How advisors can achieve growth in difficult markets

Seasoned advisors know that when the wind is at your back, it’s fun to sail. The strong markets in 2021 lifted all boats, and advisors across channels and disciplines experienced impressive growth in AUM. It was a great year for most advisors, but it’s important to note that achieving asset growth is different than intentionally growing a practice.

Fast forward a year, and 2022 ended on a vastly different note. The S&P 500 returned -19.6%, and while advisors don’t invest 100% of assets in all-stock portfolios, they felt the downturn across the board. Most financial advisors saw declines in AUM, leading to decreased revenue and profitability. It was a harsh awakening for many, especially those who joined firms in 2018.

But some advisors experience organic growth even amid challenging markets, realizing that a downturn is a great time to sow seeds for future growth. Because of this insight, they receive referrals for new prospects and successfully bring in new assets to manage.

But how can you achieve growth in difficult markets? Let’s break that process down into three parts.

FOCUS ON WHAT YOU CAN CONTROL

There’s plenty of research on this topic, but the key point is that by focusing your time and energy on tasks and goals that are within your purview, you will achieve better results — and be less stressed. You can’t control the markets, but you can control how you approach a downturn, your clients, and your activity. A positive mindset can help you achieve more than you think.

1. COMMUNICATE EFFECTIVELY

You’ve heard this advice before, but it bears repeating. Good communication is the key to a strong foundation in any relationship, including the one between advisor and client. Because it’s so important, everyone must do it, right? Sadly, no. For years, advisors have struggled with communication frequency and prioritization. A recent study by YCharts reveals that almost one-third of clients said their advisor contacts them “infrequently” or “never.” Perhaps that’s why this research also indicates that a quarter of current clients may be at risk of leaving their advisors.

Additionally, this research shows that 88% of surveyed clients consider an advisor’s communication style and frequency when deciding whether they want to retain their services. And almost 90% of clients say the same reasons apply when determining whether to give a referral. Given the important role of communications in client retention and referrals, it’s critical that all advisors make it a priority in their practices.

2. PAY ATTENTION TO CLIENT MILESTONES

Do you know what’s going on in your clients’ lives? Is your client getting married or divorced? Are they buying a home, a boat or a puppy? Have they lost a job or started a new career? Do they have kids who are about to graduate? Maybe the client is getting ready to retire, travel or move. You can easily be replaced if you’re simply an advisor and unaware of your clients’ important milestones. But if you’re a friend, confidant and coach to your clients, they are more likely to be loyal and engaged with you.

3. POSITION YOURSELF FOR GROWTH

Strong organic growth is possible even in difficult market environments, and we’ve seen that firsthand at Commonwealth. Because our advisors paid careful attention to their clients and proactively communicated during volatile times, they were able to understand their doubts and help assuage their fears. And they continue to keep their focus on clients, which pays off in new referrals, new clients, and new assets — and positions them for even further growth.

[More: What do advisory firms need to keep growing? A move beyond client referrals]

Kristine McManus serves as chief advisor growth officer at Commonwealth Financial Network.