You likely came to this article—and it may not be the only one you’ve read—because you, a financial advisor or employee of a financial advisor, want a definitive answer on how much your marketing budget should be for your firm.
I’m not a fan of marketing “hacks” or “quick fixes.” In a similar vein, I don’t believe there’s a clear-cut answer to this question. There, I’ve ruined this piece before it’s even started! But give me a chance to explain why I feel that way.
There are plenty of other articles that will tell you an advisor’s marketing budget should be between 3% to 10% of their revenue. Studies like 2022 Kitces’ report, “How Financial Planners Actually Market Their Services,” found that among the 457 used responses (more than 1,000 responses were submitted), financial advisory firms of various sizes spent, on average, $26,500 on marketing in 2021. In terms of percentage, that dollar figure translated to 7.1% of revenue. A new version of that study is currently in the works, but I’d anticipate the updated figure is likely still in the range of $24,000-$28,000.
However, most of the articles and research on the topic are about current (and past) financial advisor marketing budget averages. Regardless of the sampling effectiveness in those studies, I’m going to go out on a limb and say that a good chunk of those marketing budgets are not effective marketing budgets.
Simply put, what financial advisors are spending on marketing isn’t what advisors should spend on marketing.
Before starting my marketing firm, I worked inside an independent RIA that spent six figures on marketing and averaged more than a 2-to-1 ROI on that investment (even while factoring in advisor time). Through Emerging RIA Consulting, I’ve partnered with clients that range from solo RIAs to billion-dollar firms. They spend a couple hundred to tens of thousands of dollars on marketing a month.
Here’s what I’ve learned in that time. Advisors can spend (and justify) pretty much any marketing budget. The question you should be asking yourself is not how much you should spend on marketing, but this: How much are you getting back from what you spend?
In the rest of this piece, we’ll explore the figures out there to help set a benchmark, ways of thinking about your marketing budget, and the most cost-effective marketing solutions I’ve seen work for advisors.
What Is the Average Financial Advisor Marketing Budget?
Studies like 2022 Kitces’ report referenced above 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. Again, these are hard dollar expenses and do not include advisor time or other soft dollar expenses:
| Firm Revenue | Marketing Budget: Low | Marketing Budget: High |
|---|---|---|
| $100,000 | $1,000 | $3,000 |
| $250,000 | $2,500 | $7,500 |
| $500,000 | $5,000 | $15,000 |
| $750,000 | $7,500 | $22,500 |
| $1 million | $10,000 | $30,000 |
| $1.5 million | $15,000 | $45,000 |
| $2.0 million | $20,000 | $60,000 |
| $3.0 million | $30,000 | $90,000 |
But that’s how much advisors are spending (or were spending because the surveys were completed two years ago now, though there is a new version due out soon). 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. According to that same study, on average, firms, agnostic of size, generated $1.20 of first-year revenue for every dollar spent on marketing. Circle that figure, because that’s the most important one. Basically, financial advisors currently get back a little more than what they spend on marketing. From what I’ve seen, that number could be a lot higher.
Marketing Budget basis: Percentage of Revenue or 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.
In a previous version of this piece, I made a recommendation about how much the average advisor should allocate toward marketing. But there are so many factors at play, and so many different sizes of firms, that I don’t feel right about giving a dollar range. What I will say is that most firms in an average year—that is, not your first year of business—can do a lot with a hard marketing dollar spend of $15,000.
The thing about providing one suggested number is that, as I mentioned before, I don’t think there’s one proscriptive solution for your marketing budget. There are a lot of factors that go into it.
- How much do you want to grow? 2x or 10x?
- How much can you afford to spend?
- What needs to be done to get you to your growth goals? A new website? Rebrand?
- Will firm growth trigger new expenses?
And, much like giving financial advice without knowing someone’s complete picture, I don’t want to give guidance without knowing the particulars of your situation. So, let’s focus on marketing budgets in a different way.
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 editor freelancer or AI/app
- 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 control.
COST EFFECTIVE 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, Boeing, 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 to discuss your marketing budget. Though I only have the capacity to work with a handful of clients at a time, I want to be a resource to advisors and their marketing employees 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.
