These are good times to be an independent RIA, as the growth stars are aligning for this unique segment in financial services, which also is propelling growth of asset managers, custodians and technology companies that serve them.

Case in point, the recent RIA Symposium in San Francisco, a nationwide series of events that custodian Pershing Advisor Solutions is producing through top-tier speakers professing all things growth directly to the billion-dollar RIAs in attendance, who were lapping it all up.

According to the latest benchmarking research sponsored by Pershing and data from wealth-management-focused investment bank Echelon Partners, the RIA industry is in a strong growth mode, with double-digit year-over-year growth in both revenues (11.7%) and assets (20%), up dramatically from the previous couple of years. Meanwhile, other segments in wealth management, such as the independent broker-dealer space, have seen the opposite and are actually shrinking as the industry continues to migrate away from commissions and sprint toward fiduciary-driven fees.

Corresponding to the near decade-long market expansion since the financial crisis, RIAs have found themselves growing at rates that effectively double the size of their firms every three to five years, leading to many new management challenges. Most notably, the increasing costs for advisor talent, which is also in double digits (10%) year over year, crimps profit margins as firms race to hire the best advisors to keep up with their growth.

Despite the good times, RIA Symposium speakers all sounded a warning that this fast growth may not be sustainable. In fact, over half of the growth in RIA firms has been coming from market performance, a hidden subsidy that, while enjoyable, may not be supportable long term as the market grows more volatile.

“The biggest problem with growth rates being market driven is that they tend to cause firms to not invest the right amount of time, resources and efforts into a strategic marketing plan to sustain their growth long term,” said Megan Carpenter, CEO of FiComm Partners, a leading wealth management marketing, branding and public relations firm. “From benchmarking data, advisors are only spending 2% of their top-line revenues on marketing, which includes business development — a sales function — and when we back out business development, that means that advisors are essentially spending nothing on marketing.”

This revealing stat definitely got the audience’s attention. It also caused a minor flurry of discussion when this stat was posted on Twitter.

“It’s important to note that other industries spend 12% of their top line … on marketing, so there is a real missed opportunity in wealth management for advisors to fully take advantage of their growth opportunities,” Carpenter noted. “And not only from the new business brought in, but also in the long-term enterprise value that is built from enhancing your firm brand.”

To help advisors figure this all out, Carpenter laid out the key steps advisory firms need to put in place to create an organic growth engine that is scalable and effective in generating new business.

“When we think of marketing, we don’t want to include referrals because that is a function of your service experience, a common misperception that many firms have and as a result don’t put in place a scalable marketing strategy. They are seeing assets come in and feel that they are checking off the marketing box. This is a very big mistake,” she said.

Carpenter recommends that before advisors start marketing, they need to invest in their brand infrastructure that goes beyond logos to include the firm’s identity, messaging, website, social- media profiles, basic search engine optimization and sales enablement tools (pitch books, brochures, etc.).

From there, it’s all about creating educational content in both the long and short form — “snackable content,” as Carpenter describes the latter, which can be consumed in seven seconds or less. This educational content then needs to be distributed through social media, PR, email and other communication channels, including video, to touch and engage advisors’ untapped target markets.

“According to industry research, in the next few years, 80% of all mobile content will be consumed by video,” Carpenter notes, emphasizing how important this communication vehicle will be for advisors.

“You want to influence people who are outside your sphere of influence, and that increasingly will be through digital, social and mobile channels,” she recommends. This likely will take shape via digital advertising, online PR, social marketing, SEO, mobile marketing and podcasting, all measured and refined through customer intelligence and marketing analytics — the third step in building a scalable marketing strategy.

Along these lines, the good news for RIAs who work with BNY Mellon’s Pershing is that it will be investing $50 million over the next three years in its platform to help firms with marketing. “We want to be an extension of your brand,” said Ben Harrison, managing director for Pershing in his business update remarks. This strategy has been working for the firm, as it also has benefitted from the RIA growth curve — growing to over $600 billion in assets from $50 billion just 10 short years ago.

Despite the warning signs on the horizon, attendees left the meeting with a very optimistic takeaway from Brian Wesbury, chief economist of First Trust Advisors, LP. Wesbury says that despite budget deficits and out-of-control government spending, corporate profits are up, productivity is increasing, and earnings are growing faster than GDP. Thus, the growth party in the markets and in the RIA space should continue for at least the next few years.

To learn more about what went on at the PAS RIA Symposium, check out the many tweets on the #RIASymposium hashtag on Twitter.

— This article appeared in the print edition of Investment Advisor as “Insights to Pushing Growth for RIAs.”


Timothy D. Welsh, CFP, is president and founder of Nexus Strategy LLC, a leading consulting firm to the wealth management industry, and can be reached at tim@nexus-strategy.com or on Twitter @NexusStrategy.