NEXT CHAPTER
Steve Gresham
Faking Growth
Wealth management advisors aren ’ t really growing . But there is a way forward .
R
IP , ORGANIC GROWTH .
Most of today ’ s wealth management offerings are built for a business that no longer exists and for clients that are moving on ( not moving in ). Why is that so ?
Let ’ s look at wealth management following that train of thought ( and anticipating the ultimate derailment ):
1 . For one thing , the products are free . Investment beta and trading commissions are now free at leading direct providers . So if you aren ’ t free , what is the value you ’ re offering for what you charge ? If you say , “ It ’ s for advice ,” then what ’ s your advice about ?
2 . That ’ s important to ask , because a lot of clients say they don ’ t want advice , or at least they don ’ t want to pay for it . During a consumer panel at a recent national industry event , I heard three consumers on the panel say they don ’ t have an advisor . They said things like “ You can do everything at Fidelity ,” or “ Advisors always sound like they are selling me something .” Forty-six percent of retirement plan participants in a survey said they don ’ t have financial advisors and aren ’ t looking for one .
3 . Now let ’ s look at the clients we do have . Most of them are unengaged , and that ’ s because they have multiple financial services providers , and distant relationships with them at that . Look at the national stats . If you blend all the coverage models , from the small RIAs to the private banks up to the largest direct providers , you get an average ratio of 150 households per advisor . Most “ clients ” ( outside small , intimate firms ) are really just fractional clients . You ’ ll see them as whole clients only until they leave you — when
Most “ clients ” ( outside small , intimate firms ) are really just fractional clients . You ’ ll see them as whole clients only until they leave you . they ’ ve started consolidating accounts .
4 . “ Retirement ” will eventually replace “ accumulation ” as the reason people are turning to you for advice , and that will determine whether your advice is profitable . Twelve thousand Americans are retiring every day . They have very different needs and require much more attention and complex solutions than they did when they were just saving . This cohort will provide more than 75 % of advice industry profits through 2030 .
So if we have all these things throwing us off , how do we get this growth train back on the tracks ? And what is your definition of “ growth ”?
If your objective is to sell your organization , you can achieve impressive growth by acquisition , ride rising markets and buy more scale on the dips . Yours is a market share play with a revenue bogey and it ’ s more of a trade than a business . And when it works , it works — if you can sell at the right time .
But for the rest of the industry , especially those companies responsible to shareholders ( as well as clients and employees ), the solution is organic growth . And organic growth is measured by net new assets and client share of wallet . It ’ s also not measured by how well the top 10 % are doing , but what the median advisor is doing and what his or her median relationship is . If you are consistent , that will make you a winner in enterprise value .
An executive at Next Chapter , our
MAY 2023 | FINANCIAL ADVISOR MAGAZINE | 27