3 keys to maximizing your firm's value

Competition is intensifying for Registered Investment Advisor (RIA) firms looking to acquire assets and market share across the independent wealth management landscape. As the industry continues to face consolidation, the gap in performance between super ensemble firms and small RIAs is widening--driving firms of all sizes to ask themselves, what is our value?


According to the 2018 Pricing & Profitability Study1 conducted in partnership between Investment News and BNY Mellon's Pershing Advisor Solutions, the data is clear: large firms are not only getting larger, they are also continuing to win the market's share of high-asset clients. As a result, we have seen an increasing direct competition between smaller, independent firms. In fact, the study shows that about a third (34.6%) of RIA firms' new clients in 2018 were acquired from competitors. This trend has escalated significantly: in 2015, only 10% of new clients were won over from other advisors.


These statistics confirm what we already know: that complacency is detrimental for firms looking to grow, or even maintain, their client bases. Why? Customers today are equipped with the tools and information at their fingertips to assess what the rest of the industry has to offer. As such, it is extremely important that advisors seek guidance to help them refine their value propositions.  


As we begin 2019, there are several actionable steps we believe firm owners can take to establish a strong foothold within the industry. We see these as paramount to identifying, shifting and potentially maximizing their value so they can subsequently grow and scale their offerings. 

1.) Always be changing

One of the biggest deterrents of growth at any firm is the refusal of leadership to evolve their ways of thinking. Think about it this way: a portfolio manager would never base their investment philosophy on research that is 30 years old when there are updated studies available. So why, as a firm owner, would you base your client offerings on a decades-old consumer marketplace? As technology evolves, so do client expectations. As such, your firm should follow suit--or risk facing obsolescence.

So, what kind of new ideas or innovative services should see the light of day? Consider adopting and implementing changes that will exceed--and not merely meet--your clients' expectations. These can include creating more personalized, unique experiences with the use of technology, or increasing the amount of yearly face time you have with their families' decision makers. 

2.) Prioritize tax planning

With changes to the tax code dominating the headlines over the past year, clients are undoubtedly asking how their savings may be impacted. This provides an opportune time to take a look at how your business is approaching these tax changes. We believe that adopting an investment philosophy that leverages tax-smart tactics is a powerful way for advisors to differentiate themselves and deliver additional value to client relationships and portfolios. 

As we continue to face unknowns with regard to the impending tax code changes, prioritizing tax planning by hiring tax-focused investment professionals or taking advantage of a well-established investment management partner will not only help to differentiate your firm's offerings, it may also alleviate many concerns.Benjamin Franklin once said, In this world, nothing can be said to be certain, except death and taxes. Demystifying the latter will likely help your clients have more confidence with their circumstances.

3.) Outsource wisely

The aforementioned Pricing & Profitability study indicates that the revenue of firms across the board increased by 11.7% on median in 2017--which has fostered a "sense of confidence to hire and create capacity for even more growth in the future."2 Consider using these findings as an opportunity to take tally of where your firm could benefit from outsourcing areas such as portfolio management, tax planning or performance reporting.


Doing this can be a win-win on both sides of the coin: By working alongside partners who can elevate these important areas of your business, you will likely earn time back to focus more on addressing your clients' top priorities. This is why we believe that, going forward, strategic business partnerships will continue playing a significant role in the evolution of firms of all shapes and sizes. 


The bottom line

Complacency has no place in today's independent wealth management landscape. In order to stay afloat in an increasingly crowded environment, it's mission-critical for RIAs to take additional steps to maximize their value. There has never been such an exciting time to be an RIA--nor has there been such a critical need for firms to take a look inward and assess how they can better position themselves within the marketplace. Rise to the challenge by exploring new ideas, tinkering with or overhauling current services and practices, and streamlining efficiencies.



Source: Investment News 2018 Study of Pricing & Profitability: Benchmarking the Financial Performance of Advisory Firms.

Source: Investment News 2018 Study of Pricing & Profitability: Benchmarking the Financial Performance of Advisory Firms, page 4.