Three opportunities to grow your advisory business now

by Martin Roche, Russell Investments

Executive summary:

• Growing your advisory business takes commitment and work
• For those willing to take on the challenge, there are several areas of opportunity
• Advisors can capitalize on the expected transfer of wealth between generations, the expected wave of retirements among older advisors, and referrals from other professionals

Have you ever had people tell you they’re too busy? It’s an excuse we give others as well as ourselves and it really just means I don’t want to or No, thank you. It’s the ultimate procrastination tool. But when we want to get something done, somehow we find the time. While the busy excuse can be the little white lie we tell the door-to-door salesman so we can get on with our lives, the problem is that when you tell yourself you’re too busy it can have lasting effects.

In my role I talk to a lot of advisors, and they often ask me what other advisors are doing and whether it is working. They tell me they’d like to grow their business and ask me what they can do. The question we all have to ask ourselves when we want change is if we are ready to do the work or not. Too many times we look for the easy answer or a magic formula that helps us execute. When I pose the commitment to doing the work question to an advisor, I often see an instinctive response flash across their face—always in the positive. However, as the conversation develops, the truth comes out. While growth is desired, the work to achieve it can be daunting. Often, when faced with the reality of how much work is involved, the desire to grow begins to fade. It always seems as though, I want to grow is the right thing to say, but sometimes it is not what’s really wanted, at least not enough to dedicate real time, energy, and effort into a plan.

For those who are ready to embark and take on the necessary work, there are a few areas of great opportunity to build a growing and thriving practice.

Transfer of wealth

We are already seeing the beginning of the tremendous wealth transfer transitioning from Baby Boomers to their Generation X or Millennial children and down the line. The amount of wealth that is projected to move between generations is staggering, and the opportunity for advisors is huge in two ways: Retirement and acquisition.

It’s currently estimated that more than 100,000 advisors will retire in the next 10 years.¹ These advisors control almost 40% of industry assets or more than $10 trillion dollars. That’s a lot of money in motion that can be captured as their clients (and in turn, their heirs) may be looking for a new advisor to work with. This could be a fantastic way to gather meaningful assets from individuals and families who’ve been prudent in their strategy and understand the importance of professional guidance. So, keep your ears and eyes open for accounts transferring out of another advisor’s business. Even within your current book, there may be clients who are considering transferring wealth to the next generation and need guidance.

Now, as they ponder retirement, many advisors will want to sell their business and perhaps act as a consultant to their temporary partner during a transition period. While acquisition can be a bit daunting, if you are in the growth phase and unafraid of the extra work, this can be a meaningful way to expand your client base. If you acquire a practice with hundreds of households and an additional eight figures of AUM into your business, capacity may become a challenge. You will need to have efficient systems and processes in order to develop the new relationships while at the same time protecting your current client relationships. Time will be at a premium. If you think you were busy before, well, this might be a brave new world. How will you create a process to serve these clients effectively in a repeatable fashion? Contact your Russell Investments representative and ask for our segmentation and service model framework.

Referral sources

Another source of business growth is to expand and engage your professional network. While this sounds like a no-brainer, it’s more challenging than you may think. Can estate attorneys and chartered professional accountants (CPAs) benefit from knowing how you operate? Probably. But how do they know you exist and how deep is your relationship with them? At Russell Investments we provide a lot of support for engaging CPAs with our tax-managed investment solutions, but how do you get an introduction?

Too many times, advisors focus more on what the advisor can do for the CPAs or professional clients, if the professional makes an introduction. If advisors would focus first on how they can help the professional grow and enhance their business, the relationship will progress quicker and become a true partnership.

I recently met with a young advisor who was having trouble building her network. As we talked, I realized she was trying to get in front of too many people too fast without building rapport. As she was young, I asked her how long she planned to work as an advisor. She responded that she’d likely be doing this for another 25 or 30 years. I suggested she build one relationship a year every year. And that over that time she would see how her network would compound.

You can be the expert in planning and investments while partnering with other professionals to provide the client with a broad range of services. Attend their meetings (such as CPA chapter events), use their language, find their personal and professional pain-points, and uncover what support you can bring to the table. Professional continuing education is an effective way to add value. Ask your Russell investments team for information. Ultimately, have a focused plan, and be willing to play the long game.

Generational wealth

One of the best questions I think an advisor can ask a client is: how do you have your assets distributed? If it’s not all with you, ask your client how the other assets are helping them reach their goals and fit into their comprehensive plan. Simply asking these questions can set the stage for working together to create a personalized plan for the client. (You may be able to uncover if the assets are with another advisor, potentially self-directed, or just sitting in a bank account.) This could open meaningful conversations, execution of better long-term planning and ensure the client’s money is working as hard as it should on their behalf.

Another potential outcome of these simple questions is a conversation with the next generation. The heirs’ ideas and objectives may be different than their parents’. Studies show that the next generation often changes advisors—in fact, 70% of children move away from their parents’ advisor after their death.² While the reasons are abundant (I can only think of all the things I do differently from my parents!), the benefits of incorporating the next generation into the planning process early and on a consistent basis will likely result in retained assets, and perhaps the addition of assets as they move into the next stage of their life.

The bottom line

The success you may be looking for might be in the work you are avoiding.

To keep your business growing, you have to continually look for new assets. The good news is that there are opportunities within reach. Older advisors are retiring—explore buying their book of business or keep your eyes open for clients looking for a new advisor. You can also obtain clients through your network if you show true value: refine your value proposition to target key professionals. Finally, the children of your existing clients are potential sources of assets and need to be nurtured.

Develop a plan, stay focused, do the work. We can help!

¹ Source: 40% of Advisory Assets Will Transition in 10 years, Cerulli (June 2022)

² https://www.thinkadvisor.com/2023/04/19/5-ways-advisors-can-add-next-gen-clients-grow-assets/