Last year, the average registered investment advisory firm saw organic growth of just 5.7%, according to a recent study by Ensemble Practice and BlackRock. Referrals from existing clients was the top source of leads coming into advisory firms, the study also found. But CEOs at some of the largest RIAs in the country say organic growth should go beyond referrals, and that firms should have a multi-pronged approach to growth.
“Referrals are just table stakes,” said Brent Brodeski, CEO of Savant Wealth Management, a $30 billion RIA, speaking at the 2024 WealthManagement.com Industry Awards Executive Forum in New York last week. “Once upon a time, you just hung a shingle, and you’re different than the wirehouses, the insurance companies and banks. And the phone rings.
“That’s kind of a dying breed,” he added.
Nowadays, Brodeski said, it’s harder to grow just on referrals and market returns. Firms have to think differently.
“Those that just rely on markets and referrals are going to die on the vine. It’s a multi-factor equation to grow organically and inorganically,” he said. “I believe we need to institutionalize business development.”
Savant is investing $10 million this year into digital marketing to create lead generation, hire internal sales teams and have dedicated people to service advisors.
RIAs with $500 million may be fine growing through referrals, but that won’t be enough for larger firms, added Mike LaMena, CEO of Wealthspire Advisors.
“When you start to look at firms that are our size or bigger, you have to think differently about organic growth,” he said. “You have to have that institutionalization of drivers of growth.”
LaMena said Wealthspire aims to balance its enterprise-level initiatives, like referral programs, with telling the story of its individual advisors.
“To be successful in today’s day and age, you have to be able to do both,” he said. “You have to still empower individual advisors to be their authentic self.”
A lot of RIAs, he argued, are not doing what they need to do at the organic growth level because they’re too focused on mergers and acquisitions.
“The single biggest measure of the health of any business is organic,” LaMena said.
Adam Malamed, CEO of Sanctuary Wealth, said referrals are still the major source of new clients, accounting for 70% of client acquisition in this industry. But there needs to be more focus on how people research referrals and how firms support advisors with that aspect of it.
“What is your digital agility? How are you marketing yourself out there? It’s not just a website anymore,” he said.
Arthur Ambarik, CEO of Perigon Wealth Management, said that, at least within his firm, other channels are growing faster than referrals. Perigon, which is one of the fastest-growing RIAs, is investing at an enterprise level in other ways of growing.
“Seventy percent of new clients might come from referrals,” he said. “But I would say 100% of the fastest-growing teams in the country are not growing fastest from referrals.”
