How to Evaluate ROI for Lead Generation as a Financial Advisor

Sourcing leads through multiple channels offers more opportunities for you to connect with your ideal clients, but it’s important to consider the return you’re getting for your investment. Otherwise, you could be wasting time and money on lead gen strategies that might not pay off. Here’s how to evaluate lead generation ROI for advisors.

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How to Evaluate Lead Gen ROI: Tips for Advisors

The simplest way to gauge your ROI for a particular lead generation strategy is to ask yourself whether it’s working. If you’re consistently getting new leads, that means something is going right. But if you’re not, that’s a sign that your lead gen approach is a dud.

If you’d like to get more granular and test the value of individual channels, the following tips can help.

1. Develop a Lead Generation Matrix

First, you’ll need to identify all the channels your firm utilizes for lead generation. This step matters later when it’s time to choose your key performance indicators (KPIs).

Your lead gen matrix may include:

Email marketing
Social media
SEO and content marketing
Client referrals
Referrals from your centers of influence
Digital ads
Direct mail marketing
Physical ads (including print ads and billboards)
Collaborations and strategic partnerships
Webinar and seminar marketing
Networking
Community events
Lead generation services

Once you have your list, identify your lead gen goals. Be specific about what you want to achieve, both generally and with each lead generation channel.

For example, acquiring new clients is a broad goal. Instead, you might set a goal to acquire one new client per channel, per quarter. This goal is specific, time-bound and measurable. Or, if you have a referral program, you might set a goal to acquire two new clients per month and increase AUM by $500,000 for the year.

2. Set Your KPIs

Two advisors discuss how to evaluate lead generation as a financial advisor.

KPIs allow you to measure the results of a specific action or set of actions tangibly. When you’re talking about how to evaluate lead generation ROI for financial advisors, your KPIs should be tailored to each channel you use.

For example, say you’re planning to invest more in developing your firm’s referral program. You might track performance using these metrics:

Referral rate. Here, you’re concerned with the percentage of your total client base that refers leads to you. The formula to calculate referral rate is (Number of Clients Who Make Referrals/Total Number of Clients) x 100. You could also dig deeper and segment your client list according to how many people they refer (or how many of your clients have yet to refer anyone).
Conversion rate. Your conversion rate is the number of leads referred to you who eventually become clients. You can use this formula to find yours: (Converted Referrals/Total Referrals) x 100.
Customer lifetime value (CLV). This KPI measures the revenue you expect a new client to generate over their lifetime. Here’s the formula to calculate it: (Average Revenue Per Client x Average Client Lifespan) x Average Profit Margin.
Customer acquisition cost (CAC). Your CAC measures how much it costs you to acquire a new client through your referral program. This includes how much you pay for referrals to clients directly, as well as any expenses you pay to market or maintain the program. The formula looks like this: (Total Sales + Marketing Costs)/Number of New Clients Acquired.

An uncomplicated way to condense these metrics and calculate ROI is to focus on the total cost of the program compared to the total revenue generated. Here’s a formula you can apply to gauge your return:

(Total Revenue – Total Cost)/Total Cost x 100

For example, if you spend $20,000 a year on a referral program that generates $100,000 in revenue annually, you’d have a 400% ROI.

You can apply this same strategy to other lead generation channels, adjusting your metrics as needed. So, if you’re spending more time cultivating your email list, for example, you might measure the number of new net subscribers per month, email open rates and click rates, and how many of those subscribers go on to become clients.

3. Compare Your Goals to Your KPIs

If you set clear goals for each lead generation channel, and have done the math with your KPIs, you’re ready to compare them. You should easily be able to see if your lead gen efforts have met your ROI expectations, exceeded them or fallen short.

You’re looking for three things:

Profitability. Does this lead gen channel result in a profit for your firm? Is it making you money, or does it only cost you money? And if it’s not making any money now, how likely is it to do so in the future?
Sustainability. Is this channel something you can see yourself continuing to put time and money into over the long term? If it’s time-consuming, could you outsource or automate it without significantly increasing your costs?
Necessity. Does a particular lead generation channel provide something that other channels in your marketing plan don’t? Or could you eliminate it and reallocate that part of your marketing budget elsewhere, without a noticeable change in conversions, revenue and profits?

The best lead gen channels for your firm will check all three boxes, meaning they make you money, they’re not a drain on your time or resources, and you can’t replace them with something else.

Here’s another way to think about it: Ask yourself what the maximum amount you’re comfortable investing is to acquire and retain a new client. Then you can use that number as your baseline to evaluate the ROI of any lead generation strategies you employ.

Bottom Line

Periodically evaluating the ROI of your lead generation methods can help you refine your marketing strategy and ensure that you’re not wasting time or money on the wrong things. You may find that lead gen channels that proved fruitful initially have stalled, or that outlets you’ve paid less attention to are suddenly flourishing. Reviewing your plan quarterly can help you keep pace with changing trends and adjust your marketing accordingly.

Tips for Growing Your Advisory Business

As more clients seek out financial advice online, a digital presence is essential to your marketing strategy. The elements of a well-rounded online marketing plan include SEO, social media and an email list. You can build on that foundation by partnering with an advisor marketing platform like SmartAsset AMP. SmartAsset AMP (Advisor Marketing Platform) is a holistic marketing service financial advisors can use for client lead generation and automated marketing. Sign up for a free demo to explore how SmartAsset AMP can help you expand your practice’s marketing operation. Get started today.
Should you buy leads as a financial advisor? There can be value in purchasing leads, though it does make a difference where you find them. A reputable lead gen service should provide you with vetted, high-quality leads of prospects who are actively looking for an advisor to work with, rather than a generic list of names and email addresses.