This article was originally written by Shane for Adviser Voice.
Traditionally financial advisers and planners have obtained their leads from existing clients and referral partners, but as with many industries, the internet is changing things in a hurry.
When I first moved into the advice side of the industry I would ask a lot of advisers how they obtained their leads. Most would say referrals from existing clients, whilst others had strong referral partnerships in place with accountants and mortgage brokers.
At that point in time no one ever told me they obtained leads from the internet, but fast forward to today and the number of financial advisers obtaining leads online has increased significantly.
Out the advisers I speak to who are obtaining leads online, the vast majority are not coming from their own websites. In fact, most tell me that their own websites have failed dismally in generating leads.
Instead, they are buying leads from the growing number of websites setup by people outside of the industry who are seeing the money to be made from financial lead generation.
There is certainly nothing wrong with buying leads from these people, and I’ve spoken with plenty of financial advisers who have had success by operating in this manner. Indeed, I was first put onto this activity by a former manager at ING (now OnePath).
If you are going to buy leads online, especially from a website that may be run by someone who has no formal qualifications in finance, there are some major issues to consider and to look out for.
A different approach
Internet leads require a completely different approach to leads provided by referral partners or existing clients.
When receiving leads from referral partners you are generally not competing against anyone else for the business. Instead the referral partner has identified a potential need, and it is your job to explore that need with the general target of making a sale.
Internet leads are almost the opposite of this. In this case the potential client has already identified their own need, and they are simply looking for the right financial adviser to fulfil that need for them.
In many cases a potential client will be requesting quotes or information from a number of websites, so you could be finding yourself competing against other financial advisers who have also bought leads for the same client.
So instead of convincing the client that they have a need, you are convincing them that you are the right person to fulfil their need.
Outright purchase or commission split?
This is one of the major questions to think about when buying leads. Do you want to pay an upfront fee to purchase the lead outright, or do you want to pay a split of your commission on any successful sale?
Both options have their advantages, and the right answer really depends on a few different factors.
If buying outright, on average you will be looking at $50 per lead. If going down the commission split path, you will generally need to share around 25% of your commission depending on whether or not trail is included in the split.
Let’s take a look at both options, assuming an average commission of $2,000 and a conversion rate of 25%. We’ll use a number of 100 leads.
If you bought the leads outright you would be paying $5,000 for a commission return of $50,000 that you don’t have to share. This would leave you with a profit of $45,000.
If you were paying a commission split you’d have to hand back $12,500 of your $50,000 commission, and potentially an ongoing share of the trail. This would give you a profit of $37,500 which leaves you $7,500 worse off that if you’d have bought the leads outright.
At first glance it appears that buying outright is the better option, but it really depends on the quality of the leads. If you were only able to convert 10% of the leads the figures would be quite different.
Based on the reduced conversion rate the profit (excluding office expenses etc.) would be $15,000 whichever way you went. If the conversion rate dropped below 10% a commission split would become the more profitable option.
As I mentioned earlier, the right answer really depends on the quality of the leads and what sort of conversion rate and average commission you expect to achieve.
The target client
The target client of the lead generating website will have an impact on how desirable the lead will be for your business.
Many of these websites market themselves on offering the lowest premiums, and it’s not uncommon for potential clients to request a quote from more than one website. If you are not prepared to compete based on price, then these leads may not be right for you.
On the other hand, if you are fairly new to the industry and are still learning about the products, purchasing leads from a website that targets insurance for surgeons or barristers may not be the most suitable option at this stage.
From my experience, most financial advisers buying internet leads are happy to leave the compliance issues up to the website owner. After all, the adviser does not own the website and has no connection other than buying leads, so what’s the problem?
Most of the people running these lead generating websites do not have financial qualifications, and as they are not AFLS holders or Authorised Representatives (nor are they passing themselves off to be) they have little or no responsibility with regards to ASIC.
This doesn’t mean that their websites all contain incorrect information, indeed many of them are very well put together, but it does leave the door open for mistakes and issues to slip through.
Recently I conducted a full compliance audit on one such website, and whilst the majority of the site was okay, there were a couple of major errors that could have led to a successful complaint by a client.
If a client has relied upon information on that website when making a decision to proceed with your recommendation, there is the potential that you could get dragged into a complaint involving the client, the website owner and of course yourself.
Potential compliance issues shouldn’t turn you off internet leads completely, but it is important to be comfortable with the content on any website that you are considering buying leads from.
To buy or not to buy?
There is no doubt that internet leads will continue grow into one of the largest sources of clients for financial advisers, and with the current trend of the most successful sites being owned by people who are not financial advisers, it is clear that the buying and selling of leads will continue for a long time.
Is a strategy of buying internet leads right for you and your practice? It really depends on your target market and your way of doing business.
If you partner with a lead generating website that fits your business well, it can be a terrific way to boost your client numbers and potentially introduce some diversity to your client book. It can allow you to concentrate on providing good service and advice whilst someone else takes case of bringing in the leads.
But if you partner with a website or a group of websites that don’t fit your business, you could find yourself wasting a lot of time and money on leads that will never become clients, or clients that you don’t really want anyway.
The alternative to buying internet leads is to build your own lead generating website, but that’s another whole subject!
3 thoughts on “Tips for Financial Advisers Buying Internet Leads”
If your firm must resort to buying leads from one of these websites then you are doing something wrong in business.
How can you build a sustainable firm with *loyal* clients if they are being fed to you from these proven misleading websites?
Sure, buy website leads if you want a transactional firm, but if you want to build a real firm with real value the existing methodologies work just fine thank you.
Thanks for your comments LC.
Buying leads is not for everyone (especially online leads) but I genuinely believe that they have their place among life and general insurance intermediaries.
The most important thing is getting your leads from a reputable website. If you’re buying leads from a website which promises the cheapest prices and heavy discounting, chances are they’re going be very poor quality leads.
But if the leads from from a quality website which provides good information on the value of insurance advice, and that makes the referral process transparent for the client, then I think they can be a great way to build your client base.
It’s also important to remember that things have changed over the last twenty or thirty years when it comes to selling insurance.
Some of the older guys in our industry today probably had a lot of luck in their early career through cold calling and getting referrals from friends and acquaintances, but in my experience it doesn’t work like that now.
People want to go to the internet to find information on their income protection or TPD insurance, and they use Google to locate that information.
Unless your website ranks within the top few results for ‘income protection’ or other common terms (which is near impossible for us mortals) then you have to find some other way of accessing those opportunities.
And if that means buying leads from other websites that have managed to rank highly, then that’s what you have to do.
I strongly agree with the points you have made in this article although due to inflation and increasing popularity of online marketing Life Insurance and Income Protection leads are going for $70-$100 per lead to buy outright.
I have a website that generates leads for Life Insurance and Income Protection, however I am currently looking for a financial planning firm to services these leads.
The website is http://insurancerebate.com.au
The leads are suited to advisers who:
Can deal with clients Australia wide
Offer a rebate on the first years premium
Offer quality advice and customer service
If you are interested or know anyone that would be interested please feel free to contact me at email@example.com