When Adding One Client at a Time No Longer Seems Like Enough

Advisors with their sights set beyond what organic growth delivers find greater opportunity in the independent space

Growth doesn’t happen by accident—it begins by knowing where you are today and where you want to be tomorrow. And if there’s one thing all advisors have in common – regardless of what stage they’re at in their career or what firm they’re currently with – it’s the desire to grow their business.

If you’re an advisor at a wirehouse, you’re likely limited to growing organically; that is, one client at a time. For some, it’s a strategy that allows them to achieve their goals by steadily increasing assets under management. But for those who really want to turbocharge their growth and take it up a few notches, organic growth alone is typically not enough. It’s often these advisors who are sparked by the notion of adding inorganic growth to the mix and feel the pull of independence.

A model that accentuates growth opportunities

In addition to offering greater freedom, flexibility and customization, the independent space delivers a business model where advisors can grow their client base and revenues faster than in any other part of the financial services industry. With less limitation around what an independent advisor can and cannot do, organic growth usually becomes accelerated while M&A offers a tremendous opportunity to grow inorganically.

There’s no shortage of stats that speak to the explosive growth independent advisors are experiencing, but numbers alone don’t tell the full story. So, for those on the “outside looking in” and wondering why independent advisory practices are growing faster than their employee-based advisor counterparts, we believe the following 4 key areas to be the reasons behind their success:

Mergers & Acquisitions

M&A in the independent space is heating up as enterprise-building advisors accelerate their growth with acquisitions of like-minded practices. According to a report from Echelon Partners, there were 168 M&A transactions in 2017, representing a 21.7% increase over the year prior. With an aging population of solo-practitioners who must solve for succession – coupled by smaller advisory firms who lack scale and simply can’t afford the increasing cost of doing business – there’s no shortage of acquisition opportunities for qualified buyers (specifically those with access to the capital and expertise to get a deal done). And in an environment where 1+1=3, all parties win as they have solved for the things that impact enterprise value most: Scale, infrastructure, and identifying a next gen.

Additional Client Services, Business Lines and Outside Referral Relationships

Whether it be by way of charging for additional services (such as financial planning, liability management, cash management, insurance and family office related services for larger clients) or by establishing referral and fee sharing arrangements with 3 rd parties (including CPA’s, attorneys, commercial bankers and insurance professionals), the most successful independent firms create a culture of firm-wide growth. And given they control their P&L, independent advisors can customize their pricing structure to meet the needs of their clients.

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Independent advisors have the autonomy to market their personal brand and are free, for example, to conduct seminars and host radio shows without a compliance department imposing limitations around what they can and cannot say. Rather than relying on a compliance department whose responsibility it is to manage to the lowest common denominator, these business owners leverage the guidance of a compliance specialist who’s personally aware of their brand and messaging, with the ability to provide prompt and seamless compliance review.

A customized and enhanced suite of technology

An RIA is not constrained by their firm’s technology platform, nor do they find themselves paying for services they don’t want or need. Instead, they can build a technology stack that best addresses the needs of their client base. In doing so, efficiency and productivity is enhanced, which ultimately leads to sustainable, long-term growth.

Regardless of what business model you occupy, a plan focused on growth typically requires multiple initiatives. And while independence offers advisors the opportunity to grow both organically and inorganically, it’s not for everyone. Start by asking yourself whether you can achieve the growth you want by remaining at your current firm. But for those who feel they have the entrepreneurial DNA to be business owners and take on the challenges and opportunities it represents, then perhaps it’s a matter of looking down the independent path to achieve your goals.