Many consultants believe that bear markets are good times for advisors to try to grow their practices, even as declining asset values put a dent in firm revenues.
But can advisors reall pull off such a tactic, and should they even try?
That all depends on how an advisor or firm is thinking about growing their business, said Shauna Mace, head of practice management at SEI, an Oaks, Pa.-based TAMP and advisor services provider.
“You can’t control the markets and your revenue is being impacted,” she said. “If you’re OK with not growing or losing revenue, then do nothing. Otherwise you’re going ot have to put some effort into organic growth. You can’t just rely on the market.”
SEI has recently launched an online "growth lab" to help advisors interested in growing their practices organically and inorganically.
While it’s almost always a great time to be pursuing organic growth, not every advisor should be thinking about inorganic growth through mergers and acquisitions, said Derek Bruton, senior managing director at Gladstone Group, a Plymouth Meeting, Pa.-based mergers and acquisitions advisor.
“Do you have capital to deploy against an inorganic growth strategy? Do you have the knowledge, connections and the inclination to go after it? It’s’ time consuming,” said Bruton. “Bear in mind the people who would pursue inorganic growth strategy in an RIA firm are usually the CEO or president of the firm, so they’re also running the business. They’re consumed eight to 10 hours a day in running a business and they probably don’t have the time to pursue an inorganic growth strategy.”
To help show advisors how they can seize opportunities for all sorts of growth, Gladstone is hosting a series of “Bear Market Bootcamps” this fall in conjunction with fintech Skience and mega-RIA Lido Advisors.
Recession is a good time for growth, according to Bruton, because more people are looking for help. In a bull market, people feel more confident in self-directed investing, but when the environment becomes more challenging, more investors seek guidance.
Why Firms Struggle
Firms struggle with growth because there’s too much on their plate, said Mace, echoing Bruton.
“What happens is that oftentimes advisors are overwhelmed and they halfheartedly do some of the stuff that needs to be done to manage their business. That’s why I’m a proponent of partnerships,” said Mace.
Advisors and firm executives don’t have the time and resources to become digital marketing professionals or business development experts, said Mace, and it makes sense that they don’t: Their roles are to serve clients and run the business. Organic and inorganic growth increasingly require professionals with skills and experience in marketing and mergers and acquisitions.