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Practice Management > Building Your Business

It Pays to Be an Advisor

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Reports of a talent shortage in the financial advisory business have been repeated for years. Now we are beginning to see the consequences: The average rate of growth within RIAs has slowed materially while the price for top talent continues to rise.

Sponsored by BNY Mellon Pershing, the InvestmentNews 2017 Adviser Compensation and Staffing Study shows a steady decline in year-over-year revenue growth for advisory firms, from a high of 16% in 2013, to 8% in 2015, to 5% last year. Meanwhile, advisory staff salaries continue to rise.

In 2017, lead advisor salaries were up 23% year-over-year, service advisors were up 14% and support advisors were up 13%. Administrative staff has also seen salary upticks ranging from 11% to 15%. The implications for the advisory profession are serious and concerning.

Oftentimes people attribute slow growth to a slow economy or, in the case of the advice business, a bear market. Neither of these factors has been in play for about eight years. In fact, studies show an exponential growth in millionaires in the U.S., indicating a substantial opportunity to manage more assets.

Blaming external factors — or factors out of the control of advisors — amounts to the rationalization of real systemic problems:

  1. A lack of capacity to grow

  2. Declining productivity

  3. The absence of marketing and clear positioning

  4. Weak business development efforts


Physical limits exist for the number of active client relationships one advisor can manage. That number varies by type of client, value proposition, service experience and complexity of the relationship. It is not uncommon to see a single advisor manage 60 to 80 client relationships. Some have more and some far less, so it is helpful to establish your own benchmark for what is reasonable.

A normal work year has just over 1,800 available hours. If your typical client consumes 20 hours of time each year, you know that the maximum number of relationships you could manage would be 90. Of course, that does not account for time spent on tasks other than client service: business development, business management or continuing education.

The answer for this challenge lies in building an ensemble or a team of individuals who can perform many of the tasks that are too basic for the advisor, or where the advisor does not add value. Advisors often push back on this recommendation, saying they fear losing control of the client, a distracting process change or steep front-end costs.

In reality, the cost of not adding capacity retards top-line growth and squeezes margins because the price for overworked people is going up. As a rule, advisory firms should begin adding staff when they are at 80% of capacity and should begin the recruitment process even earlier, because it can take as long as six months to fill key roles.


One of the most startling data points that came out of the current Compensation and Staffing Study is the decline in productivity. When measured as revenue per professional, the median firm generated $517,000 in 2012 and $478,000 in 2016. When measured as revenue per total staff, the median firm generated $235,000 in 2012 and $230,000 in 2016.

Observing trends in key ratios helps reveal how well you are managing your business. If you are experiencing the same troubling symptoms in your advisory business, it is time to evaluate your workflow, your talent and your client mix. For example, how many steps does it take to open an account, develop a plan, manage a portfolio or produce reports? How many errors does your staff make in each of these steps? Are there elements of these processes that could be automated? Are the tasks performed by people who are inefficient, or mismatched to the type of work required?

Are you taking on too many suboptimal clients, meaning that the fees they pay do not cover the cost of supporting them? Is your staff expending a disproportionate amount of their time on these clients?

Positioning & Marketing

Mature firms tend to rely more on referrals from existing clients. As Megan Carpenter of FiComm Partners put it, “a referral is a well-timed introduction from a raving fan.” In other words, a satisfied client has to be in the right place at the right time to have the chance to recommend you to another potential client.

In addition to timing, your positioning statement must strike a chord with prospects. As an exercise, look at the webpages of five firms in your market as if you were a prospect. Parse the language of their offer and test it to see if it resonates with you (or your parents). Chances are all five use variations of the same words: “we offer a holistic approach to managing your wealth, tailored to your needs.”

This vague message tends to land with a thud among prospective clients. A well-conceived brand, a structure that supports that brand and the effective use of vehicles to communicate your message puts you in control of your connection with the marketplace. Consumers relate well to messaging that is all about them, rather than all about you.

Systematic Business Development

While most advisors have avoided the product sales trap common in large financial institutions, this aversion to sales also means that many advisors have let their business development muscles atrophy.

In order to sustain growth in an advisory firm, you must implement a process that forces advisors to engage with the community you wish to serve. This doesn’t make you a “used car salesperson,” but rather a dedicated entrepreneur who believes that what you do not only positively impacts the lives of many, but also delivers fairly-priced and professionally-delivered results.

As advisors mature, they often wait for business to come to them, rather than actively seeking new opportunities. Some firms hire fresh-out-of-school, inexperienced professionals to build the firm’s client base.

Unfortunately, these newcomers do not have the wisdom or credibility to attract clients you regard as optimal for your firm, nor have they mastered the skills required to be effective advisors. The senior members of the firm, however, carry the gravitas that makes them appealing to people who are looking for a new advisor or seeking professional help for a life transition. A team-based approach to delivering the advisory experience allows the firm to leverage diverse talents to drive growth and deliver solutions seamlessly and effectively.

One factor driving the consolidation of the advisory profession is the opportunity to build market dominant businesses. The best-managed advisory firms establish clear positioning, create a structure that supports that vision, develop processes that allow them to deliver their experience efficiently and effectively, and surround themselves with other people to achieve operating leverage.

Benchmark studies such as the Compensation and Staffing Study help advisory firms compare where they are relative to their peers. This insight contributes to the development of an action plan that can transform your business from average to superior.


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