By Shad Besikof
Registered investment advisors seeking to grow their assets under management need a comprehensive plan to expand their business operations. Although there are many theories on how to accomplish this, two schools of thought that seem to be predominant.
The first is organic growth. Firms that take this approach grow incrementally through better service, superior marketing techniques and a robust pipeline of leads and referrals. High growth is second. While this often has an organic growth element, it also includes swift expansions of business, typically through advisor tuck-ins and acquisitions.
Either way you decide to go, establishing a successful growth plan will take planning and persistence. Now, let’s delve deeper into these two plans so you can decide which of them would best fit your company’s mission and means.
The organic growth model requires painstaking attentiveness to the most basic principles of business growth: branding, marketing, sales and, of course, scalability. Your marketing strategy is essential to establishing visibility and engagement with key audiences, yielding your business to new clientele on a regular basis.
The tactics that can be used for either of the two strategies are:
- Seminar marketing: A staple for advisor lead generation.
- Blogging and email marketing: Low-cost options that can yield big returns if executed properly.
- Social media and search engine optimization: No longer optional, as many clients will view an uninspired or outdated online presence as a knock on your credibility.
- Direct mail and targeted advertising: Viable and powerful options, but they require proper budgeting, planning and commitment.
As you build your organic growth sales opportunities, the leads must be captured in a customer relationship management system for a repeatable and consistent funnel management process. And if your advisors are focused exclusively on advising, then there are sophisticated outsourcing solutions where you can leave the marketing, operations, compliance, and human resources to the pros.
There is a lot that goes into properly executing an acquisition, and all of this needs to be kept in the forefront of your mind as you consider the possibility of incorporating an existing business into your own.
The volume of baby boomers exiting the advisory business has sparked massive acquisition opportunities. However, there are some key questions that you need to ask yourself before moving forward with buying a book of business:
- Are you effectively serving your current clients and will your services stay consistent with the addition of potential new clients?
- Do you have the resources and ability to scale so that you can retain more clients?
- What are the benefits, both immediate and long term, of acquiring new clients?
- Does the book complement your existing client base? Or are there conflicts?
- Does the culture and investment philosophy of the acquired fit the same principles of your firm?
If these questions aren’t carefully considered, an acquisition deal can easily fall through or, worse yet, spectacularly fail the acquired’s expectations. There are quite a few reasons why this can happen, including:
- Inadequate due diligence, where the advisors don’t fully understand the business being acquired.
- The advisors didn’t fully evaluate whether there was a strong cultural fit and shared investment philosophy.
- The acquired book pursues a whole new market in which the current advisors have little or no experience.
- Advisors see it as salvation, but the benefits are far from immediate.
Advisor “tuck-ins” offer the mutually beneficial strategy of taking on advisors who can bring business into your firm yet at the same time would rather not build their own firm from scratch. This offers skilled advisors the opportunity to take advantage of your firm’s technology stack and administrative back office while at the same time instantly growing AUM.
Growth is a continuous process involving the delicate balance between the future robustness offered by book growth and the perpetual fragility of client relations. It’s a process that requires you to be analytical and deliberate in your growth strategy while remaining committed and compassionate to your existing clients’ needs to ease the inevitable growing pains of your firm’s expansion.
Shad Besikof is President and COO of TruClarity, a transition and business operations support service. Learn more at MyTruClarity.com.