The key to sustaining your firm's growth may not be what you think

Dec 20, 2018 @ 12:01 am

By Gabriel Garcia, Managing Director, BNY Mellon's Pershing Advisor Solutions

After a couple of years of decelerating revenue growth in the Registered Investment Advisor (RIA) industry, it's easy to get excited about the topline results revealed in the 2018 InvestmentNews Study of Pricing & Profitability. Firms in the study reported revved-up median revenue growth of 11.7% in 2017, compared with 5.0% in 2016 and 6.9% in 2015. When you couple such heady growth with profit margins that hover around 25%, it's easy to conclude that the industry's growth engine is running smoothly and firms should stick with whatever they're doing now. The message would seem to be: “If it's not broken, leave it the heck alone.

However, I'm not sure this is the time to put one's RIA firm on autopilot. A closer look at the study's data suggests that firms might instead want to exploit this period of strong growth to optimize – or even rebuild – their approaches to sustaining growth. (An article I penned in October delves into this topic in some depth). The fact is that in 2017, market performance did most of the heavy lifting, accounting for 8.3% of growth in assets under management (AUM) (see chart below). By contrast, business development – that is, the combination of marketing and sales efforts – accounted for just 4.8% of AUM growth (better than the 2.5% achieved in 2016, but still not gangbusters).

Why have business development efforts produced only limited success? I believe the single largest underlying reason is underinvestment. On average, across all survey participants, marketing and business development expenses amounted to only 2.0% of revenue. This number includes everything from advertising and public relations, to client entertainment and appreciation events. To be fair, it doesn't include compensation dollars for marketing staff, and it's heartening to see that 14.6% of firms hired Business Development Specialists in 2018, nearly quadruple the 4.0% that made such hires in 2017. (Of course, new hires are only as effective as their training and development – I explored the InvestmentNews study's revelations about productivity gaps in an article in November).

Why do I still think that firms are underinvesting? Let's start by reviewing what they're currently doing.

To attract new clients, firms are putting themselves out there – physically, electronically and through traditional media. The study details a long list of activities, but here is a sampling:

  1. Person-to-person – 58% are actively engaging the community; 54% are volunteering on non-profit boards; 52% are hosting networking events, such as seminars or client appreciation events; and 47% are sponsoring community events.
  2. Digital – 55% are working their social media networks, actively posting content and interacting with people; 47% have built websites that enable digital lead nurturing and conversion; 40% are publishing blogs; and 38% are conducting email marketing.
  3. Traditional media – 27% are paying for print, radio or TV advertising; and 12% are investing in direct mail campaigns.

With all of these market-facing activities, you'd think that clients would be lined up at the door of every firm. But, of course, there's a big difference between attracting attention and landing new clients. Here's where I noted some areas where more investment would really make sense.

  1. Figure out what's working among your current marketing activities (person-to-person, digital, and traditional media). If you look at where leads are coming from (and which convert into clients), you may find a bit more investment in a select area will attract the right attention.
  2. According to the survey, many firms do not devote nearly enough attention to the process of guiding people through the journey to become clients. For example, only 33% of firms formally track leads and prospect clients at a firm level and share the information with their advisors. An astounding 61% do no formal tracking at all. It's little wonder that in 2017 the average lead-to-client conversion rate was 28%.
  3. And here's another missed opportunity for growth: only 30% of firms have established a formal process for requesting referrals from related third-party professionals, such as lawyers and accountants. Fully 70% of firms do not make such efforts.

Statistics like these tell us that there are enormous opportunities for firms to strengthen their business development now, while market tailwinds are still in full force. If firms invest in training and systems to connect their marketing efforts with their client conversion efforts, the result will be a more reliable and durable process for winning in the marketplace.

BNY Mellon's Pershing Advisor Solutions provides a comprehensive array of business consulting resources, programs and personalized support to help advisory firms manage and grow their business. You can engage with our consultants in multiple ways—receive guidance for implementing one of our programs, attend a Pershing event or take part online through our webcasts. You can learn more at

About the Author

Gabriel Garcia is a Managing Director for BNY Mellon's Pershing Advisor Solutions in the Relationship Management group. Mr. Garcia works with registered investment advisers (RIAs) interested in developing and growing their practices, helping them manage business issues they face. He engages advisers to help them make informed decisions around maximizing Pershing's resources and evolving their firms to become more scalable, profitable and productive. Mr. Garcia spent his previous 15 years with Charles Schwab & Co., where he held several leadership positions in sales, training and consulting. His last six years were spent working directly with RIAs. Overall, Mr. Garcia has 20 years of experience in financial services and has consulted with more than 100 firms ranging in AUM from $50 million to $3 billion. He also is a frequent speaker at industry and national conferences. Mr. Garcia earned a Bachelor of Science degree in Finance and Business Administration from Radford University. When he's not in the office, he enjoys CrossFit and spending time with his family at the Jersey Shore. You can follow him on LinkedIn at


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