The best solution for most, especially small-to-medium-size firms, is to seek out a partner specialist in these fields, Mace said.
How To Grow Sustainably
Advisors also struggle with growing pains—when to make a hire, when to implement technology and when to outsource certain functions.
“Sustainable growth is a big area—the no. 1 area—where we’re getting questions,” said Mace. “Not just how do we grow the business, but how do we evolve the business and think about secondhires—we’re working on that toolkit now.”
In spite of technology’s increasing role in serving clients, Mace said that human capital is the biggest factor in being able to sustainably grow a business. That makes questions about how to hire, how to compensate and how to move from a solo or siloed practice into an ensemble or enterprise practice important to answer early in a firm’s growth journey.
Today, advisors are also frequently asking Mace about how they can create a sustainable, scalable and consistent client experience that can also evolve as client needs and preferences evolve. Advisors and clients do want the efficiency and convenience offered by technology.
“For many advisors, technology is not why they got into the business,” said Mace. “They don’t want to devote a lot of time and energy to figuring out if their tech stack backs up, or how they can build workflows and automation to gain efficiency.”
Cracking The Inorganic Growth Code
Embarking on the process of growing through mergers and acquisitions requires even more resources at hand, said Bruton.
Acquisitions take capital, he said.. “There are plenty of equity players out there, private equity and strategic consolidators, looking to bring equity to the table. If you’re looking to grow inorganically, you’ll need to make one of those choices unless you’re fortunate enough to have cash on the balance sheet and are able to self-fund some acquisitons," he said." With smaller acquisitions, people can go in that direction.”
But inorganic growth rarely happens without organic growth also happening. Young advisors are hesitant to join firms without a record of growth. Acquirers are more likely to buy practices with a history of growth, said Bruton, and sellers are more likely to want to sell or merge with an acquirer with a proven organic growth strategy.
The magic really comes when you have successful organic growth and inorganic growth."One feeds the other,” said Bruton. “When you’re out trying to buy a firm, as a buyer, you can explain to them the organic growth you’ve experienced. If it’s strong, that’s going to sell that firm on joining you. You rarely see a firm successful in acquiring firms that hasn’t shown success themselves in organic growth—they tend to go together.”
Likewise, inorganic growth gives firms an opportunity to expand wallet share from existing clients as they bolt on new services and resources, said Bruton.
Implementing technology to improve the client experience is another key to expanding client wallet share, said Bruton. Clients are already familiar with the account numbers, statements and brands they interact with at their current institutions, which means there’s a lot of inertia to fight against when trying to increase wallet share from exisitng clients.
“People are willing to stick with what they have unless there’s a distinguishable delta between their current experience and a new experience someone is pitching them,” said Bruton. “If it’s just slightly better, it’s not worth the hassle of moving the account and going through the paperwork.”