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July 27, 2011 at 12:41 PM
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 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 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?
RIA Operations: Structure Capacity to Meet Demand
