What You Need to Know
- Most firms already have what they need to meaningfully improve their growth.
- Advisory firms make clients happy and keep them by ensuring that there’s plenty of service capacity.
- The best gauge of when to hire is related to internal benchmarks, such as a firm’s advisor-to-client ratio or advisor-to-revenue ratio.
Are you wondering where your firm’s next leg of growth will come from? Leaders often look outside their business for the answer — typically, they’ll gravitate toward adding marketing services, hiring star advisors, or exploring mergers and acquisitions.
But the fact is that most firms already have what they need to meaningfully improve their growth. Rather than searching for external silver bullets, firm leaders could choose a path that may be more labor-intensive but often far more effective. The key is remembering that the field is people-centered.
Organic growth doesn’t get the kind of headlines dedicated to non-organic growth in industry publications, and probably never will. But the most common question that advisor firms ask my consultancy is not “How can we sell or buy?” but “How can we really get growing organically?”
There’s a huge amount of interest in organic growth among wealth management firms. Those who have figured it out are the same ones being deluged with acquisition offers.
Often, firm leaders assume marketing is the way to take growth to the next level, for example: “We provide a great set of services, and we just need to broadcast that to the world!” That line of reasoning is understandable.
But our firm’s two decades of experience has taught us that growth is all about a firm’s people. Financial advice is a service-based business, and the more advisors you have, the more opportunity you have to serve clients and spread your brand message.
But that doesn’t mean you should rush out and hire five advisors. Instead, it’s imperative to lay the proper groundwork. Here are some tips:
1. Understand your capacity requirements.
A major mistake most firms make is failing to ensure they have enough capacity within their advisor teams to enable sustainable growth. The recurring revenue model makes it easy to continually assign new clients to an advisor without stopping to think through how many clients each advisor can effectively serve.
There is no one-size-fits-all formula that firms can use to determine the optimal ratio of advisors to clients, simply because each firm’s service model is different. It’s up to each business to figure out the right ratio — as well as maintain that ratio by hiring more advisors at the right time. The No. 1 killer of organic growth is employing too few advisors to properly serve the growth in clients, which means hiring too late.
And these days, the definition of good service has changed. When clients contact an advisor with a question or concern, they expect a response in an hour or two. Advisors who are tasked with serving 250-plus clients, which is common in the industry, simply won’t be able to meet these new expectations.
A lack of service capacity can make clients sour on the firm, and it certainly makes them think twice about recommending it to others. The inverse is also true: Clients who sense that their advisor is really taking the time to care for them are likely to become great advocates for the business.
That’s why I’ve long argued that the best investment a firm can make in growth is adding to the capacity to grow. Advisory firms make clients happy and keep them by ensuring that there’s plenty of service capacity.