Employee versus entrepreneur mentality: Is the wealth management business 'dying comfortably'?

I’ve been involved with several start-up’s in my career, one launching a B/D and RIA from scratch with PE funding and another Fintech firm funded by wealthy investors. At both, every day was like your hair was on fire. ... There may not even be a tomorrow!

The CEO of the fintech firm put it to me this way, “You can’t think long term or even short term. You have to focus on one single thing each and every day….don’t die”. Primal, even Darwinian. But you survive to fight another day, then string together days, months and even years until you finally “make it."

That takes thinking single-mindedly about growth. And in the wealth management business, growth comes in two primary forms; organic through business development-prospecting/recruiting and inorganic, through mergers and acquisitions.

There was an article in InvestmentNews recently titled Advisory firms are hitting record profits – but their organic growth engine is stalling. Organic growth came in at a record low of 3.7% while profit margins climb, and many RIAs don’t financially incentivize advisors for winning new business.

Let that sink in. Record profits and record-low organic growth at the same time isn’t a growth engine stalling. It’s a business quietly deciding to stop being a business. Strip out market appreciation and 3.7% barely covers the natural decay built into every book: clients retire and decumulate, clients pass away, assets move to the kids’ advisor.

A firm posting record margins on stagnant organic growth isn’t building enterprise value. It’s harvesting it.

The most recent Cerulli study found that RIAs allocate an average of just 5% of total expenses to marketing, and only 14% use a dedicated marketing resource. ... Yikes!

And the public record says the same thing. In the new RIA Signals Report from Paithos Research the SEC Form ADV filings of over 14,000 registered advisers – no survey, no self-selection. The median RIA grew assets 14.5% in fiscal 2025, a year the S&P 500 returned 17.9%, and added exactly one net new client. Nearly half of all firms ended the year with the same number of clients or fewer. The market did the heavy lifting, and the firms cashed the check.

I’ve spent four decades in this business on both sides of the model, leading career (W-2) and independent (1099) channels, and here’s what that experience taught me. The employee mindset sees clients as accounts assigned to it. It asks, “What’s my salary and payout?”, waits for growth to show up from firm-provided leads, and looks up the org chart when something goes wrong.

The entrepreneurial mindset sees the book as an owned asset with enterprise value. It asks, “What’s my P&L?”, gladly takes home less this year to build capacity that compounds, treats prospecting as a permanent discipline, owns the outcome when something goes wrong, and manages toward a ten-year vision. One mindset thinks in gross compensation. The other thinks in valuation multiples. That single difference drives nearly everything else.

The old career agency system I grew up in at Equitable, for all its flaws, manufactured entrepreneurs. You learned to prospect or you failed; as managers our mantra was “recruit or die”. The industry’s shift to recurring fee revenue was unquestionably good for clients and stability, but it made it possible to stop growing without feeling any pain. The hard traveled trail becomes a hammock.

Paithos puts hard numbers on that hammock: The median firm’s assets per advisory employee jumped from $98.6 million to $108.5 million in a single year while clients per employee didn’t budge. Revenue up, effort flat. The business development muscle is wasting away in a stage of atrophy, and muscle you don’t use can be lost forever.

Which brings me back to that article’s most damning finding: Many firms don’t financially reward advisors for winning new business at all. Comp design manufactures mindset. My old boss at AXA Financial (now Equitable), Kip Condron, was famous for saying “Compensation drives all behavior”. If the plan pays the same for servicing inherited assets as for landing new ones, you will get a firm full of servicers, and you’ll deserve it. I’ve run turnarounds and start-ups, and the first lever I look at is always the same: does the money follow the behavior we say we want? In most firms with a growth problem, it doesn’t.

The filings data shows what the firms that behave differently look like. Firms that grew client rosters at least 10% last year grew assets three times as fast as the flat-or-down cohort. They were twice as likely to use client testimonials and more likely to pay for referrals. Correlation, not proof of cause – but exactly the pattern you’d predict.

Meanwhile, four filing seasons after the SEC’s Marketing Rule made testimonials fair game, barely one firm in nine uses them. The tools are on the table, and mostly the entrepreneurial growers are picking them up. They aren’t just growing – they’re taking share from the comfortable ones.

The playbook isn’t complicated, but it requires will. Pay meaningfully for net new assets, not just total production. Make business development a trained, managed, and inspected discipline. Measure organic growth net of market movement so beta can’t mask stagnation. Put real ownership economics; equity, succession paths, enterprise value participation, in front of your next generation. And recruit for the entrepreneurial trait itself, because it’s far easier to teach a hungry advisor your platform than to teach a comfortable one hunger.

In a start-up, “don’t die” is the whole strategy because death feels imminent. In an established advisory firm, the danger is precisely the opposite: Nothing feels imminent. Margins are fat, markets are up, and revenue arrives on schedule whether you earned it this year or ten years ago.

But a firm growing organically at 3.7% isn’t surviving. It’s dying comfortably. The entrepreneurial mindset knows the difference between being profitable and being alive.

In this business, growth isn’t a department or an initiative. Growth is the business. Everything else is servicing the past.

John Lefferts is a former president & CEO of AXA Advisors (now Equitable Advisors), former president & CEO of Lion Street Financial, and, most recently, head of Cetera Investors. He is a 2025 inductee of the FINSECA Management Hall of Fame.