Success in converting leads favor the firm that makes dedicated hires

July 18, 2011 — 2:20 PM UTC by Griffin Meyers


Growing an advisory practice is no easy task, and it doesn’t help matters when you feel you’re getting competition from the very companies that custody your assets.

All of the big three custodians have mega-marketing budgets that allow them to go after affluent clients directly. There’s another way of looking at this dilemma: Schwab Advisor Services, Fidelity Institutional Wealth Services and TD Ameritrade Institutional each offers an advisor referral program designed for their retail clients that demands a level of handholding that the firms are not equipped to handle.

Many RIAs can benefit by forming constructive relationships with custodian retail branches through these formal referral programs, specifically TD’s AdvisorDirect, Schwab’s Advisor Network and Fidelity’s Wealth Advisor Solutions. See: Fidelity launches gigantic referral database to give advisors a shortcut to wealthy prospects.

When done right, the ability to build and execute a sales strategy around one or a combination of these programs can ignite asset gathering. But one of the great misconceptions about referrals is that they do not require any commitment of time, manpower and other resources. A referral is merely an introduction; it doesn’t assure that you’ll capture the account any more than a blind date assures marriage.

If you’re going to leverage these programs to gain referrals, you need to be prepared to receive them. Having a commitment to growth, a detailed plan, and the ability to execute the plan are the first pieces of the puzzle toward achieving increased AUM within these platforms. The next steps are putting the proper resources to work; both out in the field and back at the home office.


Getting the personnel in place to support a sales strategy is key to maximizing the referral opportunity. Strategically hiring sales people in target markets around the country is one way to add capacity. But firms can’t forget to staff on the front lines. If the phone is ringing and there’s no one there to answer it, it’s a missed opportunity.

One firm we know made its commitment to a program before entering it by building out its sales force, client servicing and operational capacities. It then hired a sales manager that sought out proven sales talent to staff the different geographical regions across the nation, rebranded the firm and developed a compelling sales message based on the firm’s history and investment style. As a result of these efforts, when the firm entered the program it grew its AUM by over 125% over a two-year period.

Salespeople need to focus on maximizing the referrals out of each branch they are assigned to – and that’s a full-time job. Firms that fail to achieve the growth they’re aiming for fail to differentiate roles within the firm. For instance, some have the same person who does the investing also seeking out referrals. It just doesn’t work! Aside from sending a mixed message to the prospective client, a skilled portfolio manager may be dreadful at closing a deal and vice versa.

Form strategic relationships

A small firm with a distinctive value proposition can broaden its footprint by forming a strategic relationship with a larger firm. We saw this work for a firm that offered a unique investment strategy but lacked the sales staff to distribute it beyond its local market. By establishing a solicitation agreement with a custodian that had a national sales force and access to an entire branch network they were able to double their AUM within one year. The custodian involved in the process saw it as an opportunity for the firm’s strategy to be accessible throughout the branch network thus benefitting its client base.


Referral programs have become more competitive over the last 10 years. As the number of RIA firms in the marketplace continues to grow we expect the bar to continue to rise regarding the requirements necessary for admittance. Although some believe these programs have matured and don’t bother pursuing them, we believe the opportunity is still rich for firms with creative strategies in markets that are not overly saturated.

To enter their referral programs, the big-three custodians require that RIAs provide fee-based compensation, have a minimum level of education and investment experience, a minimum amount of assets under management and the proper state and federal licensing.

Beyond these basic requirements, they are looking for investment disciplines that will fill the gaps in different geographical areas. Each potential entrant is considered on a case-by-case basis and none of the programs publish a set minimum asset commitment.

In addition to meeting program requirements, advisors pay fees to participate in TD Ameritrade’s AdvisorDirect program and Schwab’s Advisor Network. We believe participation fees are a small price to pay for the access to the branches and the ability to attract pre-screened, qualified referrals. (Fidelity is not currently charging a fee although this may change later this year.)

TD Ameritrade has a “percentage of revenue” fee structure and charges 25% of the fee the client pays the advisor each year. Schwab charges .25% of the assets that are converted. A flat basis point fee structure may be more appealing to an advisor who manages an all-equities portfolio and charges 100bps vs. an advisor who offers fixed income and charges 50bps. We’ve found that the average referral is within the $350K to $500K range. Firms with higher minimums may want to consider lowering them within these programs, using the reduction as a marketing point, i.e. “We offer clients referred through the program a reduced minimum.” However, like most investors, the assets held at one custodian may only be a fraction of a prospective client’s investable assets and the initial referral could lead to a much larger conversion.

Delivering the message

An RIA’s work doesn’t end once a firm has been granted access to a platform – it still remains competitive within the program to receive referrals; they don’t just start pouring in. Having a unique story to tell is critical in differentiating a firm from others on the platform. Although not mandatory, providing a competitive GIPS-compliant track record can also help demonstrate a firm’s track record of producing favorable results for their clients.

The most important aspect to hatching a successful strategy within these referral networks is to have a well-trained sales team that can deliver a consistent and compelling message to the branch network on a daily basis to attain referrals and, in turn, convert them into new clients for the advisory firm.

Schwab franchises

One recent development of interest is Schwab’s announcement of its franchising plan to expand its footprint. See: Schwab spells out the details of its franchise plan. Many view this as another layer of competition. However, our understanding is that the Advisor Network will also be one of the offerings through these local franchises and to us, it seems like the opportunity to extend the leverage outlined above.

As the RIA business continues to grow and become more competitive, these programs will continue to evolve by seeking out and obtaining the best advisory options for their clients. Schwab, TD and Fidelity have developed these programs to provide a needed service to their clients but have also turned them into a tool for gathering institutional assets for themselves and turning them into very profitable revenue sources. Success depends on the advisor’s dedication to understanding how to be successful within the programs and work them to their fullest.

After 10+ years helping RIA firms attain rapid growth as direct employees, Griffin Meyers and his business partner, Paul Tracey, launched Advanced Advisor Consulting to assist Advisory firms develop and execute sustainable growth strategies.

Mentioned in this article:

TD Ameritrade
Asset Custodian
Top Executive: Tom Nally

RIA Growth
Consulting Firm
Top Executive: Paul Tracey

Share your thoughts and opinions with the author or other readers.


Mike Byrnes said:

July 18, 2011 — 3:51 PM UTC

Good points.

My take on how to make these relationships successful is to:
1. Differentiate your firm from the competition (which is harder to do in this case, as competitors are usually a notch better than the rest just to be accepted into the programs.)
2. Build strong alliance relationships (without being pushy… it takes time to grow trust)
3. Deliver outstanding services to the client referrals so they never leave (to keep the revenue flowing in)
4. Continue to maintain the alliance past the initial courting phase (an area where advisors can make mistakes if complacency sets in)

Mike Byrnes, President
Byrnes Consulting, LLC
Twitter: ByrnesConsultin


Steve said:

July 18, 2011 — 9:58 PM UTC

Would love some recommendations on GIPS compliant performance reporting sources if you can forward…ST


Nevin Freeman said:

July 18, 2011 — 10:15 PM UTC

Hi Steve,

The RIABiz Directory has <a href="" rel="nofollow" target="_new">a section for Performance Reporting</a> that is a good place to start. I assume most, if not all, modern performance reporting engines will be GIPS compliant.



Griffin Meyers said:

July 18, 2011 — 11:29 PM UTC


There is also a list of service providers on the GIPS website,

Some firms follow the requirements as outlined on the GIPS website and do it in house. Others will take it a step further and have their numbers verified by a third party.




Griffin Meyers said:

July 18, 2011 — 11:42 PM UTC


All great points with #2 and #4 being so critical to getting and maintaining lead flow. If you fail at developing relationships with the ones providing the referrals it’s going to be difficult to be successful in any program.




David Spaulding said:

July 19, 2011 — 1:19 PM UTC

Compliance with GIPS does more than demonstrate a good track record; it also shows a commitment and investment in what is understood to be “best practices” for providing historical performance to prospective clients. In addition to compliance, verification is also critically important. Our firm helps clients become compliant and also conducts GIPS verifications. Our newsletter ( and blog ( provide ongoing information on the standards, as well as all aspects of performance and risk measurement.
David Spaulding
The Spaulding Group, Inc.

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