In our weekly newsletter, top advisor Peter Rohr discusses how he built his business by adapting a "beehive mentality." Rohr provided service for firms (the hive) which then allowed him access to its employees (the bees.) While this may not be a strategy for every advisor, it does show the value in tapping into self-contained networks. Most of us live in tidy, hive-like networks — professional, social, cultural geographic, etc. Having a client, for instance, who is a chief resident at a hospital opens the door to dozens of his or her professional associates. This is a tried and true strategy that has dozens of variations. You may specialize in divorcées, athletes, doctors, small business owners, astronauts, etc — and have effortlessly rolled up business through word of mouth for years (and found yourself on our rankings in the process).
The effectiveness of this word of mouth marketing has made many advisors justifiably skeptical of any and all external marketing. Why spend money trying to attract high net worth clients "off the street", when it's much easier to sit back and let clients do the work for you? That said, the value of any new "off the street" client isn't just his or her individual account, its the aggregate potential value of the associated social/professional network. So while its is often difficult to justify marketing spend in the short term, if you take a longer term view, the potential upside — especially when your clientele are high net- and ultra high net-worth — almost always justifies the spend, when you consider the potential upside of finding a new "hive."
The graphic above is a social network map developed by the CDC as a theoretical model for flu outbreaks. Most advisors are content to stay in the central node, cultivating contacts within their social networks. They are however missing out on a much larger potential gain by ignoring new networks — be it doctors or opera singers. Advisors who can cultivate relationships with multiple social networks can supersize their practices.