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How much should advisers/planners spend on marketing in 2022? (The answer isn’t what you expect)

How much should you spend on your marketing?

That’s a question we know many advisers and planners struggle with. So, it’s one you can find some answers to this week, with a little help from some expert friends.

But first, we need to tackle the elephant sat stubbornly in the room – advisers and planners who are reluctant to spend any money whatsoever on marketing.

After all, if we can’t agree on the principle, what’s the point of talking money?

In our experience, there are several reasons why advisers/planners don’t invest in their marketing:

  • Some simply don’t believe they will see a return to justify the expense
  • Others are conditioned by previous experiences – for example, the promised ROI on a previous project was less than expected
  • Some advisers/planners are happy to spend money in principle but have a limited budget (that’s fine, big budgets can be dangerous) and are paralysed by the fear of spending it in the wrong place
  • Others have a larger budget but don’t know where they should spend it (hint: always start by developing a marketing strategy), so do nothing.

Of course, if you don’t want to grow your business, there’s no need to spend money on marketing. However, if growth is important, a reluctance to allocate budget is frustrating (and not just because we run a marketing agency!)

Firstly, marketing (and, for the record, that includes maximising the existing client recommendation opportunity) is the engine that drives your growth.

As Daniel Priestley, author and co-founder of Dent, said when we asked his thoughts for this blog: “When someone refuses to invest in marketing, it’s as if they’ve built a perfectly engineered space rocket but they don’t want to put fuel in it.”

Secondly, the initial fees, ongoing adviser fees, and longevity of client relationships mean an adviser/planner’s return on investment (ROI) is significant. That’s before we factor in another three or four times the ongoing fee if the business is sold in the future.

Most importantly though, financial planning changes lives. Effective marketing communicates that message and ultimately leads to more people experiencing the benefits of it.

So, how do you reframe your marketing budget as an investment and not an expense?

Let’s start with The Society of Advice founder, Carl Richards: “My whole life changed when I started to truly understand the difference between an investment and an expense. If you see your marketing as an expense, you will want to limit it as much as possible.

If your marketing isn’t effective, you should see it as an expense, and it should be eliminated. On the other hand, if you see the benefit of it, and you see it as an investment, you’ll want to spend as much as possible. If I can put a pound into something and reliably get two pounds out, I’m going to do that all day until I meet my ‘why?’

If we’re clear about ‘why?’, then we see the difference between an investment and an expense, that will ultimately drive the decision in terms of ‘how much?’

I think it’s much better for us to get clear about why we want to do the thing, in this case, marketing. Then make sure that it’s an investment; can I track that it generates results? Sometimes those results are hard to draw [a] straight line from, but we should get some idea of metrics we can use to make sure our marketing is working. Then, it’s an investment, not an expense.”

Data = confidence

We agree with Carl.

If you struggle to see marketing as an investment, you will only change your mindset when you have confidence that the budget you allocate to it will achieve your ‘why?’

Data gives you that confidence.

It’s why we insist that our clients track at least 12 data points for every new enquiry. It’s why we build a marketing KPI dashboard for each of our clients. And it’s why we spend so much time analysing the data before making evidence-led recommendations.

Unfortunately, most advisers/planners don’t collect the right data for each new enquiry or have a marketing dashboard.

The result? No data = no confidence.

All this brings us neatly to the views of someone we hugely admire for his combined commitment to marketing and planning excellence, Anthony Villis of First Wealth.

Anthony says “First, I totally get it! There is a lot of nonsense spoken in marketing, and too much reliance on ‘spray and pray,’ where you have no idea of return on investment.

“To see marketing as an investment, you need data, and you need numbers. Work out your metrics and track them; client referrals, introductions from professional connections, content engagement, website visits, CTA clicks, newsletter sign-ups, phone calls into the business, meetings booked.

“It’s never an exact science, but you can quickly get an idea of what you’re spending, what the outcome is, and, importantly, whether what you’re doing is working.”

Reprogramming over? Next question, how much should you spend?

We’ll give our view at the end. First, though, let’s hear from advisers, planners, and marketing experts from both inside and outside our profession, here in the UK and overseas.

First up, we wanted to understand the views of the adviser/planner community. So, we ran polls on Twitter and LinkedIn, asking a simple question: “What proportion of turnover (all income into the business) should advisers/planners allocate to marketing?”

The combined answers were:

  • 0%: 5.86%
  • 0 to 5%: 35.09%
  • 5 to 10%: 46.80%
  • Depends: 12.24%

Given that most advisers/planners would avoid rules of thumb when it comes to financial planning, we were a little surprised that so few selected “depends.” Over the coming weeks, we’ll reflect more on why that was the case.

So, how would our experts have answered the same question?

Let’s start with Anthony Villis of First Wealth: “Basing a marketing budget purely on a percentage of turnover is too simplistic. It needs to be based on evidence, data, and your company business plan.

“Firstly, decide if you need to market your business. Then, assuming you do, think about the different forms of marketing – for example, client referrals, professional introducer relationships, and online marketing – and how successful they are in your business.

“Next, consider how many clients you’re looking to take on each year and the cost of finding these based on your data. This gives you your marketing budget.”

So, let’s put Anthony in the “depends” camp.

Next up, still in the financial services profession, we asked Lee Robertson – founder of Octo, a platform for those involved in the financial services profession to interact and exchange ideas.

Lee said: “Younger businesses will probably need to spend more on client acquisition, websites, social media, client communication strategy etc. Established businesses, with presence and clients, perhaps less.

“Define within the business what constitutes marketing spend with an audit based on your business and objectives. Ask value questions across PR, marketing, client communications, events, awards, and social media and content production time. This should help define the time, costs, and effort required to cost how much should or could be committed to a marketing spend.”

So, let’s add another to the “depends” camp.

For a different perspective we’ll head over to the US and Sarah Grillo who helps advisers build marketing strategies and get the best out of LinkedIn.

Responding to the same question Sarah said: “5 to 10% of budget. Most of your time should be spent on your clients because most of your growth should come from referrals. Basic marketing elements such as a value-rich client newsletter, appearing on social media regularly for clients to see, and facilitating ease of communication with clients can help improve referability.”

Back in the UK, we asked two leading marketing experts for their thoughts. Daniel Priestley, author and co-founder of Dent, said: “Leading professional services businesses put an average of 7% of their revenue into their marketing budget for things like ads, sponsorships, and other promotions.”

So, that’s two experts suggesting similar rules of thumb as a percentage of turnover.

Finally, we turn to Joe Glover, an expert on marketing events and webinars, who said: “I’m not a fan of allocating a certain percentage spend of revenue to marketing. I think it has to be more considered than that. My preferred method is zero-base budgeting, a methodology which means building a budget from the ground up without a specific figure in mind.”

Joe continues: “Ideally a marketer will know their numbers well enough to build a plan based on how folks are converting through their activity, and therefore how an increase in expenditure will likely lead to a change of revenue. This isn’t an exact science but is more precise than the finger in the air of saying x%.”

So, what’s our view?

We’re firmly in the “depends” camp. We believe that you should start with the end in mind (what Carl calls your ‘why?’) and work backwards to calculate the amount you need to spend.

A bottom-up approach can help you to define your marketing budget

Let’s say you want to grow your practice by taking on new clients. That process might work as follows:

  • Identify the number of new clients, and the value, that you want to take on
  • Calculate the number of new enquiries you need to achieve that objective
  • Understand your current run rate of new enquiries
  • Calculate the shortfall
  • Develop and implement a fully-costed strategy, to show you the cost of filling the shortfall.

This bottom-up approach means you understand the budget you need to achieve your objectives. It might be more than you thought, it might be less, but at least you know your number. If it’s realistic from cash flow then great. If it’s not, you can start to consider trade-offs.

Then, to give you confidence that the money you allocate to marketing will prove to be an investment that produces a return (rather than a cost), build a marketing KPI dashboard (more of that in the coming weeks) so you can track the return.

Then implement your plan, monitor the results on your dashboard, and tweak where necessary to ensure you remain on track.

For all the financial planners reading this, that process should sound pretty familiar!

We’re here to help

Our Ignition Marketing Strategy process takes you through five stages over three meetings.

You will be left with a costed strategy and a KPI dashboard to monitor progress. Click here to learn more about how that process can help you.

Alternatively, if you have thoughts on today’s blog, please email to share them with us.

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