I receive a lot of emails from firms and producers with less than $1.2M in revenue, so I am going to use this blog to speak to all of you.
It’s very common among independent advisory firms nearing that revenue level to see their growth slow dramatically.
This usually happens for three reasons: their onboarding of new clients has slowed, their client retention rates are falling and then to “solve” this problem they’ve added a number of costly new services, such as tax preparation, insurance, trusts, etc. Unfortunately, those serices attract enough clients quickly enough to cover their overhead, and consequently drive down profits even further.
The problem in these situations is that firm owners don’t recognize what their real problem is, and consequently try to implement inappropriate solutions.
The real problem is that as advisory businesses grow beyond $500,000 in annual revenues—and approach that $1.2 million barrier—they start to reach a kind of market saturation, maxing out the relatively small number of “target” clients in their local market. And combined with generally low close ratios using their standard “pitch,” together with a declining number of referrals, their growth slows to a crawl.
Or to put it in more simple terms: most independent advisors don’t know how to sell.
So it shouldn’t come as a big surprise that if they can’t sell their current services, they aren’t able to sell their new services, either. What’s more, multiple services, usually with multiple pricing structures, confuses clients, which doesn’t help the sales process either.