Many registered investment advisors (RIAs) want to grow their practices, but many are focused on big, grandiose outcomes. There’s nothing wrong with those ambitions, but advisors often need help when it comes to implementing a credible growth plan.
For example – just using simple numbers here – principles at a firm with $100 million in assets under management may want to ratchet that number up to $500 million and, later, $1 billion. Obviously, those are big jumps, but big growth can be realized by thinking small.
That’s not as counterintuitive as it sounds. By notching incremental gains on a daily basis, advisors can effectively grow their practices and that pertains to much more than simply adding more clients and assets. Small, consistent gains are regularly attainable and as RIAs consistently notch those wins, confidence increases in reaching larger growth objectives.
Here are some steps advisors can take to get some wins under their growth belts today while setting the practice up for bigger things in the future.
Outsourcing, Technology Matter
Advisors are already aware that technology is an essential part of their practices, but data confirm it behooves advisors to stay abreast of tech trends and be quick to embrace tech as a foundation of growth, not reluctant to arrive at that conclusion.
“Fidelity did an RIA (Registered Investment Advisor) benchmarking study that compared advisory firms that embraced technology to those that did not. The study found that ‘technology embracers,’ when compared to their RIA peers, experienced,” notes Ryan Krystopowicz, WisdomTree director of client solutions.
As Krystopowicz points out, there are good reasons for advisors to be ‘tech embracers.’ Those include generating nearly double the revenue compared to less tech-savvy counterparts, higher organic growth rates and a three-year compound annual growth rate for assets under management that’s 220 basis points in excess of less tech-centric practices.
Outsourcing is another prime frontier for advisory practice growth opportunities. That doesn’t necessarily mean outsourcing investment management – something many advisors are reluctant to do – but there are avenues for outsourcing, which can bolster efficiencies and improve practices’ growth trajectories.
“Outsourcing can mean different things to different people. I think of it as a spectrum,” adds Krystopowicz. “On one side is 100% outsourcing of a business function. The goal is to give up all duties/responsibilities/time spent related to it. On the other side is partially outsourcing a business function to professionals. The goal is to leverage their expertise to achieve better outcomes.”
Leveraging Experts
In business, financial and otherwise, clients are instinctively drawn to perceived high levels of intellect and experts.
In the advisory world, there are multiple avenues for increasing a network of experts and they don’t have to include reducing the practice’s value-add propositions when it comes to investment strategies. In fact, there are other areas in which a practice can enhance its expert portfolio to the benefit of future growth objectives.
“Investment management is just one area for advisors to consider utilizing outside expertise—thus expanding their network of professionals. The fact that, in the past five years, there was a 77% increase in the median number of services that advisory firms offered clients leads me to believe there are many other areas—such as estate planning, tax advisory, etc., to also consider,” concludes Krystopowicz.
Related: Why Do the Bigger Brands Control the Advice Marketplace?