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The three common factors driving the highest-growth advisor practices


As of 2023, there are approximately 330,300 financial advisors in the United States. And every single one of them is responsible not just for keeping up with market trends and smart investment recommendations but also for engaging and keeping clients.

To stay competitive and achieve high, sustainable growth, advisors have to keep themselves informed with new developments and best practices – and we’re not talking about the investments themselves.

Advisors are people that investors, quite literally, invest their time, money, and, most importantly, trust into. Different people collaborate and make decisions in a variety of ways, and to keep up with the demand for personalized advice while growing their businesses, advisors need to be able to answer this question:

“How do I scale my business to drive high growth?”

Mike Van Wyk, Director of Customer Research and Insights for Capital Group and contributor to the annual Advisor Benchmark Report, sat down with Morningstar’s Big Picture in Practice podcast to share his expert insights on the three common factors that influence scalable, high growth for advisors.

You can listen to this and other episodes of the Big Picture in Practice podcast by Morningstar on all major streaming platforms. You can keep up with the latest episodes by subscribing to our Big Picture in Practice Newsletter.

Why did some advisor practices grow 144% more than others?

144% advisor business growth is no joke. Hyper-growth like that stems from advisor practices that prioritize investors’ evolving needs and expectations while forming advisor strategies around them.

According to Mike, there are three common factors that influence high growth for advisor practices:

  • Client Acquisition
  • Relationship Alpha
  • Strategic Scale

1. Client Acquisition

Advisor practice growth goes hand-in-hand with client acquisition. Fewer new clients, less growth. As such, it requires top priority status for firms that have specific growth goals. According to Mike, personal referrals are a significant percentage of client acquisition volume – which is not only a plus for a business's financial health but also for its reputation.

Most active advisor practices are reliant on personal referrals to get new clients. In fact, Capital Group’s benchmark report states that referrals continue to be the best source of new business — representing 87% of new client acquisitions.

Why are referrals so important? Are they a passing trend?

No, because people will always want personal verification from a source they trust.

“When you receive a referral, you know that client values the experience that you've created for them as an advisor,” says Mike, “and you know that whoever is receiving that referral – whoever's hearing that endorsement from a client – they're going to take that seriously and they're going to value it because it's coming from someone they trust.”

Referrals can no longer stand alone in today’s world, however. A critical component in the advisor toolbelt is a strong and scalable digital marketing strategy structured around why advisors do what they do and offering proof of delivering their promised value.

Whether digital marketing is done in-house or with an external agency, high-growth advisors today are prioritizing content creation and promotion at every possible touchpoint to answer questions from potential clients and highlight the benefits of working with that advisor practice. It’s become such an important part of scaling an advisor practice that some investment professionals are doing the work to also become content marketers in the quest for better client connections.

2. Relationship Alpha

Relationship Alpha (ree-lay-shun-ship al-fuh): A way of advisor thinking that goes beyond expected support and services to nurture a loyal, long-term client relationship.

How do you get noticed among a collection of advisors all vying for the attention of the same clients? Find a scalable way to stand out beyond the standard table stakes that advisors have always offered clients. Essentially, go from a Relationship Beta to a Relationship Alpha with extra services that incentivize client loyalty.

“We do see that financial advisors can differentiate the services they provide to clients that aren't necessarily the ones that differentiate you as a practice,” explains Mike. “There is a set of higher-value-added activities that more and more advisors are providing. And those are things like estate planning, family wealth planning, tax planning, and tax strategy. So, we see advisors starting to move past the table stakes and into some of these activities that add additional value and move them into a Relationship Alpha category.”

The push for higher-growth advisor practices to be active in retirement plan consulting and management can be linked to an increased volume of referrals, which in turn drives the need for the third common factor – strategic scale.

3. Strategic Scale

As advisors seek to scale, they're basing that strategy on the idea of personalization. Advisors are focusing more energy on constructing a client relationship – and keeping it – with good rapport and solid trust while balancing daily administrative needs and financial prowess.

There's a great new study by Morningstar that shows that clients don't leave an advisor just based on market results; they will leave based on the way they feel about that relationship with the advisor and whether personalization is being delivered.

– Mike Van Wyk, Director of Customer Research and Insights, Capital Group.

Advisors need to think about how a personalized experience is reinforced at every touchpoint a client encounters with the practice. Plenty of strategic scale comes through the personal touch of the advisor themselves, but personalized, high-growth practices are increasingly supported by software. Mike emphasizes the importance of client-facing software like Zoom and DocuSign that help foster personal client connections from anywhere.

The other half of strategic scaling is using model portfolios to plan for desired client outcomes. A model portfolio gives you a foundational plan to start with, but as you align it specifically to the client’s desired outcome, advisors turn a model portfolio into a scaled strategy built on the efficiency of essentially using a template. Personalization meets efficiency to produce scale.

Applying diverse advisor personalities to high-growth advisor practices means...

According to Mike, there tend to be two profiles of personalities that are attracted to working as a financial advisor:

The “Sage” and the “Caregiver.”

The Sage profile is an advisor who is focused on math and investing data. They stay up to date on market trends and like to talk specifically about the investments themselves.

The Caregiver describes advisors who chose this career path because their priority is connecting with and providing life-changing advice to people as they navigate through the various stages of their lives.

“As the investment landscape continues to progress and evolve, what’s interesting is that somebody who identifies as more Sage has to become a bit more of a Caregiver to succeed,” observes Mike. “And a Caregiver has to be able to claim the numbers. Over time, they’ll likely each take on characteristics of the other.”

“For better or for worse, the volatility over the last four years has given us this great period of time to look at the way financial advisors handle change, and adjust to dramatic change,” says Mike. “And what we saw was that high-growth advisors see that as an opportunity. And they're very flexible about adapting to the opportunities that are in front of them.”

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