Bust the plateau: How to jump-start a growth-challenged RIA

What happens when financial advisors do all the right things, but their practices still won't grow?

If this sounds like you, first stop, take a breath and appreciate how far you have come. A lot of advisors, especially folks who had the courage to jump from the wirehouse world into the independent space, had to learn on their own how to be entrepreneurs in addition to their day job as stewards of their clients' financial futures. 

A plateau in growth isn't a sign of failure; it means you made the right moves to get to where you are. But the sad fact is, what got you here won't necessarily get you there. When you hit a level of success that can no longer benefit from maintaining the status quo, your goal is to recognize that growth milestone and then chart a new course that fundamentally expands your capacity. It's a process that will require people, process, capital and, most importantly, being deliberate in how you invest your most valuable resource — your time. 

In my experience, the first real plateau in an advisor's practice tends to happen right as it becomes a business. As RIAs approach the $500 million AUM mark, growth from personal relationships and individual referrals is harder to maintain at scale. At this level, advisors begin to throw money around, investing in new technology solutions, greater operational headcount and droves of coaches and consultants to solve their growth issues. That adds up to lots more overhead, a drag on your revenue with, in many cases, little to no impact on growth. 

Breaking through this plateau is a matter of learning to optimize your business. But for growth to happen, your team needs to know where they're headed. CEOs need to pass the torch to other people in your business. Why? Because your growth over the next 10-plus years will depend on your ability to serve clients who are passing their own torches to their heirs. You will need to serve seasoned advisors looking for graceful exits even as you look for next-generation talent. 

To go beyond individual referrals to reach the clients who are going to help you grow your business, you need to think about scalability and invest both time and capital into new initiatives. You need to define what success looks like and track key metrics that indicate whether you're on the right path. Understanding your return on investment will allow you to determine which initiatives move the needle and which to let fall by the wayside.

Plateau-busters

When crafting and deploying your marketing strategy, patience is critical, as many initiatives take time to produce results. To experience the full lift, you may be required to run multiple campaigns through different mediums simultaneously. This may include digital ad spend, social media marketing, email campaigns, as well as in-person or virtual client events and seminars. The goal is to establish credibility while acknowledging that different generations prefer to engage with your firm in different ways. Catering to a diverse audience at scale can be challenging and expensive but is becoming increasingly necessary as client preferences evolve.  

READ MORE: Advisory firms hungry for predictable organic growth

Capitalizing on acquisition and recruiting opportunities requires the same intentionality as growing a client base, but excelling at client prospecting and delivering a high-caliber client experience does not mean you have mastered recruiting or acquisitions. It's true that today's M&A landscape is highly competitive and capitalized and that well-established players continue to dominate. But that doesn't mean the door has closed on the demand for inorganic growth — advisors still need succession plans and advisory firms still need resources and scale to adapt to clients' needs. 

But to compete in this realm, we all must up our game. Start with a value proposition tailored to the advisors you're targeting. Then, you'll need a team — whether in-house, outsourced or provided by a strategic partner — on your side that includes experienced back-office operators and individuals dedicated to transition logistics. Couple that with a modern technology stack that evolves and creates a consistent advisor experience across multiple custodians, and you are on the road to positioning your firm for growth.

It's easy to become paralyzed by the complexity of taking your business to the next stage of growth. This is why building a team of talented people and allowing them to have dominion over their areas of expertise is crucial. If they're incentivized to achieve their career goals, your firm will reap the benefits of a high-functioning team. Remember that you're no longer a practitioner — you're now performing the duties of a CEO. I know firsthand that giving up control can be difficult, but the operational leverage gained from transferring your knowledge and delegating to a team of professionals is critical for blasting through the plateau.

What comes next?

Be prepared: Once your firm has resumed its upward trajectory, it will be time to consider the next growth stage. 

This is the point at which it pays to diversify revenue streams. I suspect our industry's love affair with AUM will continue, but it never hurts to explore compensation models around services like in-depth financial planning or specialized investment products or expanding your scope of services by strengthening your firm's tax, estate planning and insurance capabilities. This will generate the one-stop-shop solution that attracts the next generation of clients by meeting them where they are. Not only do you uncover new avenues of growth, but you build more resiliency into your business with services that stand independent of market activity.

In this environment, you can see why strategic growth partnerships and private equity investments have become so popular. Aligning with growth-focused firms or investors can provide the necessary capital infusion that is particularly crucial in this high-interest-rate environment. If you're successful at executing inorganic growth strategies at a scale, it's only a matter of time before you run out of runway from a debt funding perspective and need the flexibility and capital solutions that equity investors can deliver.  

But this solution isn't a magic bullet, either. Ask around, and I'm sure you will hear horror stories about growth partners who did little to add value strategically. Often, this is a result of decisions that stifled long-term success in the name of a few extra dollars in the short term.

No matter how you plan the next leg of your growth journey, expect to do a lot of research and lean on your peers who have grappled with similar issues. You need to learn what you don't know. You'll know you are making the shift from advisor to CEO when you spend more time managing your team than your clients.

I admit it's bittersweet, but it's also an exciting sign of your professional growth and a chance to give others around you the opportunity to grow into their new roles.