- Key insight: Stagnant organic growth and tightening custodial gatekeeping are creating opportunities for untraditional firms to push into the referral marketplace.
- What's at stake: Advisory firms that rely on market tailwinds risk growth stagnation, as true RIA organic expansion sits at just 3% to 4% without market appreciation, while traditional referral pipelines continue to shrink.
- Forward look: Entrants including TradePMR, Betterment, Pershing, and a potential Vanguard-Altruist partnership will aggressively expand client-matching marketplaces to break traditional custodial referral monopolies.
With advisors under pressure to increase their managed assets without market appreciation, various third-party firms are finding new ways to make money in drumming up client referrals.
One of the latest and most novel to enter the referral business is CD Valet, an online market place for savers looking to compare rates offered on certificates of deposit from various lending institutions. John Blizzard, the founder and CEO of CD Valet, said between 150,000 and 200,000 investors go to the firm's website each month.
In return for a $500 monthly fee, advisors will gain a chance to add those visitors to their prospect pipelines. CD Valet's new
An affiliate of Seattle Bank, CD Valet runs the world's largest CD marketplace with roughly 40,000 options for savers to invest in. Blizzard said visitors to the site lay down between $50,000 and $100,000 in each transaction and have anywhere from $1 million to $5 million to invest in total.
"What we suspected based on a number of things, and then we validated through a survey with our subscribers, was they have a lot of interest in going beyond CDs and doing some other things," Blizzard said. "But they really need the handholding that an advisor can bring."
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How referral services can help firms with organic growth
CD Valet's new referral business comes as independent advisors are being pressured to increase their organic growth — the ability to bring in assets from new or current clients rather than mere market appreciation of invested assets. Firms with strong organic growth are better positioned to weather economic downturns, when rising markets can't be expected to boost asset tallies. They're also
Despite the widely recognized value of exhibiting an ability to drum up new business, curiously few firms take an active approach to client referrals. Drawing on its recurring industry survey, the research firm Cerulli Associates reported in July that only 51%
"In reality, most firms are passive in their referral efforts, making offhand suggestions at the close of a meeting or including it as a component in an email signature," Cerulli wrote in its
Cerulli's report hints that a certain amount of complacency may be behind firms' lack of initiative in seeking referrals. It noted that RIAs saw their assets under management increase from 10% to 11% from 2019 to 2024. But with gains from rising markets excluded, those growth rates fall to between 3% and 4%, according to Cerulli.
Joe Anthony, the CEO and owner of PR firm Gregory, said advisors can little afford to ignore any sources of organic growth these days. The ultimate question for any firm considering using referral services is whether their substantial costs eat up too much of the revenue brought in from any new business they help secure.
Anthony said advisors can gain an idea of that cost-to-benefit balance by experimenting for a time with paying for referrals. The trouble is that many of the firms that are best-equipped to absorb the costs of a referral service are already large.
"It's a lot easier when you have the scale and ability to overcome margin compression to get involved in two or three of these different lanes and see which works best," Anthony said.
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How the referral business is changing
CD Valet's plan to use its marketplace for certificates of deposit to connect clients and advisors comes amid a good deal of disruption in the referral business. Charles Schwab, for instance,
Perhaps scenting an opportunity, other firms have been stepping up with their own referral services. TradePMR, a custodian recently acquired by Robinhood Markets, the robo-advisor and custodian Betterment and custodian Pershing
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CD Valet's appeal to 'savvy savers' and how that helps advisors
Blizzard of CD Valet acknowledged that a service helping investors find high-yielding certificates of deposit may seem a strange place for advisors to go prospecting for clients.
To him, though, it's a natural business alignment — especially as the current trend of interest rates drives more and more savers to lock in the high returns often offered by CDs. In return for agreeing to lock their money up for a set period of time, investors usually obtain higher returns from certificates of deposit than savings and other types of bank accounts.
Blizzard said the sort of person who's attuned enough to economic events to worry about how inflation may be nibbling away at their savings is also likely to be the sort seeking more extensive financial advice.
"We call them savvy savers, because they're just great at looking for and finding good deals and putting their money to work," Blizzard said. "The banks consider these deposits when they open a CD, but the customer really thinks this is an investment."
Blizzard said CD Valet has already talked to a "couple dozen" advisors who've expressed interest in the referral service and who are likely to be included in a test rollout. He said he and his partners have already talked to many advisors at industry conferences like Wealth Management EDGE and Future Proof. Large firms, he said, seem particularly enthusiastic "because we have real customers that are coming to our site already."
He said CD Valet vets potential advisor partners by pulling up at their BrokerCheck pages and looking for unsavory client complaints or other disclosures. More than that, though, Blizzard and his partners rely on online reviews.
"That's how you hold accountable financial institutions or advisors and then really prop up those ones that do an outstanding job," he said. "We see it on the CD side with banks that have great reviews and great service, great digital account openings."
Blizzard said he thinks there are many savers and investors who are in need of financial advice after, say, selling a business but are reluctant to ask friends or neighbors who their advisor is. One big sign that they are looking to do more with their money is their willingness to visit a site like CD Valet.
"It shows there's a lot of interest in earning more, having a more comprehensive plan, with taxes, retirement, all those things that are just complicated for a DIY investor," Blizzard said. "At some point, a lot of people like that say, 'You know what? It'd be great to have somebody help with this.'"
Introductory bullet points created by AI with editorial review.
