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Growth by Design: How Marketing and Operations Shape Firm Growth—Slideshow

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Over the course of a year, Eliza De Pardo and Dan Inveen, principals at consulting and research firm FA Insight, have co-authored a series of Investment Advisor articles dissecting the results of their study “Growth by Design.” Following the firm’s inaugural study, “People and Pay,” the 2010 study moves from people practices to a special focus on two other important leading indicators of firm performance–marketing and operations.

These two functions have important implications for how, or whether, firms grow. A firm needs a strong marketing capability to attract clients, while a strong operational capability ensures the firm can efficiently serve increasing numbers of clients.

While advisory firms are optimistic about their ability to grow, De Pardo and Inveen wonder what the industry has really learned from recent events. Under favorable market conditions, growth comes with relative ease for most firms, but the economic downturn revealed weaknesses where the old ways of doing business proved inadequate. Are firms making the necessary changes that will bolster growth under more challenging conditions?

Click through the following pages to read the entire series.

Ready to Grow Again, October 2010Ready to Grow Again, October 2010

In 2009, revenues dropped 9.5% and operating profit shrank seven percentage points to an 11% margin for the typical independent advisory firm, according to the second annual FA Insight study of advisory firms. The contraction was brought about by the once-in-a-generation market collapse of late 2008 and early 2009, during which advisors strained to counsel anxious clients while simultaneously managing costs to preserve profitability.

In contrast, firms were ready to grow in 2010. Revenue was on the rise. Advisors, having proved their value during a challenging time, strengthened client relationships and positioned themselves to acquire more of them. Significant hiring was expected to take place for the first time since 2007, with the typical firm planning to increase from five to six in staff size.

Read more from the October 2010 issue of Investment Advisor.

The Necessity of Growth, February 2011The Necessity of Growth, February 2011

For the typical advisory firm, revenue and profitability stabilized in 2010 and, in many cases, returned to familiar and very comfortable pre-2008 levels. Stronger financial markets are no doubt making life easier for firm owners, but will these market improvements lure advisors back into a state of complacency?

The defining moment has arrived for firm owners. You can be pulled along with recovering financial markets and risk being dragged backward during the next inevitable market downturn. Alternatively, you can learn from the recent tough times, shore up business vulnerabilities and drive growth strategically to achieve more sustainable business performance. In its 2010 “Growth by Design” study of advisory firms, FA Insight is unequivocal. Prioritizing the strategic pursuit of growth will diffuse the impact of future market downturns on firm performance, as well as help to maximize firm value.

Read more from the February 2011 issue of Investment Advisor.

RIA Operations: Structure Capacity to Meet Demand April 2011RIA Operations: Structure Capacity to Meet Demand, April 2011

To grow sustainably over an extended period of time, any business must consistently deliver to the needs of its target clients. This is particularly true of advisory firms. While growth requires a capable business development function, creating a fertile environment for growth further requires that, once new business is won, the firm is able to service its clients in a manner that keeps pace with client expectations.

Operations relates to a firm’s ability to efficiently and effectively manage the various processes, people and systems that interact to deliver valued client outcomes. How a firm structures and manages its operations is essential for delivering on the firm’s value proposition in order to retain target clients and attract more like them. A strong operational capability ensures the firm can efficiently and effectively service increasing numbers of clients. A properly structured and maintained operational capability will cater to the client experience in addition to realizing efficiencies and controlling costs.

Read more from the April 2011 issue of Investment Advisor.

Define and Conquer August 2011Define and Conquer—Marketing Strategically to Achieve Growth, August 2011

In 2010, research and consulting firm FA Insight released The 2010 FA Insight Study of Advisory Firms: Growth by Design, exploring two fundamental leading indicators of firm growth: operations and marketing. Following the market decline of 2008 and 2009, the study reported that advisory firms were ready to grow again in 2010 with increased expectations for staff hiring levels and stronger forecasts for growth in assets and revenue alike. Preliminary results from FA Insight’s 2011 survey indicate these expectations became reality, with assets, revenue, clients and staff all up markedly in 2010 relative to recent years.

The question for advisory firms now is, “Will the renewal of growth be sustained through the pursuit of a deliberate growth strategy or put at risk because of a more complacent strategy that mimics security market performance?”

Read more from the August 2011 issue of Investment Advisor.


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