DeVoe & Company unveiled a new consulting platform focused on bolstering participating firms’ organic growth rate. Founder and CEO David DeVoe said his firm launched the platform in response to a disquietingly slow rate of growth for the average advisory firm that is often masked by market performance and overall industry growth.
“It’s not intuitively obvious the industry is growing slower than it should be,” DeVoe said. “The industry does a great job of serving clients in a critical part of their lives, yet the growth isn’t what it potentially could be.”
The DeVoe GrowthBuilder platform is led by Bob Ciullo, who recently joined as a managing director to shepherd the program. He previously served as chief advisory officer at several RIAs and oversaw 250 RIAs as a managing director at Schwab Advisor Services.
The program splits a firm’s growth capabilities into five segments, including prospecting, assessing, positioning, closing and retaining, and starts with the GrowthDiagnostic—45 questions to gauge a firm’s current standings, resulting in a numerical grade in each of the five categories.
According to Ciullo, this initial batch of questions is focused specifically on growth, in contrast to other platforms that focus more broadly on a firm’s total health. From prior data from the program's soft launch, as well as other DeVoe data and his own expertise, Ciullo said RIAs were typically scoring higher on closing and retaining clients, but encountered shortfalls earlier in the growth process.
“The weaknesses here are prospecting, (where) activities are certainly slowing down, assessing whether the prospect is a good fit for them, and positioning how well they tell their story and value proposition to prospective clients,” he said.
The questionnaire asks firms to rate their effectiveness on a range of topics, including generating new prospects, assessing prospect needs and whether firms have particular business development tools, including a kind of prospect scorecard or a designated business development officer. After the questionnaire, DeVoe will work with the firm, including biweekly meetings with executives and weekly team meetings with advisors, as well as one-on-one coaching opportunities with each advisor.
Ciullo said the customizable format of the program could be particularly beneficial for solo practitioners and small firms whose principals at the start of their firms had to juggle the dual demands of business development and relationship management. Often, those skills elder principals developed for prospecting were not filtering down to their successors.
“They’re wearing so many hats that they can’t focus on business development, and that still hasn’t been translated in the next generation. That exists, and it’s beginning to show up,” he said. “With the markets performing as they have, that has masked the lack of growth.”
While the industry has had a high growth rate over the past couple of years, that masks the fact that growth rates for the average firm are on the decline, according to a Dimensional Fund Advisors study. The 2021 Fidelity RIA Benchmarking Study also acknowledged that while there was growth in all firm sizes, large firms grew faster than their smaller peers, a trend Fidelity attributed to bigger business development initiatives and a possible flight to quality and/or scale during the COVID-19 pandemic. The tenuous state of organic growth is in contrast to DeVoe's assessment on inorganic growth, as the company predicted a record 2022 for RIA M&A activity.
DeVoe said the expansion was most pronounced among so-called “meta-RIAs,” a phrase he used to describe the roughly two dozen large firms with the capacity and management to grow their business quickly. But DeVoe worried about the long-term effects of the larger RIA growth outstripping growth of the typical, smaller business, and said GrowthBuilder was particularly fashioned for those smaller RIAs that want to grow faster without being acquired.
DeVoe expects the company to be able to point to data from about a dozen participating firms within the year, and hoped the GrowthBuilder program could expand to two or three dozen firms in the following year. But he worried that over time, flat organic growth among small RIAs could make it more difficult for businesses in that AUM level to attract and keep employees.
“Good people are going to want to be in healthy firms that are growing quickly and are opening up a variety of career paths and opportunities for them,” he said. “And if the industry or specific firms are unable to achieve appropriate growth rates, they’re going to suffer losses of human capital and often their very best people."