Three Observations
Having worked in this industry for 30 years and coached advisors for more than 20 years, I will say that I am not surprised by this data. Here’s what my experience tells me.
1. The typical advisor works really hard for their first 10 years in the business. If they survive, they start making several hundred thousand dollars a year in personal income and they’re happy. At that point, they focus on maintaining the business and the business grows through a few referrals (who replace distributions and lost clients) and rising markets over time. And let me be clear, there’s nothing wrong with this scenario.
2. There’s a small number of advisors who are not satisfied with a one- to three-million-dollar revenue practice and want to build an eight or nine-figure revenue business. We all know who those names are. The funny thing is, many of those firms show substantial AUM and revenue growth, but the vast majority comes from M&A growth, not net organic growth.
3. If you want to increase the long-term value of your firm and not just focus on sustaining your current income, then double down on organic growth. Very few advisory firms deliver consistent, repeatable organic growth. And many of those that do rely on referrals from custodians—which results in concentration risk.
The most valuable firms are those that demonstrate consistent net organic revenue growth. Are you one of them?
Steve Sanduski, CFP, is a financial advisor business coach, the co-founder of ROL Advisor, a discovery process technology system, a New York Times bestselling author, and host of the Between Now and Success Podcast.