Skip navigation

Top Firms Are Focusing on Prospect-to-Client Close Ratios

Low close ratios are almost always the result of a lack of training.

One of the most interesting findings from our newly released 2023 Herbers & Company Service Market Growth Study is that the typical advisory firm is challenged when it comes to converting prospects to clients.

In our survey of more than 700 advisory firms, the average respondent reported that they close just 33% of their prospects. That pales in comparison to the 73% close rate for firms that we judge to be top organic growers.

Our study did not seek to find reasons why average firms let so many prospects slip away. But Herbers & Company consulting engagements over more than two decades provides us insights about what separates the best-organic growing firms from those that struggle at closing.

When working with advisory firms to expand their growth, we ask clients for data. One critical piece of organic growth data is close ratios. Often, we find that firms haven’t tracked the data, haven’t thought about how the client experience correlates with close ratios and generally aren’t focused on the metric.

Most often, firm leaders are primarily concerned with driving leads to their business and then hiring enough talent to accommodate any resulting client growth. That leaves a big gap, though: You can drive lots of leads, and have ample advisory capacity, but are those relationships resulting in new clients?

Why Firms Neglect to Focus on Close Ratios

Before I go on, it’s worth looking at the three reasons why so many firms fail to track close ratios. First, in my experience, most firms don’t consider close rates as one of the most important drivers of revenue. Advisory firm leaders often focus on the number of leads coming in, the number of new clients, clients that are being served, and total assets being managed. Their logic is that bringing in more leads will result in more clients and assets. But they tend to forget that more leads doesn't necessarily equate to more new clients with assets. Indeed, in some cases, firms grow faster despite having fewer leads, simply because they achieve higher close ratios.

Second, many firms don’t have a consistent way of tracking the close ratio. By technical definition, the number of new clients divided by the number of sales proposals represents the close ratio. But each advisory firm has a different client experience and differing definitions of when the “sales proposal” happens.

And finally, there’s the aversion to “sales” among financial advisory practices. When I started in the business 20-plus years ago, most independent advisors had rejected the sales cultures of their former broker employers. “Sales” was practically a dirty word. The composition of the industry has changed a lot over the past two decades, but a stigma around “selling” remains. Thus, a propensity not to focus on the sales process remains.

The Do-Show-Tell Sales Methods

All advisory businesses seek to convert prospects, also known as selling. There are three sales approaches, which are commonly described as Do, Show and Tell. Two decades ago, most prospect to client conversions were done via the “Do” process: Initial meetings took place, information was gathered and work started—before the prospect had signed on, they received free advice. Advisors typically create financial plans or investment allocations, building trust by “doing” work without any pay, and hopefully impressing the prospect to become a client and transfer their assets.

The “Do” sales process is a loss-leader, spending advisor capacity and time without payment to convert prospects, and it works. The process is in the financial advisors’ comfort zone and doesn’t require much selling. It’s just doing the work. Advisors are typically confident putting together financial or investment plans and explaining them to clients. Asking the prospective client to move their assets is a relatively easy final step to gaining a new client.

But, as advisory businesses got bigger over the years, managing the capacity of their advisors became an issue. The result: advisors were managing a full client load while still doing free loss-leader work with the prospects. All that work before gaining a new client overwhelmed capacity.

That’s when the “Show” approach started to become more common. Instead of creating financial plans or asset allocations, advisors “showed” prospects their firm’s technology and/or a sample financial plan, for instance. It was explained to the prospect that they could get their own customized plan if they became a client. “Showing” the prospect the tangible deliverables without “doing” free work is a way to minimize up-front-work and manage advisor capacity. It weeded out prospects who took the free financial plan in the “do” process and never transferred assets, and guess what, it also worked to close new clients.  

Then came the “Tell” process often more common in mid-size or larger, more-established firms who have a recognizable brand that can afford more an “it’s up to you” approach. The advisor sits down with the prospect, walks them through the firm’s client-service process, then communicates that once the client agreement is signed, they can get going on the work. The “tell” process is sales, without the used car salesman feel.

The “Do, Show and Tell” processes all work. Some work better for different firms depending on their client service model. But they can all be effective in converting leads to clients. However, and this is a big however, the successful use of any of these approaches’ hinges on advisor training. And, from our experience, this is the place where firms run into trouble on close ratios.

The Solution to Higher Close Ratios Is Better Training Programs

There’s a widespread assumption throughout the industry that only rainmakers or dedicated sales experts can close business. That’s just not true: All advisors can convert clients. I know this because I’ve seen a wide variety of non-sales-oriented advisors’ close business. But, to increase close ratios requires training, and I’m not talking about sales training here. I am talking about learning better communication … and practicing.

When a new advisor sits in front of a prospective client for the first time, they're likely not to close that client. But with more experience and practice communicating to prospective clients comes polish and confidence, which leads to higher and higher closing rates. Many advisory firms make the mistake of pulling advisors off the sales process after they fail to close the first few prospects.

Forward-looking firms allow for failure, but more importantly, they train the advisor how to communicate with a client and practice with them again and again. While they may lose a few prospective clients at first, the future conversions will typically far outweigh those early setbacks. No one should understand this better than firm founders. Stories of founding entrepreneurs whiffing again and again before hitting their stride are legion. Smart leaders leave room for their talent to fail and learn.

Equally important for maintaining a high close ratio is to pick one approach—Do, Show or Tell. Many small firms start with the loss-leader “Do” approach because they’re desperate to create a sustainable book of business. “Doing” the free work in the forefront gives them an edge without the pressure of “selling” to a prospect. As they grow bigger, they might continue to offer free up-front financial planning for the biggest prospects. But they might also charge others a flat fee for a financial plan, using the “Show” approach. Finally, a “Tell” process might be used for prospects that are less desirable.

Employing multiple sales approaches is a recipe for having very low close ratios, because it means that advisors need to be trained and proficient in three different communication methods rather than becoming an expert in just one. Again, our study did not identify the reasons that so many firms have low close ratios. But based on our consulting experience, I can say that the low ratios are almost always the result of a lack of training. Advisory firms can begin by first, tracking the close ratio, and second, identifying which advisors need a little more help with communication training.


Angie Herbers is founder and managing partner of Herbers & Company, a practice management and growth constancy for financial advisory firms. She can be reached at [email protected].

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.