Relax, advisors: You just got permission to ease up on social media.

While advisors reported strong growth and continued optimism, according to a new study from Russell Investments, they chalked up most of their growth to referrals from clients and peers -- assigning very little value to efforts like social media activity.

A strong majority of advisors (87%) said they were "optimistic" about acquiring new clients this year, according to Russell's Financial Professional Outlook. And 86% said they had acquired more clients than they lost in 2012, with nearly half saying they had brought on more than 10 households.

When asked to identify the source of growth, advisors reported big payoffs from client referrals and, to a lesser extent, CPAs and other professional peers, says Kevin Bishopp, who runs Russell's practice management efforts for advisors who buy the company's products, and who served as author of the quarterly report, released Thursday.

The least popular strategies included social media, seminars and social media, he says -- adding that he sees that as good news. "We know that stuff has low return on investment," he explains.

"When an advisor is working through existing clients who could be an advocate for the advisor, or through a center of influence, like a CPA ... it speeds the process and increases the likelihood of client acquisition," he adds. "And that doesn't have the costs the other strategies do."

The results came from Russell's quarterly Financial Professional Outlook; the survey included results from 251 advisors at both RIAs and broker-dealers.


Another surprising result: Advisors reported that most client losses came from a death. In a write-in category, it was "far and away" the greatest cause, Bishop says.

But that highlights a problem for advisors, he points out -- the failure to engage clients' spouses and children. "If the advisor doesn't typically have a good relationship with the spouse ... or a good relationship with the kids, the money is gone."

His recommendations for advisors:

  • Joint meetings: If you're not meeting with both spouses jointly, start doing that immediately, Bishopp says. "Take a read: How trusting [is the less engaged spouse] of that relationship? You have got to find ways to pull the spouse in."
  • Programs for younger heirs: Consider offering to set up a family meeting, Bishopp suggests: "Ask clients, 'What role do you want your children to play in your long-term planning?'"


Among the report's other findings:

Advisors and clients have different things on their minds. Advisors say the top three conversational topics initiated by clients were government policy concerns, market direction and global events -- but that the top three initiated by advisors were: portfolio rebalancing, government policy, and (in a tie) portfolio performance and tax implications.

Advisors' practices expanded in 2012. More than a third of advisors said they added 16  or more clients in 2012; 18% lost no clients, while another 55% lost only one to three clients.

Everyone's more upbeat about the market. Three-quarters of advisors said they were optimistic about the capital markets over the next three years, while only 32% said clients were upbeat. Surprisingly, that 40-point difference is the closest advisors and clients have been over the 11 quarters Russell has been conducting the survey, Bishopp says. But in the report, he cautions that advisors may need to temper client expectations: "It appears that investor optimism is attempting to catch up with the markets themselves."

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