The Importance of Organic Growth for Financial Advisors

Posted by Kristine McManus

May 17, 2016 at 10:00 AM

organic growth for financial advisorsGrowth means something different for every advisor. But one strategy I frequently hear advisors mention is a plan to acquire a practice. Certainly, this is a good long-term strategy, but acquiring a practice very seldom adds any revenue in the short term. Why? For one, the world is full of advisors looking to buy a practice, and there aren’t enough advisors looking to sell. For another, it can take more than a year to find an appropriate advisor to have a conversation with, much less get a sale under way. So, how can you grow in the meantime?

Even if your plans call for the purchase of a practice down the road, you can still take action today to help grow your practice. Specifically, the importance of organic growth for financial advisors should not be overlooked: When you focus on the client-facing activities that are proven revenue drivers, you can build your business no matter what happens.

Get More Assets from Existing Clients

One of the best ways to grow your business is to gain additional assets from people who already know your value as an advisor: current clients. You might think you already have all of your clients’ assets. But according to research conducted by Spectrem, one-third of all millionaires use more than one advisor for their financial needs. So, it’s likely that there are client assets held away from you.

Here are some strategies that focus on your existing clients: 

  • Leverage client meetings to identify opportunities to ask for additional assets. A useful conversation starter might be, “Asset allocation works best when all of a client’s assets are included in the plan. Do you have any assets not held with me?”
  • Let clients get to know you through effective branding—communicating who you are, the people you help, and the problems you solve. Ideally, your brand should convey the experience of doing business with you.
  • Tell your story through your professional biography. Remember, merely listing your credentials doesn’t make you different. Instead, focus on things that are unique to you (e.g., your family, hobbies, activities, and community involvement).
  • Hold powerful client events to strengthen existing relationships. Done right, social time spent with clients helps create loyalty and goodwill, plus spurs introductions and referrals.

Find New Clients and Assets

If you’re looking to grow your business, gaining introductions to new people should be high on your list of priorities. Research conducted by ClientWise finds that the best-of-the-best financial advisors acquire more than 70 percent of new assets and relationships through referrals from existing clients or other advocate sources. Here are some strategies for finding new clients (and their assets): 

  • Ask for introductions to specific people. And when you are offered a referral opportunity, look for ways to turn it into an introduction.
  • Develop strategic alliances with centers of influence (e.g., CPAs, attorneys, insurance agents). These professionals tend to have trusted relationships with their clients, and their referral to an advisor carries a lot of weight.
  • Consider focusing your business on a profitable niche, as this gives you a way to be strategic about the clients you wish to serve.
  • Leverage your online presence through LinkedIn and other social media platforms.

Keep Clients Longer and Retain Assets

Even if you’re not looking to grow, one of the best ways to ensure the continued health of your practice is to keep existing clients. Sounds simple, right? But many advisors don’t pay enough attention to the clients they already have. Your goal should be to keep them happy and engaged, which can lead to increased assets and more referral opportunities. 

  • Focus on what really matters to clients: the relationship with you as their advisor, rather than just investment performance. Simple actions like calling them back quickly when they have a question or concern, making time for them when they need it, and remembering details about their families and careers can go a long way in building trusted relationships.
  • Get in the practice of frequent, non-investment-related communication, which has been proven to be an effective way to build loyalty. The optimal number of client touches seems to be between 24 and 28 times a year. How does your practice stack up?
  • Reach out to clients across generations, as the children and grandchildren of your current clients will most likely receive an inheritance or serve as their beneficiaries.

Buy a Practice or Hire an Advisor

To help hit their growth targets, many advisors consider buying a practice or bringing on a new advisor. Both of these strategies can lead to top-line revenue growth, but they also come with a considerable investment of time and energy, not to mention money and resources. Before undertaking either of these strategies, be sure that you clearly understand that these are long-term revenue-generating approaches, not quick fixes for a short-term business need. 

  • If you’re considering buying a practice, your vision for the future can help you decide whether this approach makes sense. Just as you guide your clients and manage their assets to help them reach their goals, so too should you weigh buying a practice against your own business plan and goals.
  • Keep in mind that bringing on a new advisor can not only increase overall firm production, but also brings the added benefits of camaraderie and the backup of another producer.

What Makes Sense for Your Business?

If you ultimately decide that buying a practice or hiring another advisor is what's needed to take your business to the next level, of course you should continue to pursue this goal. At the same time, however, keep in mind the importance of organic growth—as focusing on your current clients can help ensure the future success of your practice. 

What strategies do you use to reach the children and grandchildren of your current clients? Have you had success buying a practice or hiring a new advisor? Please share your thoughts with us below!

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