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5 Reasons Why Growing Your Firm Is Not Optional: FA Insight

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Has your growth strategy become so commonplace that it’s now just considered standard practice?

In our 2012 FA Insight Study of Advisory Firms: Growth by Design, 80% of firms reported “strong” aspirations for growth. Despite this, for many of the shareholders we meet, growth strategy is often limited to setting a target for asset or revenue growth combined with only a general sense for how to accomplish the target, such as generating referrals from existing clients. Other shareholders may have more defined growth strategies but these strategies may be unmanageable, un-implementable and in some cases lack any real commitment with shareholders pushing and pulling in different directions. Sound familiar?

The old adage truly applies: “If you don’t know where you’re going, any road will take you there.” It’s for this reason that our 2014 Growth by Design study will provide guidance for shareholders on engineering an effective growth strategy to meet unique firm aspirations. To participate in this year’s FA Insight study and receive a complimentary copy of the full results, visit

According to the 2012 Growth by Design study, shareholder motivations for growth get stronger with the more growth a firm achieves. Undoubtedly shareholder motivations for growth will strongly influence growth strategy. There are many compelling and indisputable reasons to grow, but the actual motivations for growth reported by shareholders might surprise some. In 2012, we expected financial returns to shareholders to top the list of motivations, which they almost did. The following study results, however, reiterate what we know instinctively: Growth is much more than a numbers game.

Top Five Motivations for Growth

  1. To better meet client needs — Increasing client complexity and client sophistication will demand new skills and capabilities. This has not escaped the attention of shareholders. Whether by advancing and recruiting talent or attaining new skills through acquisition, the ability to meet the growing needs of clients was deemed as the number one reason to grow.
  2. Better meet the financial objectives of shareholders — Clearly one of the primary reasons to take on the risk of founding and building a firm is to advance the financial objectives of the individuals absorbing the risk. Failing to meet shareholders’ financial objectives provides limited motivation to remain in business. Enough said.
  3. Improve cost savings and gain efficiencies — Ideally, increased scale will be associated with increased productivity, efficiency and profitability. Shareholders are clearly motivated by this outcome. For some, however, scale creates greater management challenges, and the anticipated advantages do not always follow.
  4. Better attract, retain and develop talent — Top talent seeks out growth. The industry’s most capable individuals will demand career opportunities, increased responsibility and increased compensation and ownership opportunities. Without growth, all of these valuable people-related outcomes become very difficult to deliver.
  5. Broaden ownership and succession options — According to the 2013 FA Insight People and Pay study, 85% of all firms surveyed do not have a plan for ownership distribution, and in the last two years just 16% of firms added a primary owner. Whether via organic or inorganic means, growth is recognized as a solution for introducing new owners and realizing equity.

Interestingly, the motivations for growth vary according to firm size. For the industry’s largest firms (a group we call the Innovators — generating more than $4 million in revenue), two related constituencies, personnel and shareholders, are the key motivation for growth. These larger firms recognize that increased scale can provide a powerful human capital advantage, offering greater career options as well as economic opportunity for the next generation of owners.

Our consulting work with firm leaders in the area of strategic planning is predicated on the view that growth is necessary. In fact, we are yet to work with a shareholder who doesn’t aspire to achieve sustainable growth. The optimal growth strategy for each firm will vary significantly based on factors such as shareholder motivations, current capabilities and the firm’s market opportunity, all of which are necessary considerations for achieving shareholder value.

Less Deliberation, More Deliberate Planning

The 2014 Growth by Design study will once again uncover the market-beating methods of the industry’s sustainable growth firms. Along with guidance on how to plan deliberately for your future growth, this year special attention will be paid to:

  • How to assess organic versus inorganic growth opportunities
  • The most effective marketing strategies, including a particular focus on firm pricing
  • The operational practices that support sustainability

Benefits of Participation

The FA Insight team welcomes your participation, which in turn enables us to bring you advanced insight for your business. By taking part in the 2014 Growth by Design study each participating firm will receive a complimentary study report with more than 50 pages of detailed benchmarking data and prescriptive analysis when it becomes available in summer 2014. Additionally, survey participants will receive exclusive and immediate access to the FA Insight People and Pay Benchmarking Tool. The tool provides industry compensation data across advisory positions and allows advisors to compare their firms against their selected peer group.

Advisors, you have until March 28 to submit survey data for your firms. Firms interested in participating can visit The Growth by Design study is supported by Investment Advisor magazine, FA Insight’s media marketing partner.

 See the previous insights of FA Insight principal and Director of Research Dan Inveen into the 2012 Growth by Design study.


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