The Formula for Calculating the Expected ROI of Social Media for Financial Advisors and Insurance Agents

The “What's the ROI of social media?” question has been a topic of debate, analysis, and discussion ever since marketers started making the case for the business use of social networks. The reason the conversation on social media ROI persists is that for most businesses it is relatively difficult to get even a reasonable approximation of the true financial impact of social.

That’s why Gary Vaynerchuk’s famous “What’s the ROI of Your Mother?” portion of the talk he gave at Inc 500 in 2011 resonated so loudly throughout the digital marketing community and is still referenced today. Social media marketing, by its very nature, is about interacting with people and there will be a lot of time and energy invested in what may often look like non-business related engagement. This is no different than going to real life networking events or belonging to a local BNI or Rotary Club chapter. In these offline social networking activities, you know that you will eventually get new business from them but you just don’t know exactly when or how much business that may be. Yet, very few financial professionals question the value of networking time invested within their local community.

In my experience, the reasons many financial advisors and insurance agents question the ROI of social media in their practice are a sense that their target market isn’t using social and the belief that social media usage will be a huge time suck. The first objection is an easy one to overcome with data. Over 70% of all adult Americans use social networks regularly and the numbers get much higher than that in younger segments. More importantly, 90% of high net worth individuals are using social routinely. The time objection is really a lack of appreciation for the value potential of social media usage. If advisors and agents really knew how many potential new clients and how much impact regular engagement with their existing clients might have on their book of business they’d make it a priority.

In this post, I am going to share a simple formula with you for calculating the expected ROI of your social media engagement as a financial professional.

social media roi formula


The “as a financial professional” caveat is there for a very specific reason by the way. Most of what is written about social media ROI is written for marketers at large brands or enterprises that are dealing with customer populations in the tens of thousands or even millions. But as a financial advisor or insurance agent, your business is unique to you. You are the brand. Your clients are doing business with you. Even if you work for a large wirehouse or are affiliated with a larger firm the client sees you as their “guy” or “gal”.

While the big brands and enterprises talk about "client relationships" and  "engaging with the customer” you live and die by relationships. And social networks like Facebook, Twitter, LinkedIn, Google+ and so on are the most powerful relationship management tools in the history of business. It’s the power of these tools to make it efficient for you the advisor or agent to manage a very large number of relationships with prospects, clients and referral partners that makes it easy to craft a predictive model for the financial return you’ll see from your social media efforts.

The formula looks like this:

  • C x E% x W% x R x Y = Revenue
  • T + P + Ed = Investment
  • (Revenue - Investment) / Investment = ROI

Before we move on the components of the formula I want to touch on one thing real quick. There is a legitimate case to be made that ROI is not an appropriate measure for evaluating social media marketing spend. The reason being is marketing is an expense, not an investment. Sean Jackson, CFO of Copyblogger, co-wrote a fantastic post titled "There is No ROI in Social Media Marketing” that really articulates argument well. You should read it. As a financial professional you’ll love it. But…finish reading this post first because this one is going to make a huge impact on your business.

Okay…onto the formula components for your social media ROI calculation:

C = Connections

Connections are what make a network work. Especially connections to people in your target market. The expected value of your social media marketing efforts is driven mostly by the quality and scale of the network of connections you have. It sounds so obvious but you would be absolutely amazed at how often I have heard a financial professional tell me that “social media just isn’t working for me” and I take a look at their LinkedIn, Twitter, and Facebook profiles and none of them have more than 100 connections. If you want to build a large book of business you are going to have to connect with people. Lots of people. Lots of high-quality people.

If you are an adult living in America you have almost certainly met thousands of people over the course of your life so far. Many of those people are high-quality connections who may someday be in the need of your services as an advisor or agent. Many more will have the opportunity to refer business to you. The easiest way for these people to stay connected with you and for you to not lose touch with them is to connect with them via their preferred social network.

Size matters when it comes to your network. You would never think that you could build a profitable book of business by sending a mailing to only 100 people or only talking your close friends and family right? Of course not. Success with social media begins and ends with your network. Make it a serious priority to add lots of high-quality connections.

E% = Events Percentage

The business of financial advisors and insurance agents is largely event driven. As I have often said from stage when speaking to financial professionals:

Not everyone you meet is in the market for your services right now. But eventually most of them will be. So you need to be paying attention to their life to notice when those events happen.

People use social networks to broadcast major life events to their connections. Sure there’s a lot of selfies, food porn and cat videos but the money in motion events are there too. Your connections will update Facebook, Twitter, LinkedIn, Google+ and  more with news of job changes, marriage, divorce, new babies, new homes, new cars, death in the family, and just about any other major life event you can imagine. You have the ability to be in the loop for every potential 401k rollover, 529 plan or insurance policy needed simply by connecting with people via social networks and paying attention.

The paying attention part is important. Digital marketing professionals call this part “listening.” You are listening to your network for updates that indicate a need for your assistance.

Now, the reality is not every member of your network is going to have a money in motion event each year. Some percentage of your network will, however. What that percentage is will vary by network composition. Certain segments might change jobs more frequently or be in prime childbearing years while others might be in pre-retirement. But you can make an assumption and test it against actual activity over time. For example, you might assume that 20% of the people you are connected with will change jobs in a given year. Seem too high? Too low? You can test it via LinkedIn’s Year in Review application. When I run it for my network I see that 203 people out of the 959 that I am connected to on LinkedIn changed jobs or got promoted at work. That’s about 21%.

Assuming an even distribution across a 48 work week year that would be 4 prospects to reach out to per week about a potential 401k rollover, financial plan, or discussion about life insurance. How would your business change with four new qualified leads per week?

Of course, we know that you aren’t going to win the business of all of these people with life events in a given year. Some will already have an advisor or be “all good” with insurance. Some will not be the right clients for you because they fail to meet your asset minimum. This leads us to the next formula component.

W% =  Win Percentage

What is your win percentage? How often do you convert a prospect into a client? Here again it is going to vary based on the quality of your network and your ability to close business.

Let’s say that 50% of the people who have money in motion events in your network are true prospects and are in the market for the services you provide. Great! Now, let’s say that you have an average close rate of 50% on qualified prospects. This translates into a win percentage of 25% on connections with money in motion events discovered via social media. If we continued my LinkedIn Year In Review numbers from above we would expect you to close 25% of the 203 people who changed jobs during the year resulting in about 51 new client relationships for the year.

Now things are starting to get exciting. But how exciting? Let’s go to the next formula component to put some dollar signs on this opportunity.

R = Revenue Per Client Annually

In this formula component, I am going to keep things really simple to make it easy for you to convert the math to your revenue model. There are just far too many fee and commission schedule variants in the financial industry to cover. I’m going to use an asset management fee approach that is common for RIAs which is what I am most familiar with given my background in investment management.

Let’s assume that each new client, on average, will open an account with $100,000 and you earn 1% annually on assets under management. That’s a revenue stream of $1,000/year for each new client. It’s a small amount but again, adjust as you see fit.

Y = Years Per Client

Most financial clients have a multi-year lifetime relationship with their chosen financial professional. If your business is transactional in nature this number would be 1. But for most advisors and agents client relationships will continue to generate revenue annually.

Here again you will need to make an assumption or use actual numbers from your practice. I am also going to keep things super simple and avoid using a net present value of an annuity stream for this number. Feel fee to do that if you want but personally I don’t think that level of precision is needed in this process.

Let’s assume you keep a client for 7 years on average. I chose that number because I used to work for a very large financial firm with a huge retail client population and that was average client lifetime according to actual data over 60+ years and millions of clients. Results may vary on your end.


Okay, here we go…ready?! Below is the revenue formula based on the numbers I shared above.

959 Connections x 21% Events x 25% Win x $1,000 Revenue Per Client x 7 Years = $352,432 in New Revenue

Key things to remember:

  • This is the result of your first year’s efforts with social media marketing.
  • Imagine how your practice might be transformed over the course of a few years.
  • We are keeping things super simple here and avoiding any discussions about social media strategy and tactics.
  • If you want to learn how to make this new revenue stream a reality the courses on finservMarketing will help.


Once again, we’ll categorize these expenses as investments to keep on track with the ROI theme but as a matter of business management, these are marketing & advertising, education, and service expenses.

T = Time

Your time is valuable and it certainly should be considered as should the time of any employee tasked with social media management on behalf of your firm. The one important note here, however, is to avoid over-allocation of time spend on social media as the cost associated with your business. Be efficient and purposeful with your efforts and consider only the costs of business activity.

Over the course of a year, you may spend, on average, 5 hours per week adding connections, scanning updates, reviewing alerts, publishing content, commenting and reaching out to prospects via social channels. Again, as a matter of practicality this time is no different than attending networking events, using email or making phone calls but for purposes of this exercise let’s quantify it.

In keeping with our simple theme let’s use an hourly rate of $100. Now I know a lot of top producers have effective hourly rates that are many multiples of this figure and that’s fine. If that’s the case you would also adjust the average client account size above in the "Revenue Per Client Annually” component as well.

At $100/hour and 5 hours a week spent on the business use of social media over the course of a 48 week work year your time investment would be $24,000 for the year.

P = Paid Marketing

As I mentioned at the beginning of the post, your business is dramatically different than many businesses using social media to attract customers. Your business is based on relationships. As a result, your expected paid marketing expense is likely to be very low compared to most businesses. Below are a few out of pocket expenses you will likely have as you begin to make social a priority in your practice:

  • Social Media Management Solution - As a regulated professional you are going to need a solution that ensures your activity meets compliance standards. Social media activity of a business nature, like all electronic communication, must be archived for record keeping and be supervisable by appropriate management and your compliance team. There are several solutions available at a variety of price points depending on your business structure and firm affiliation. If you are an independent professional with full autonomy over your regulatory responsibilities you should explore HootSuite or RegEd’s Arkovi system. If you are affiliated with a larger firm that has compliance supervisory authority over your practice you will likely be using Hearsay or Actiance. The annual price for these solutions range from $100 to $500 per user for the year.
  • LinkedIn Premium Account - Of the four major social networks, LinkedIn is the only one that offers premium solutions. You can get a lot done with a free account but there are a few features that make having a premium account worth it. Prices of premium accounts range from $100 to $900 per user per year.
  • Social Media Advertising - While you can certainly feel free to experiment with ads on Facebook, LinkedIn and Twitter to increase your fans and followers, I’m not convinced this is the best investment for a financial professional at least in the early stages of building your practice. Once you have scaled your client base it may begin to make sense to take advantage of the social graph advertising options available on the major networks but you should expect your spend to be relatively low. Let’s say $1,200 a year for ads maybe. Note: Ads are also a challenge because they will need to be pre-reviewed by compliance.

Altogether you may have a maximum out of pocket spend of $2,600 for the year on paid marketing.

Ed - Education

I’d be remiss if I didn’t include this one.

The price of education is either paid through years of experience in trial and error or it’s paid in the form of hiring a professional who will share his knowledge, skills and wisdom. This is the value proposition of hiring a financial professional and it is the value proposition for finservMarketing as well.

Coming up to speed on social media marketing, and more broadly digital marketing, can take quite a bit of time. Our goal is to shorten that timeframe dramatically with easy to follow video tutorials and live webinars at a price point that is approachable for financial professionals at any stage of business development. We’ll take the guess work out of your social media marketing efforts and give you actionable strategies that produce results.

A year of finservMarketing courses might cost about $1,000, depending on how many courses you take.

Important Note: Your firm will likely require you to attend compliance training on the dos and don’ts of social media. If you operate an independent firm you should ensure all of your licensed professionals complete social media compliance training.

Investment Equation

Now let’s put together the investment (actually expense) side of the equation.

$24,000 Time + $2,600 Paid Marketing + $1,000 Education = $27,600 Investment

Key things to remember:

  • The time expense is really a managerial accounting expense. Unless you hire an individual specifically for the task of managing your social media efforts this expense is not likely cash expenditure.
  • This “investment” is a single year expenditure of effort and expense that generated the multi-year revenue stream above. Of course you will continue to invest in your social media marketing efforts in future years but in each year the investment/expense should be evaluated on their own merit.

Putting It All Together To Calculate Your ROI

($352,432 New Revenue - $27,600 Investment) / $27,600 Investment = 1,177% Return on Investment

That is is a pretty exciting number for any business. What makes it so realistic is the very nature of the business model of a modern financial professional. You build your business on relationships and as a matter of course traditional marketing expense is very low, compared to other businesses, while recurring revenue is the norm.

The numbers look pretty solid even if we only include the first year’s new revenue of $50,347. In that case, you would still realize an 82% ROI. As a general rule, if you produced an 82% return to your clients in a year they would be very happy customers.


The point of this in-depth exploration of social media ROI was to empower you with a process for evaluating social media usage for your business. Too often advisors, agents and wholesalers shrug off social as being a waste of time and not worthy of their attention. But as you discovered here, social is almost tailor-made for the way financial professionals do business.

If you have questions or would like to dig a little deeper on this or any other topic please let me know. I would love to hear your thoughts in the comments below.