By Neil Jensen

Everyone in the investment industry knows that summer is a slow time for opening new accounts. It's a given that we should accept that investors go on holiday and the last thing they want to think about is retirement planning, let alone the perceived headache of transferring accounts to another firm.

I don't think we should accept that line of thinking.

I think that summer is when many of our clients have more time to reflect on their future, and that we should make a push to be part of that future.

One of the marketing ideas that we've had since the beginning of the firm, yet never acted on, is a client referral program. The idea is certainly not a new one, yet it is not commonly used in the mutual fund industry (at least in Canada).

I'm proposing that we pilot a two-month project this summer to see if a customer referral program would work at Steadyhand. The hope is that by rewarding clients to open new accounts or refer new clients to Steadyhand, we can turn the summer into a busier period than it generally is.

Here's how it would work:

• The program would run July 1 - Aug 31st.
• We create a referral code or "key" for each client, and email the key along with an announcement of the program to clients.
• The client can use the key when they open new accounts, or provide the key to others to use when they open new accounts.
• Each new account that is opened with the referral key will result in a "reward" to the client that referred the new client/account.

Some of the issues that we are are grappling with are:

• Does this cheapen the Steadyhand brand? There is the perception that spending $25 or $50 for a client referral is different than spending $25/50 per new client on advertising. I think we can get around this by being clear and transparent in our communications around the program - and let's be honest, we are trying to build a business and are willing to experiment with different means of acquiring customers. There is also some concern that we will look too much like the banks ("open an account and receive a free toaster"). 
• Will it actually work? Is a reward enough to change client behaviour? It wouldn't be a lot of money for our clients, but I'm OK with that. The intention isn't to give a large reward for referrals, but just to nudge people to take some action. We have a number of ideas for rewarding clients:
  • a $25 or $50 management fee rebate
  • waive fees for a quarter (3 months) or longer
  • donate to a charity on the client's behalf
  • entry into a draw for one year's fee rebate
  • 10 tickets to the third round of the Toronto Maple Leafs 2010-11 playoffs run!
  At the moment we make a point of sending a note of thanks to clients who refer new business - perhaps that is sufficient.
• Do we alienate clients who open up accounts outside of the program window? Will existing clients feel like they were somehow ripped off because they didn't get the fee reduction? I think our answer to this simply has to be that we are experimenting with all avenues to continue to grow our business.
• Are there any privacy or regulatory issues? Securities regulations would seem to require us to notify both the prospect and the client of the reward. We currently don't tell anyone, including the referror, when a new client signs up. We would have to obtain permission from both parties to allow this exchange of information.

As you can tell, this has generated a lot of internal debate, and I'm not sure that we will actually ever try it out; however, I thought the discussion would make for an interesting blog post.

We'd love to hear your feedback on whether we should proceed with this pilot program (post your comments below).