Last year, the average registered investment advisory firm saw no organic growth of only 5.7%according to a recent study by Ensemble Practice and BlackRock. Referrals from existing clients were the main source of leads coming to consulting firms, the study also found. But CEOs at some of the nation's largest VNRs say organic growth must go beyond referrals and that firms must take a multifaceted approach to growth.
“Referrals are just table stakes,” said Brent Brodeski, CEO of Savant Wealth Management, a $30 billion RIA, speaking at the WealthManagement.com 2024 Executive Forum in New York last week. “Once upon a time, you just hang a shingle and you're different from wire, insurance companies and banks. And the phone rings.
“It's kind of a dying breed,” he added.
These days, Brodeski said, it's harder to grow on referrals and returns alone. Firms need to think differently.
“Those who rely only on marketing and referrals will die on the vine. It's a multi-factor equation to grow organically and inorganically,” he said. “I believe we need to institutionalize business development.”
Savant is investing $10 million this year in digital marketing to build lead generation, hire inside sales teams and dedicate people to service advisors.
The $500 million RIA might be fine growing through referrals, but that won't be enough for larger firms, added Mike LaMena, CEO of Wealthspire Advisors.
“When you start looking at firms that are our size or larger, you have to think differently about organic growth,” he said. “You have to have that institutionalization of growth drivers.”
LaMena said Wealthspire aims to balance its enterprise-level initiatives, such as referral programs, with telling the story of its individual advisors.
“To be successful in this day and age, you have to be able to do both,” he said. “You still have to empower individual advisors to be their authentic selves.”
Many RIAs, he argued, aren't doing what they should be doing at the organic growth level because they're too focused on mergers and acquisitions.
“The single biggest gauge of the health of any business is organic,” LaMena said.
Adam Malamed, CEO of Sanctuary Wealth, said referrals are still the main source of new clients, accounting for 70% of client acquisition in the industry. But there needs to be more focus on how people research referrals and how firms support advisors with that aspect of it.
“What is your digital dexterity? How are you marketing yourself there? It's not just a website anymore,” he said.
Arthur Ambarik, CEO of Perigon Wealth Management, said that, at least within his firm, other channels are growing faster than referrals. Perigon, which is one of the fastest-growing RIAs, is investing at the enterprise level in other ways to grow.
“Seventy percent of new customers can come from referrals,” he said. “But I would say 100% of the fastest growing teams in the country are not growing faster from referrals.”