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A Financial Advisor’s Guide to the Loyalty Ladder

The best prospects are at the top of the ladder.

By Duncan McPherson

You are trying to attract new clients, not chase them. People are led not pushed into taking action.

I want to pass along what I consider to be the showpiece of client-centered marketing. This is the heart of getting referrals and of building a great business-the loyalty ladder. The loyalty ladder has five rungs and everyone in the marketplace sits on one of those five rungs. What you are trying to achieve is something called conversion: you are aiming to convert as many people as you can up to the top of the ladder.

Let’s start at the bottom. The bottom is for suspects. A suspect is frankly anyone with a pulse, and there are a lot of them out there. Will a financial advisor get a good return on his investment of time and money marketing to suspects? Of course not. But I still see advisors who spend time marketing to them, because they haven’t figured out the true differences between a suspect and the next rung on the ladder—prospects.

With one word I can embody what a prospect truly is: predisposed. That means the person has been influenced in advance and possesses a certain level of self-motivation. Ultimately it means the person calls you. You are trying to make your phone ring with inbound calls from predisposed prospects. I’m not the biggest fan of cold calling, and suggest you engage in activities that will make your phone ring. This is called the law of attraction. You are trying to attract new clients, not chase them. People are led, not pushed, into taking action.

Gaining customers
Once you have identified your prospects, you want to convert them up the ladder to at least the next rung, which is for customers. Remember, there is a huge difference between a customer and the next rung on the ladder, which is for clients. A client is someone who is exclusive to you. Every cent he has and every need that can be serviced they have empowered you to fulfill. A customer is someone who has a portion of his or her business placed with you now and another portion coming down the road.

One of my favorite questions for an established financial advisor is this: “You’ve got 500 clients, but how many of them are completely and exclusively yours?” More often than not, I’ll find that the advisor has “opportunity leakage” in his or her business. This means there are a number of customers in the inner circle and there is tremendous opportunity to uncover new business right there. But because the advisor is so fixated on sales and transactions or simply gathering assets he leaves his new customer twisting in the wind as he tries to find more new business.

Don’t stop at gaining a customer. You have a responsibility to your customer and to yourself to convey your full array of offerings so that you can put all the pieces of the financial puzzle together for them. You can’t wait for your customers to volunteer information about all of their needs. It might not occur to them that you could handle all of their affairs.

Nor should you stop at converting your customers into clients. The value and durability of your business have virtually nothing to do with how many clients you have, and everything to do with how many advocates you have. Advocates are the name of the game. You know what an advocate is and all of you have at least a couple in your inner circles right now. I have one friend who calls them apostles and another who calls them ambassadors.

Advocates think you walk on water, they are fiercely loyal and they empower you with each need they have. And most importantly, they brag about you to everyone who will listen. My question is this: “What would happen to your business if you had 200 advocates?”

You’d be on the verge of a breakthrough. And there is a practical as well as and a fulfillment side to the issue of advocates. From a practical side, it has been proven to cost far more time and money to convert a prospect into a customer and then to a client than it does to convert a customer into a client and then an advocate.

But more importantly, from a personal fulfillment perspective, you want to get to a point at which you don’t have to convince people anymore. You just work with the people who are already convinced and let them do all of the convincing.

I had a rather heated debate about this with someone not long ago, who was having a tough time letting go of his old habits. He must have just hit a home run in terms of a sale and was bragging about it to me. However, it was becoming increasingly agitated that I wasn’t getting excited for him, to the point that he actually said, “Don’t you get it? This is huge.” To which I replied, “If all you are going to do is focus on the commissions, you are trading your time for money. It’s going to be anticlimactic because you aren’t building a business that way. It’s not the commissions you should be focusing on. The relationship you have with that client will last long after you’ve spent the commission, no matter how big it is. It’s the commitment of that person you should be focusing on. It’s the lifetime value of that relationship that will really be of value. If that client stays with you forever, gives you every cent he has as his life unfolds, and brags about you to two or three people every year, that’s what should get you excited.”

Duncan MacPherson is the president of Duncan MacPherson & Associates in Ottawa and serves as a consultant to top financial advisors. He can be reached at

This is an excerpt from the transcript of the seminar "Advanced Marketing Techniques: A Financial Advisor’s Guide to the Loyalty Ladder" given at the Million Dollar Round Table 2001 Annual Meeting in Toronto, Canada. For the complete copy of the presentation, contact MDRT at 847-692-6378 or visit its website at


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