RIAs’ assets have grown at an 11% compound annual growth rate over the past decade, fueled by strong market performance and advisors demanding independence.
Now, RIAs are facing challenges in their ability to grow organically and are looking for ways to grow while investing in time-tested options, according to a new report from Cerulli Associates.
Across the recent history of RIAs, the primary focus has been on inorganic opportunities, driving growth through mergers and acquisitions. But with M&A activity becoming commonplace in the market, the overall concentration is shifting back toward organic growth.
Sixty-seven percent of billion-dollar RIA executives polled by Cerulli cited organic growth as a top priority. Fifty percent of executives said M&A/inorganic growth is the next highest priority.
The renewed focus on organic growth is exposing gaps in RIAs’ marketing and business development strategies.
“The need for dedicated marketing, business development and client service mindsets is crucial as firms seek to retool and refocus for their next stage of growth and opportunity,” Cerulli associate director Stephen Caruso said in a statement. “Actioning these priorities is the challenge facing RIAs today as they seek to tap into new markets and leverage new technology in doing so.”
Referrals are playing a significant role in RIA business development; 93% of billion-dollar RIAs said referrals are one of their top organic growth strategies. This has enabled some firms to avoid more traditional marketing approaches.
On the other hand, other larger firms have delved deeply into the marketing realm, trying to leverage multiple strategies to maximize their results.
However, the average RIA faces limits on its efforts to drive organic growth. Caruso noted that 83% of firms in Cerulli’s poll cited limited resources and advisor time constraints as a major or moderate challenge.
Furthermore, advisors allocate just 7% of their time to business development.
“As scale becomes the goal for many firms, building thoughtful and strategic marketing capabilities will establish a solid foundation for sustainable growth,” he said.
For strategic partners, including asset managers, the need for support in this area is already prevalent and will increase as founders and partner advisors exit the business, according to Cerulli.
Asset managers can deepen relationships with a firm, it said, by delivering value-added content around common marketing themes, such as ideal client personas or branding.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.