The Gap Copyright Dimas Ardian, Getty Images

Wealth Management Economies of Scale

That wealth management is a business predicated on scale is an oft-forgotten fundamental truth.

It’s Economics 101, but it’s a fundamental truth that we so often forget: wealth management is a business predicated on scale.

If one can acquire more clients with more assets then earnings increase. This is magnified as one grows the wealth of existing clients.

This business dynamic makes the wealth management industry kind of like The Gap. It can grow revenue through "same store sales" growth (returns for existing clients) or through opening new stores (new client acquisition). And while the two aren’t mutually exclusive, increased focus on one channel does detract from the other.

For the wealth manager, neglecting existing clients is not an option. This creates an inevitable dynamic for successful wealth managers of hyper-growth followed by hyper-service and growth either through acquisition and/or more junior financial planners. While this isn’t wrong, it’s also not ideal.

Acquisition can be risky and putting your firm’s value proposition directly in the hands of someone less experienced can create brand dilution. But with an effective digital distribution strategy, for both existing and prospective clients this does not need to happen.

Further, if assets under management can grow without acquisition than revenue grows alongside margin expansion, and that is an extremely powerful dynamic.

What Does This Mean in Practice?

Great, you’re probably thinking. I would love to grow my business and devote time to client acquisition without sacrificing client service, but how? Digital distribution is the key here and it’s both intuitive and highly accessible using these three steps:

Create Your Digital Storefront - As a wealth manager you offer something unique—perspective, client service, a niche focus, etc. There is a reason you exist, a reason your clients trust you and a way in which you can scalably educate the masses while simultaneously accruing these benefits back to your practice. If you don’t have this presence or these materials, start now. There is no more effective form of client conversion than having them discover your expertise on their own.

Distribution Channels - With your voice and materials established you must now distribute through the right channels. Without distribution your efforts in the first step are wasted. No one is going to your blog and no one is randomly finding your website. Wealth managers need to be where their target clients are and to leverage platforms and technologies that can enhance SEO while keeping in control of the brand and value proposition. Note, this does not mean spamming people on LinkedIn!

Analysis & Conversion - Once you effectively distribute your content, creating a means of lead acquisition/conversion and analyzing the effectiveness of your efforts are critical. While this may seem daunting, it really isn’t. There are a multitude of tools and services available that don’t require an internal digital marketing expert nor significant investment. Drop me an email or connect with me on social media if you’d like some help here.

It seems like it’s been awhile since trends have been anything but defensive for the wealth management industry. While some of these dynamics will persist in the market, 2017 will mark the beginning of a shift towards growth, and there is no easier and more effective distribution strategy than digital.

Peter Hans is the CEO and co-founder of Harvest Exchange.

 

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