Wealth management firms continue to struggle to achieve organic growth, an indicator of organizational stability and a main driver of enterprise value, according to a new report by F2 Strategy.
F2’s analysis of a national group of firms with $6 trillion in assets under management showed that 51% reported organic growth of 10% or less, and 35% did not know their organic growth rate. The average organic growth rate has steadily declined since 2021, the analysis showed, from 9.3% to 7.8% this year.
Firms need to build stronger, more coordinated growth strategies across sales, marketing, technology and product functions, F2 said. They also need to upskill current employees.
The report is based on a survey conducted September among 42 leading RIAs, wealth management firms and broker-dealers representing $3.2 trillion in assets.
Current State of Organic Growth
According to the report, smaller firms, which tend to rely most on organic growth, are likelier than larger ones to struggle with implementing a defined organic growth process. This is often because they have not prioritized investment in infrastructure, including people and tools.
The result is unpredictable growth: Four out of seven firms with less than $1 billion in assets reported that 0% to 5% of their growth was due to organic growth.
For their part, larger firms are more likely to have roles such as chief commercial officer or chief growth officer whom they hold accountable for organic growth than their smaller counterparts where team members wear multiple hats.
The low numbers of firms that have defined metrics as part of investing in their defined organic growth plan, the report said, align with the low numbers of firms with defined growth processes, because these go hand in hand.
Referrals are wealth management firms’ top growth strategy, cited by 18 out of 30 respondents. At the same time, some firms do not ask clients directly for referrals, expecting that their exceptional service will prompt clients to make referrals without being asked to do so.
Other organizations that have educated their advisors on how to talk to their clients about the firm, and at little cost, have found a powerful way to increase their referral rate. Besides referrals, a few other tactics, including podcasts, have increased in maturity over the past 18 months, according to the report.
Wealth management firms are looking for ways that artificial intelligence can help them be more efficient across multiple organic growth channels, according to the report. They are testing AI to support marketing and growth efforts by identifying leads, upselling or cross-selling to existing clients and evaluating marketing effectiveness.
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