Breaking from past strategies extends beyond tech; XYPN co-founder Michael Kitces, presenting research his firm conducted on growth levers in RIAs, stressed that the industry’s “growthiest” firms relied the least on client referrals, traditionally RIA’s most widely cited “growth” tactic.
Referrals aren’t disappearing at successful firms, but the revenue from “growthier” firms’ marketing spends obliterated the revenue generated through traditional referrals, Kitces said.
As with firm principals taking on the CTO role, Kitces said firms that relied on advisors to “market themselves,” via referrals or otherwise, drained costs for the firm as those advisors who are good at it become more expensive to recruit.
“The more we pay advisors to service their existing clients, the more expensive it gets to pay them to get new clients,” he said. “And it literally starts breaking our marketing.”
Nitrogen CEO Aaron Klein agreed, saying he didn’t know of another industry thrusting practitioners with finance and economic degrees into the role of “growth engine” for the firm.
While strategies for helping advisors drive growth were akin to “the Wild West,” Klein believed high-growth firms are finding ways to help good advisors grow their client base without putting the onus on those same advisors to grow additional relationships, avoiding a strategy that turns advisors “into something they don’t want to be,” namely.