy or has networking become the new strategy of choice? Here's where each fits into the industry today.Cold Calls and Do Not Call
In 2003, the National Do Not Call Registry was born from the Federal Trade Commission and the Federal Communications Commission. This allowed consumers to opt out of cold calls for a period of five years. After five years they simply had to re-register. By 2010, the registry topped 200 million numbers and has continued to grow.
After numerous lawsuits from the telemarketing industry, courts upheld the legalities of the Do Not Call Registry, essentially bringing cold calling to an end for financial advisors.
But the registry only applies to households – not businesses. As a result, financial professionals can still cold call businesses. The good news: With businesses, the payoff is potentially much higher. Although it's often hard to get through to the decision makers at companies, going after the company's 401(k) plan or the business of a highly-paid company exec may make the added effort worth it.
Cold callers today know that pitching a product is a fool's game. It's all about building relationships. Some advisors use the strategy of asking specific questions and offering free advice based on the response. Maybe the business owner is concerned about the high fee structure associated with his employees' retirement plan. The advisor might make suggestions of companies to check out and offer to do some research and get back to them. This soft-sell approach has worked well for some advisors, especially those early in their careers. For more, see Cold Call Without Getting The Cold Shoulder.New Ways to Network
Networking and referrals are an advisor's bread and butter today, according to those in the business. As one unnamed advisor puts it, Referrals through current clients probably make up 40% to 50% of new clients for established practices. That might explain why 86% of top-performing advisors in a recent study said they "do not have a distinct, consistent marketing and client acquisition strategy."
Maybe they should develop one. A recent Fidelity study found that younger advisors receive three times more referrals than older advisors because they embrace emerging technology trends.
What types of trends should they be mastering? More tech-savvy clients want instant delivery of financial documents and literature as well as innovative ways to speak to their advisor – video chat, for example. Others are embracing social media as the industry adopts clearer compliance rules, and mobile gives advisors more real-time tools to serve clients better. All of these technologies only serve to increase referrals and the ability for financial advisors to build stronger relationships with their clients.
Old-fashioned networking still works too. Being involved in local Chambers of Commerce and Rotary clubs is still seen as community service that results in business along with serving on the boards of non-profits and speaking at events.
Networking organizations such as BNI are mentioned by advisors, as well as more niche groups – groups for female or minority advisors, for example.The Bottom Line
Established financial services businesses receive most of their new business from referrals, but they know that networking is well worth their time. Investing time in learning new technology and social media can deliver big dividends in growing an advisor's client base. Cold calling may be essentially dead for soliciting business from households, but FAs shouldn't count out the benefits of calling businesses. For more, see Alternatives To The Cold Call.