The past one-and-a-half years have left a lot of financial advisors and their clients bruised and battered. While scars still linger, the majority of advisors remain optimistic about their growth prospects.

According to a newly released study by Charles Schwab, 65% of firms say they're satisfied or very satisfied with growth over the past three years. In addition, 84% of firms plan to grow either aggressively (35%) or moderately (49%) during the next five years.

"For the past year or so, a lot of financial advisors have been huddled and focused on existing clients," says Trish Cox, senior vice president and chief operating officer at Advisor Services at Charles Schwab. "But there are rays of hope and they're re-engaging again."

Schwab's 2009 RIA Benchmarking Study of 610 advisory firms that custody their assets at Schwab looks at performance numbers in 2008 and some of the best practices that can help advisors grow in 2009 and beyond.
Sometimes the notion of best practices can be as simple as making time for long-range planning. Sounds easy, but finding time for strategic thinking has been difficult because advisors recently have been spending so much time focused on high-touch service for existing clients that there's not enough time to think about tomorrow.

The intense workloads experienced by advisors in recent months, coupled with the lousy markets that hammered many portfolios, caused the percentage of dissatisfied advisory firms to jump to 35% in March 2009, up from 24% in June 2007. Perhaps some of that frustration is a result of being reactive, rather than having been proactive regarding the recent crisis.

"Those with more long-range plans around how to manage through those hard times seem to be a bit more satisfied than those who were taken a bit unaware and had to retrench and focus on client retention," Cox says. "And those firms who had long-range plans in place had disciplined management in good times that prepared them for a retrenchment."

One advisor told Cox that it's more important to be disciplined in boom years and not kid yourself that you're creating extra revenue during times when the environment is actually creating that growth.

"In this advisor's case, it was about being smart by keeping some retained earnings for a rainy day," she says. "Those who built that into their plans-knowing that markets are cyclical-aren't caught flat-footed and needing to lay off staff."

Now that the hubbub has subsided from the darkest days of the market downturn, advisors can let go of the hands of their existing clients and start reaching out to the hands of prospective clients. But those folks aren't as quick to make the handshake that seals the deal on a new client-advisor relationship.

"Conversations with prospects and referrals are taking longer," Cox says. "What might've taken one conversation is now taking as much as four or five meetings to close the deal."

As one advisor told Cox, it's almost like picking up a puppy in a dog pound and it's not sure if you're going to pet it or beat it. Prospective clients are timid and want to make sure it's the right situation for them. They might've been burned, and as a result are talking to more advisors before signing on the dotted line.

"I think it's taking longer to build that rapport and trust, and prospects are gun-shy," Cox says.

So how to improve the odds of closing the deal more quickly and effectively? "The thing we've seen with best practices is really making sure you've got the ideal client profile and not going out on a limb to accommodate someone just to get new business," Cox says. "It's about being able to articulate the firm's unique value proposition and the services you're able to deliver to that client."

According to the survey, 71% of firms see marketing and business development as a barrier to growth, and 25% see it as a major barrier. Those numbers are up from 54% and 17%, respectively, from Schwab's 2007 RIA survey.

"I don't think many advisors see themselves as doing much marketing and business development," Cox says. "Their numbers are based on referrals."

In 2008, survey respondents said 85% of new clients came from referrals from clients, professional colleagues and custodian programs combined. The largest chunk (54%) came from client referrals.  

But referrals can be gained more efficiently and systematically than just through happenstance. Cox cites an advisor in Florida who's put together an aggressive marketing and business development plan around attracting women clients. Part of that is wrapped around a referral process that uses existing female clients.

Mark Soehn, principal and managing director at the advisory firm FSAG Inc. in Chicago, says his firm seeks growth by consciously trying to tap into the so-called circles of influence of its high-net-worth client base. "There's a certain number of people within each person's circle who are like them," he says.

One of the best growth enablers is technology. According to Schwab, some of the best-managed firms use rebalancing tools, portfolio management and customer relationship management systems to maximize efficiencies.

And as firms grow, they develop specialized staff roles such as a dedicated business development officer (present at 7% of the smallest wealth managers, with $25 million to $100 million AUM; and increasing to 45% at wealth managers with more than $1 billion). Other key staff roles include relationship managers (present at 21% of the small firms and at 93% of the largest) and dedicated financial planners (present at 49% of small firms and 97% of the largest).

Among other survey findings, respondents reported that revenue peaked in 2007, and they expect it to decline 19% from that high, including a 10% drop in 2009.

Of the 610 firms participating in Schwab's RIA survey, 370 have more than $100 million in AUM, 110 firms have more than $500 million and 53 have more than $1 billion. The average participant has 325 clients, $380 million in AUM and $2.5 million in revenue.