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Practice Management > Succession Planning

Four Key Areas to Grow Your Practice

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Organic growth in a financial practice is a function of the advisor and the firm working together, a white paper released in March by the Oeschli Institute and First Clearing found. Firms need to assess the relationships they have with their advisors and help them stay relevant for today’s affluent investors. Advisors need to recognize that clients don’t want a “one-dimensional relationship” and that they’ll have to provide a depth of industry knowledge.

“Today’s elite advisors are developing personal relationships with their affluent clients and expect no less from their firm,” the white paper says. “It is these personal relationships that enable them to successfully engage in the core relationship marketing activities: introductions, referral alliance partners, intimate social events, and strategic networking.”

Here are four key areas of relationship building to focus on:

1. Client acquisition is one of the weakest areas of practice growth.

According to the report, the number of advisors acquiring 10 or more clients with $500,000 or more of investable assets has declined over the past 12 months. Elite advisors, those who have acquired five or more $1 million-plus clients over the past 12 months, spend more time with their current affluent clients and develop better personal relationships with them.

Advisors need help from their broker-dealer, the report found. Over half of advisors said their BD doesn’t help them develop affluent sales skills.

The report notes that few veterans of the industry have changed their approach, despite changing client demands post-recession. The resulting weakness in client loyalty, combined with the aging of these advisors’ client base, puts their business longevity at risk. Furthermore, the aging of advisors themselves, and the industry’s move toward hiring younger advisors, means firms need to focus on encouraging organic growth.

2. Firms need to master relationship management and relationship marketing in order to support organic growth.

Unsurprisingly, affluent clients rate in-person meetings as the most effective form of communication, followed by phone calls. Account statements and financial planning tied as the third most effective forms of communication. The report suggested firms place less emphasis on brochures and similar materials, as just 28% of affluent clients called those items effective.

Those results indicate that personal interaction is important to affluent clients. “Although financial advisors might think that they are providing high-level personal service to their best clients, four out of 10 clients with $5 million or more don’t feel they are getting the level of service they desire,” according to the report. Forty-five percent of affluent clients said they don’t feel they’re getting enough personal attention. Almost half say they get too much paperwork, and 45% say they’re pitched new products too often.

3. Relationships with clients aren’t the only important relationship advisors have.

The report found that firms with the best relationships with advisors had senior management teams that spent more time with advisors, which lessens the chance of advisors being recruited to other firms and builds an environment of trust.

The report found elite advisors are far more satisfied with their careers than other advisors and asks, “Are they ‘very satisfied’ because they are elite or are they elite because they love what they do?” The answer may be a little of both. “These elite team advisors love what they do, are committed to excellence and have developed into an elite team as a result.”

The report found 44% of advisors are over 50, and 52% or between 30 and 49, “the prime growth period for a financial advisor.” With just 4% of advisors under 30, firms need to work hard to develop successors. Furthermore, firms report wildly different expectations for hiring, with the number of expected new trainees ranging from 200 to 2,000.

“These figures are usually subject to both speculation and change, but the reality is that the industry needs to act quickly as the number of new advisors who are successfully graduating from trainee programs and prepared to join the ranks of the current corps of financial advisors is not high enough to address the loss of aging veterans,” the report says.

4. Succession planning is where the gap between elite advisors and other advisors narrows.

Forty-six percent of elite advisors have discussed a succession plan, but haven’t fully developed one, compared with 48% of all advisors. Sixteen percent of elite advisors are interested in having a succession plan, but haven’t found the right person to take over; 14% of all advisors agree.

The report suggests programs that combine training and mentoring are likely to be most effective in developing new advisors. Acquiring new clients from the children of current clients is another recommendation. Just 14% of junior advisors are doing this, compared with 29% of senior advisors.

Firms should be cautious about joining a wealth management team, the report found. There’s very little difference between non-elite teams and solo in key metrics like satisfaction, new assets and client loyalty, and the report suggests that as they would with anything else, advisors perform proper due diligence before forming or joining a team. 


Read Angie Herbers’ blog post, Advisors’ Biggest Practice Management Mistake, at AdvisorOne.


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