Recency bias is probably playing a role here, but I think this is one of the most asked questions when it comes to advisor marketing. I bring up recency bias because I just saw the question in an advisor Facebook Group last week for the second time in about two months. I’ve typed up comments to respond to this question previously, but I felt like I needed to have a resource outside of Facebook to answer this question. Not only because that’d be easier than typing a new comment every time (I actually copied and pasted my most recent comment for the post last week), but so there was something that existed for all advisors, not just ones in the Facebook Group in which the question was asked.
So…how much should financial advisors be spending on marketing?
Studies like 2022 Kitces’ report, “How Financial Planners Actually Market Their Services” show that advisors typically spend in the band of 1-3% of their revenue on hard dollar marketing costs—things like your website, Facebook Ads, graphic design, video production, and so on. Here’s a really straightforward breakdown of how that may look for your firm:
- $100,000 revenue: $1,000-$3,000 marketing spend
- $500,000 revenue: $5,000-$15,000 marketing spend
- $1,000,000 revenue: $10,000-$30,000 marketing spend
But that’s how much advisors are spending (or were spending because the surveys were completed about two years ago now). The study doesn’t capture what is believed to be the ideal amount to spend, only what is currently being done. With that said, the study does show the return on marketing spend for the various firm sizes. So you can at least see how valuable your marketing dollars may be for a firm your size. On average, firms generated $1.20 of first-year revenue for every dollar spent on marketing.
Budget as a Percentage of Revenue vs. Dollar Figure
Whenever this question about ideal marketing budgets gets asked, the answer is almost always a percentage, including the data from the Kitces study. However thinking about your budget as a percentage of your revenue may be problematic for a couple of reasons.
The first issue is that, depending on your firm’s size, a percentage of revenue can give you a really wide range of numbers. If your firm is producing $2 million in revenue, should you be spending $20,000 or closer to $60,000?
The other issue at hand is that marketing costs may not scale directly in proportion to your revenue. That is, you’ll likely spend a larger share of your revenue as a smaller firm, especially if you’re just starting. And it’s likely not a consistent slope downward as your firm size increases. Data from the Kitces study back this claim up. The hard-dollar marketing cost decreases at each of the five revenue tiers established for the study.
With this in mind, for those firms less than $250,000 in revenue (and certainly under $100,000), I’d encourage you to think in terms of a dollar range instead.
So, how much should you spend?
If you exclude salary and advisors’ time dedicated to content production, the firm I was at previously spent only about $15,000 on true hard-dollar marketing expenses, less than 0.5% of the firm’s revenue. (The reason I exclude salary is because many firms don’t have a full-time marketing employee). Sure, this is anecdotal evidence. But it provides a good baseline and shows that even large firms don’t have to go buck wild with spending to be effective.
So with that baseline in mind, I believe the dollar range most smaller firms should focus on spending in a year is $3,500-$6,000, not including the cost of your time. This will look different if you’re just getting started because a new website is likely going to be your biggest marketing expense and cost upward of $3,000 on its own. But if you’re outside of year one, then you can do quite a bit for that amount of money.
I acknowledge that I do have a conflict of interest in making this statement. I serve financial advisors, so why would I want to undermine my own efforts to make money by diminishing the value of my services? However, the basis for that budget range is meant to capture firms that are DIY marketers, not ones working with outside consultants or agencies.
Focus on Incremental Spending Instead of Sunk Costs
I was just talking to an advisor last week about their list of marketing costs. He asked me about several items he was spending money on, and if they were worth it. His mindset is how most advisors should think about their marketing budget.
There will inevitably be sunk marketing costs. You need a website, a hosting platform, an email provider, a domain name (or two), and Zoom, among other items. I understand those costs add up, and you want to limit your spending as much as possible. But unless you want to go old school and smile and dial, you’re going to need those digital components to build out your marketing in 2023. So instead of focusing on things you don’t have much of a choice on, focus on the marketing line items you have control over.
To get the ball rolling, here are some items you choose to spend money on:
- SEO software/specialist to optimize your site
- Facebook Ads/Google Ads
- Video production AI/app or freelancer
- Lead generation service
Here’s the thing: You don’t have to—and likely won’t—spend $15,000 in one fell swoop (unless you’re investing in a lead gen service; more on that below). You’ll spend money in chunks. So take it piece by piece and gear your marketing additions as added layers.
Marketing tends to be overwhelming because it’s often viewed as an all-or-nothing approach. You have to have a podcast, write blogs, produce videos, and run social media ads. Or you do nothing at all.
Instead of trying to do everything all at once, focus on one—or maybe two—marketing tactics. Spend your time and money building out that one thing. If you’re having success, you can begin to layer on additional tactics from there.
P.S.: Please be really careful about investing in lead generation services. They’ll more often than not charge you thousands of dollars for leads or appointments (I’ve seen some charging $10,000+ a month). Used correctly, SEO, Facebook Ads, or Google Ads could do the same thing for you for a fraction of the cost, and you’ll have complete control.
The Highest ROI Marketing Tactics for Advisors
Let’s finish our discussion of marketing budget with some actionable items for you to think about. Here are the tactics I believe are the best use of your time.
- Niche + SEO content: If your niche lends itself to Google searches, then building out a couple of written pieces targeting a keyword/SEO strategy can pay big dividends. This works well for employer-based niches like Amazon, Nike, or Facebook.
- Niche + Facebook/LinkedIn Ads: If your niche isn’t something people are likely searching for, or too small to have a large enough volume, consider building out an ads funnel to target them. LinkedIn and Facebook offer great options to get really specific with targeting. You can go after larger regional employers, professions like lawyers or doctors, or lifestyle-based demographics like pre-retirees.
- Local SEO: This one takes a bit of time to get results, but can give you a steady stream of clients if done right. There is plenty of data to show people are searching for advisors in their geographic region, and ranking at the top of Google Search results will drive prospective clients to your website.
- Google Ads: This is something you don’t need a niche to do well. And if you don’t want to spend money optimizing for SEO or local SEO, you could simply pay for the keywords instead. One of the best features of Google Ads is that you can optimize your campaigns for the exact results you want, i.e. someone filling out your ‘Get Started’ form.
- Building a Personal LinkedIn Brand: I’ve seen several advisors do this really successfully. If you’re regularly posting engaging, strategic content on LinkedIn, you can amass a substantial following. One advisor I spoke to was turning his LinkedIn presence into 2-3 prospective client appointments per week. Again, this one takes time to pay off, but you don’t have to have thousands of followers to be successful in turning this tactic into new business.
Next Steps
So, now what? If you’re still unsure of where to start, I’d encourage you to reach out. Though I only have the capacity to work with a handful of clients at a time, I want to be a resource as much as I can. I know it can be difficult to find answers about marketing, and even harder to judge whether that information is reliable or not. So drop me a message or question if I can be of assistance.
