What differentiates high-growth financial advisory firms from low growth firms? It’s a burning question for many firms but a complicated one to answer, especially in this COVID-19 days.
“The challenges are different,” says Bryce Skaff, co-head global client group at Dimensional Fund Advisors, who spoke in a recent webinar with Ben Harrison, head of advisor solutions at BNY Mellon | Pershing, about what DFA is hearing from advisors.
“Referrals are less frequent; it’s a longer prospect conversion cycle [and] the leads that do come in are less warm … so the skills and tactics required to convert something from lead to prospect to client may be a little bit different from what people were used to in the past.”
In addition, according to Skaff, is the ”tremendous challenge” of keeping investors disciplined and confident given the volatility and unexpected returns in the market.
There’s also the reality that the top quartile of firms, which DFA defines in terms of revenue growth, acquire four times as many of their clients through acquisitions (12%) as low-growth firms (3%).
Top Firms Have a Marketing and Business Strategy
Another big difference between top and bottom revenue collectors among financial advisory firms: a dedicated marketing and business development strategy.
The fastest growing firms on the Pershing platform currently are those that have such a strategy in which they had significantly invested before the pandemic and continue to invest in now, said Harrison.
“Maybe this pandemic has started to reveal the fact that to solely depend upon referrals and not have a dedicated business development and marketing strategy that you’re continuously invested in is not fueling growth,” said Harrison.
How Growth Happens
“Growth doesn’t just happen,” said Skaff. “It’s a return on investment.”