How financial advisors plan to grow their practices

Two recent surveys are providing critical insights on ways that financial advisors are using to grow and scale their businesses.

The first is the Envestnet 2024 Advisor Perspectives Survey, which examines the current state of financial-advisory practices and anticipated industry trends, and explores how advisors are planning to grow, scale, and protect their businesses for the future.

Key findings from the Envestnet report include:

--Untapped opportunity? Holistic advice. Advisors view the expansion of service models (e.g., tax, estate, 401(k) planning) as the most underappreciated opportunity in the industry, the report said. And clients agree: McKinsey found that nearly half of all wealth clients prefer to work with an investment professional who can holistically address financial needs across investments, taxes, banking and life insurance.

--Fee-based advice on the rise. Advisors who are affiliated with brokerage firms anticipate increasing their fee-based asset mix by 11 percentage points over the next five years. This shift underscores a growing preference for more transparent compensation models, the report pointed out.

--Preference for all-in-one technology stacks. Nearly three times as many advisors favor an all-in-one technology solution to a do-it-yourself approach using point solutions. This preference highlights the importance of integrated systems in enhancing operational efficiency and delivering a seamless client experience, according to the survey.

--The organic growth imperative. Time and prospecting are cited as the primary obstacles to growing a practice organically. Even though 71% of advisors consider organic growth “very important,” the median advisory firm saw only 2%-3% growth in assets, excluding market appreciation. “This finding,” the report said, “suggests a need for advisors to rethink strategies around outsourced business functions, digital lead prospecting and referrals, brand marketing and automation.

--Next-gen investors: From talking point to focal point. Serving younger investors is moving from a talking point to a focal point, with 36% of advisors planning to add tools and advice for this segment within the next two years. The adoption of modern client portals and mobile apps will be necessary to engage these young and digitally native clients, the survey pointed out.

Envestnet conducted the survey earlier this year, gathering responses from 290 financial advisors. Compared to the overall financial advisor population, respondents had a similar median age and above-average team assets under management and were weighted more heavily (62%) toward fee-only registered investment advisors.

More forces that drive growth for financial advisors

The second survey, by Broadridge Financial, reported that many advisors are building their practices through a personalized content approach and leveraging next-generation technologies such as artificial intelligence to reach prospective and current clients.

As investors demand a more high-touch experience from their advisors, financial advisors who communicate more frequently with their clients are found to be far more confident in meeting their practice goals, the study said. Sixty-eight percent of U.S. advisors who communicate at least quarterly with their clients are confident in meeting their goals, compared to 51% who communicate with clients annually or less frequently.

Similarly, U.S. advisors who personalize their content marketing are more confident about reaching their practice goals (71% compared to 62%) and have almost double the rate of being “very confident” in reaching practice goals next year (30% vs. 18%).

Those who personalize their content are also more likely to:

• Convert social media leads to clients (45% vs. 34%).
• Use generative AI (50% vs. 38%).
• Spend more time on marketing efforts (an average of 2.5 hours vs. 1.9 hours a week)
• Have a defined marketing strategy (32% vs. 10%).

The need to share personalized educational content with clients

Another important element in an advisor’s growth strategy is the use of personalized educational content that forges deeper relationships and helps clients achieve their unique goals, the Broadridge survey shared. Yet, many advisors find challenges in developing and sharing personalized education. The top reasons that U.S. advisors don’t share educational content with clients are that they’re not sure about the best way to do it (49%), they don’t find enough time (46%), they perceive a lack of interest from clients (44%), and they run into compliance issues (34%).

AI to the rescue for financial advisors

To overcome these challenges, many financial advisors are leveraging innovative technology solutions. For example, more half (56%) of Canadian advisors currently use or plan to use generative AI in digital marketing strategies, compared to 43% of U.S. advisors.

The top-use cases for AI among North American advisors include generating personalized content, developing personalized marketing campaigns, automating administrative tasks and communications, and segmenting clients and prospects. This highlights how generative AI is a key tool in enabling advisors to engage with clients in more meaningful ways while lowering their operating costs, the report said.

The importance of using a defined marketing strategy

The Broadridge study also noted that advisors who leverage a defined marketing strategy are significantly more confident in meeting their practice goals over the next 12 months (83% and 89% of U.S. and Canadian advisors, respectively, compared to 62% and 61% of U.S. and Canadian advisors without a defined marketing strategy), In addition, 70% of U.S. advisors with a defined marketing strategy saw an increase in inbound requests in the past 12 months, compared to only 44% of advisors without a defined marketing strategy, the survey said.

“We conduct this survey annually to analyze how advisor behavior is evolving with the changing financial advice landscape. There is a direct correlation between advisors who spend more time on their marketing efforts, their levels of confidence, and the number of prospects they attract,” said Kevin Darlington, general manager and head of Broadridge Advisor Solutions. “It simply shows that devoting the right amount of time to create a defined strategy drives measurable results, helps advisors map out their time commitment and allocate the appropriate resources before they set out to engage in marketing. Advisors should leverage the right tools and technology that can save them time and resources and allow them to be intentional with their efforts to get the highest return on investment.”

Detailed insights from Broadridge’s fifth annual financial advisor marketing survey are at https://www.broadridge.com/advisor/insights/financial-advisor-marketing-report-2024.

The Broadridge survey was conducted by 8 Acre Perspective, an independent marketing research firm. A total of 403 U.S. financial advisors across primarily IBD and RIA channels completed the survey, which was fielded from October 20-November 15, 2023.

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