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Practice Management > Building Your Business

When More Is Less

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In the U.S., we’re all about “super size.” For Americans, more is always better, it seems. So it’s logical to assume that the more services offered by an advisory firm, the stronger the business. Unfortunately, that assumption is not necessarily correct. According to our research, top performing advisory firms actually tend to offer a narrower range of services-which surprisingly translates into a more profitable business. Of all RIA firms that participate in Rydex AdvisorBenchmarking’s survey research, 35% offer six or fewer services to their clients (see chart below to see which services are most often offered). These same firms are the ones that enjoyed wider and healthier profits-an average $450,000 compared to $284,000 for those firms offering more services-a substantial 58% difference.

Identifying that more services don’t necessarily translate into more profits may also provide a revealing look at today’s investment clients. The savvy investor may not be looking for a “jack of all trades” advisory firm. Instead, by offering an exceptionally wide band of services, a firm could be signaling that it doesn’t have an area of specialty or expertise. This is not to say that providing multiple products and services isn’t an important part of a successful wealth management business model, but firms that have their fingers in too many pies may not be as profitable. For example, a company that hires its own accountants or attorneys will likely have higher overhead costs. Conversely, in order to provide clients with a wide range of services without housing them internally, many advisors are utilizing strategic alliances with specialized professionals, thereby offering a high-level, polished expertise to their clients and prospects and creating a “two-way street” for client for client referrals (see Practice Edge August 2005).

Less May Be More

Besides having higher profit margins, firms offering fewer services share several other winning characteristics that contribute to their success. Specifically, these advisors:

- Utilize written business plans

- Maximize the use of partnerships with other professionals, such as CPAs, to generate new clients. In fact, 70% of advisors who offer fewer services utilize professional referrals compared to about 40% for the rest of the financial professionals.

- Focus primarily on serving high-net-worth clients and institutions. These more focused firms have about 20% more high-net-worth clients compared to the rest of the firms.

- Require a high minimum account to maintain focus on larger clients-with an average minimum account size of $515,00 compared to $345,000 for the rest of the firms.

-Offer a concentrated range of wealth management services

Yes, opportunities for advisors who are capable of adapting their practices to the new environment are tremendous. Success in today’s marketplace is determined by sound business strategy, effective management of resources, and a focus on the services clients need most delivered with the highest quality.

So does offering more services bring in more clients? Probably. Does it bring in more profits? Probably not.

face=”Arial,Helvetica,Geneva,Swiss,SunSans-Regular”>All registered

investment advisors are invited to participate in the latest Rydex

AdvisorBenchmarking survey of RIAs. Advisors who participate will

receive a customized Practice Analysis report, learn best practices of

the most successful advisors, gain access to trend analysis, and will

get a complimentary copy of the 2005 Annual Survey. To participate,

visit <a




src=”/images/ablogo.gif” width=”400″

height=”83″ border=”0″>

face=”Arial,Helvetica,Geneva,Swiss,SunSans-Regular”>Maya Ivanova is

a research analyst with Rydex, an affiliate of

Rydex Investments. She can be reached at <a

href=”mailto:[email protected]”>[email protected].

face=”Arial,Helvetica,Geneva,Swiss,SunSans-Regular”>If you would like

to receive any of the following research reports via e-mail, please

contact <a

href=”mailto:[email protected]”>[email protected].


size=”-2″ face=”Arial,Helvetica,Geneva,Swiss,SunSans-Regular”>The

Advisor Confidence Index monthly release;

AdvisorBenchmarking’s Comprehensive Analysis of the RIA Marketplace Study;

AdvisorBenchmarking Media Exposure


face=”Arial,Helvetica,Geneva,Swiss,SunSans-Regular”>To receive a customized benchmarking analysis of your practice, visit the free online tool


Inc., an affiliate of Rydex Investments, is a research and

analysis center focused on the RIA marketplace Through its web site,, the firm conducts multiple advisor

surveys every year covering a host of business management and

investment-management practices. The findings and analysis of the data

are then released to the marketplace in the form of annual studies,

quarterly research notes and monthly newsletters. The service is aimed

at helping advisors grow and enhance their firms by comparing how

their businesses fare against other advisors, as well as learning best

practices of the most successful advisors.


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