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Practice Management > Building Your Business

Where Did All the Organic Growth Go?

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What You Need to Know

  • The majority of recent growth in the RIA market has come from market appreciation and accelerating M&A activities, not true organic sources.
  • Advisors are facing pressure both from RIA mega-firms and discount brokers and digital players.
  • RIAs must regain the marketing muscles they had in their earlier, scrappier startup days.
[Editor's note: The full source for details on the negative organic growth rate of RIAs in 2022 -- Steve Sanduski -- has has been added and was unintentionally excluded from an earlier version of this commentary piece.]


The independent RIA industry remains the fastest-growing segment in financial services, a crown it has held onto for the past several decades.

But despite this continued growth which is tied to RIAs’ ability to win in the marketplace by leveraging their fiduciary, fee-based advice models there remains an underlying and troubling concern: the majority of recent “growth” has been coming from market appreciation and accelerating merger and acquisition activities, rather than from true organic sources, such as current clients depositing incremental new assets and the onboarding of new clients. 

Market appreciation has been a major factor in the growth of the industry and perhaps has led to complacency on the marketing front for advisors, as strong bull markets drove incremental fee-based revenues year after year, potentially covering up for a lack of focus. As international cricketer Kapil Dev once said, “If you play good cricket, a lot of bad things get hidden.”

Mega-RIAs, Wirehouses Still on a Roll

While growth has been consistently strong for the 30,000-plus RIA firms in the industry, it has not been equal. Research from the Investment Adviser Association shows that the vast majority of industry growth has been accruing to the largest firms, such as the emerging market dominators that each have north of $5 billion in assets under management.

These mega-RIAs represent only 10% of the total number of advisory firms, yet control 93% of all RIA assets. In other words, 90% of RIA firms are struggling to remain viable businesses. 

The average RIA firm had negative revenue growth over the past five years when market appreciation is excluded using a traditional 60/40 market portfolio as a proxy for RIA investment allocations, according to business coach and CFP Steve Sanduski’s analysis of Schwab’s 2022 RIA Benchmarking Study.

This trend is becoming an increasingly troubling development for the long-term sustainability of the industry, as competition increases rapidly from both new and old sources. 

Once viewed as dead in the water and obsolete after the financial crisis of 2007-2008, the traditional wirehouses are remaking themselves. They’re co-opting the messaging of independent advisors by referring to their financial planning capabilities in broad-based marketing campaigns, which has resulted in regular headlines that broadcast “record-breaking” wealth management revenues for these once-tarnished Wall Street brands.

In fact, one wirehouse firm brought in $110 billion in net new assets last quarter, and now has $4.6 trillion in client assets in its wealth unit, showing that the wirehouses are on a roll.

Industry Under Pressure

At the same time, discount brokers and digital players are promising investors comprehensive wealth services for a fraction of what other firms charge. Industry consolidation through M&A is creating the RIA mega-firms mentioned above, which are sopping up the majority of the independent-advisor industry’s organic growth.

Compounding this increasingly competitive environment is the aging of the industry in terms of both advisors and investor clients. As popular industry consultant Mark Tibergien, the former CEO of Pershing Advisor Solutions, explained, “The RIA industry was built by baby boomers for baby boomers.”

This means that as these baby boomers enter retirement in massive numbers each year, they’re no longer accumulating assets for their aging advisors to manage. Rather, they’re decumulating assets, and by taking withdrawals to fund their retirement, this further constricts firm growth. 

At the same time, the No. 1 source of new business for advisory firms continues to be referrals, and they’re under pressure as a reliable source of growth as partnering professionals like CPAs rapidly enter the wealth business. Thus, traditional referral activities are just not enough to make up for client withdrawals being used to fund retirement spending.

When combined with a much more volatile market climate, advisors find they can no longer rely on steady market-fueled windfalls every year to drive their growth and compensate for lost revenues tied to client turnover and asset decumulation. 

Time to Rev Up Your Engines

All of these trends are putting most RIA firms in a precarious predicament that points to only one solution: They must regain the marketing muscles they once had in their earlier, scrappier startup days.

Plus, they have to embrace a key business priority: immediately relearn and reinvest in marketing their businesses using the tools of today’s digital age. As consumers rapidly seek out service professionals online and through social media, advisors need to consider new approaches to the ways they market and sell their advisory offerings.

Where should they start? Marketing experts generally agree that the best first step is to build an “organic growth engine,” meaning an end-to-end capability for sourcing optimal leads, nurturing them with personalized content, and then closing these business deals through proactive outreach. 

Fortunately, million-dollar advertising budgets, call centers and expensive “martech” systems are not needed. Advisory firms can leverage low-cost digital channels for lead generation, create their own content (or leverage online-content platforms) and convert leads through their own, personal follow-up. 

Two of the most important benefits of an organic growth engine are that it increases income today and that it’s a powerful valuation driver that firms get credit for when they sell their entities. So, beyond being a critical stabilizer to keep firms sustainable, organic growth has now become the most valuable multiplier RIA firms can achieve.

Hone Your Message

When working on new growth strategies, it’s also a must to refine your marketing efforts so you have a clear definition of what your target market is. This allows you to develop a precise marketing message for your value proposition that will resonate with prospects. 

While many firms fear they may miss out on opportunities by becoming more focused in their messaging, the reality is actually the opposite; a general, high-level message does not create the same urgency to take action as one that is personalized and tailored to solving a specific financial planning and investment management need.

“Look-alike” marketing is a process that you can employ to analyze your existing client base to determine the attributes and characteristics of your current top clients and then replicate them. 

For example, if the group of investors that you service best includes young tech executives with equity-based compensation, you know what messages will appeal to them (such as how to optimize stock options), and where to reach them based on their interests and demographics. You can also create content, such as a webcast or a blog post, that showcases your expertise in these areas. 

From there, promoting those assets on search engines, social channels, YouTube, proactive emails and your website will provide the stimulus to drive these highly desirable prospects your way. These promotions and advertisements need to have a clear “call to action” to engage with your content in the form of downloadable guides, checklists, webcast invitations and similar materials so you can gather their contact information and put them into your sales funnel. 

A critical component to develop as part of your organic growth engine is a follow-up process to reach out to leads quickly, qualify them and close the business. Even the most powerful lead-generation systems can’t replace the human-to-human interaction at the final point of sale. 

Thus combining advisor education programs on how to use video with robust online profiles is critical to cementing the deal. Prospects go online to confirm their purchase decision by researching advisors, reading reviews, checking out their content — just like they would when considering a new restaurant, hotel, doctor, lawyer, accountant or plumber.

The good news is that the ecosystem that supports advisors is responding by creating new organic growth tools, technologies, platforms and advisor coaching programs that firms can leverage to regain their marketing swagger and remain relevant in a much more competitive, complex, challenging and digital world.

Timothy D. Welsh, CFP, is president, CEO and founder of Nexus Strategy LLC, a leading consulting firm in the wealth management industry. He can be reached at [email protected] or on Twitter via @NexusStrategy.

(Image: Shutterstock)


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