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The advisory industry is currently abuzz with articles, conference discussions and social media commentary bemoaning the sad state of organic growth. While more organic growth is always better than less, recent research conducted by Commonwealth Financial Network and WealthManagement.com found that the industry’s rate of growth as measured by clients served and assets managed (less the effects of market appreciation) was higher in 2023 than it was in 2022. What’s more, survey results revealed that advisors place a high priority on organic growth and are looking for specific ways their firms could help them in efforts to increase it.
Here are some of the highlights of our research:
After growing at an estimated mean rate of 9.4% in 2022, the mean annual growth rate of those in our representative sample of advisors and firm owners, as measured by assets under management, rose to 11.3% in 2023. What’s more, 91% said that the growth was organic in nature, with 54% coming from referrals. To put that into perspective vis-à-vis equity market performance, the S&P 500 Index lost 18.1% of its value in 2022 and gained 24% in 2023.
This year, most respondents have a defined target/goal for new-client acquisition, with the typical respondent expecting to secure an estimated median 12 new clients. Of respondents with a formal business plan, about half say those plans distinguish between organic and inorganic growth. Of those that make the distinction, 57% say that organic and inorganic growth are equally important, while 37% say that organic growth is more important.
Advisor age is the one characteristic that jumps out as the chief determinant of the tools and methods advisors favor — and the assistance they would like to receive — to reach their organic growth goals. Younger advisors with less tenure in the industry are more apt to use social media and content marketing as anchors of their marketing efforts; older, veteran advisors are more apt to rely on referrals.
This bifurcation makes sense. Having grown up with the internet as a major presence, younger advisors are more familiar with social media and have made it more a part of their life than many older advisors. In addition, since their client base tends to be younger, less affluent and less numerous than those of senior advisors, it would be difficult for them to rely as heavily on referrals as do advisors, who have numerous client relationships and working ties to centers of influence that may be decades long.
Younger survey respondents, while still seeking referrals, tend to be somewhat more apt to focus on niche markets than veteran advisors taking part in the survey, and more likely to be proactive in reaching out to those markets via content marketing and social media than are more senior advisors with a bigger customer base.
For each group of advisors, therefore, firms would do well to provide the tools and assistance that would help them do the type of marketing that best suits their needs and business model. Here’s what advisors said would help them improve the effectiveness of their marketing and ultimately drive organic growth:
- More automation. More than half (52%) of respondents said that if routine tasks (filling out forms, transferring data, etc.) were automated, they could spend more time on marketing. They also would like more tech-based marketing tools.
- More education. Advisors would like a greater understanding of the marketing tools they already have. In social media, since LinkedIn is clearly advisors’ preferred platform (used by 60% of advisors and found impactful by 69%), encouraging the use of its educational tools and engaging with outside experts who specialize in maximizing LinkedIn’s effectiveness would likely be met with favor.
- Measurement systems. “How am I doing?” is a question about marketing efforts for which advisors would like answers.
- More help with marketing programs. Advisors would like their broker-dealer/custodian to help them with programs and ideas that are working to increase growth.
- Supportive practice management assistance. Are there ways to reorganize operations and procedures to support organic growth programs? Advisors would like to know what they are.
The industry’s recent focus on organic growth — even if perhaps a bit overwrought — is welcome. Less reliance on market performance and more attention to attracting the millions of Americans who would benefit from professional financial advice is healthy for the advisory business. Even better, the tools now exist to make strong organic growth a reality.
Want to explore more about what’s driving growth across the advisory industry? Download our report Driving Firm Growth 2024: Understanding the Differing Needs of Younger and Veteran Advisors to discover the strategies and tools that are shaping success for advisors at every career stage.
