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Blogs - The Diamond Appraisal
5 Ways To Assess and Manage Necessary Growth
Diamond Consultants
Thursday, November 8, 2012

Benjamin Franklin said, “Without continual growth and progress, such words as improvement, achievement, and success have no meaning.”  Franklin was right. 

While it may seem obvious that business growth is central to any advisor’s ultimate success, in today’s highly complex and competitive marketplace, the importance of growth cannot be overstated. 

In fact, if there’s one thing that all advisors have in common - no matter what stage in their careers – it’s the desire to grow their businesses.  Whether they are early in their tenure or late in the game and focused on succession planning, savvy folks know that attrition, rising costs, and pressure from the competition will kill a business not in growth mode.  In addition, growth is necessary to satisfy the needs of clients and to attract top talent.

Growth primarily occurs two ways: organically and inorganically.   Organic growth is considered as the traditional process of business expansion by adding new clients, and increasing assets under management. Inorganic growth is achieved through an increase in the size and scale of a business in other ways including:

  • Changing firms or models and leveraging superior thought leadership, platform and technology
  • Mergers
  • Acquisitions, or
  • The recruitment of individual advisors

Most advisors agree that organic growth alone is generally not enough to allow them to remain competitive.  Further, it’s a widely held belief that if an individual advisor or team is not continually adding assets, they are losing ground.  The most successful advisory businesses grow both organically and inorganically.  There are many coaches and consultants who specialize in helping advisors maximize organic growth.  Often these specialists will conduct internal seminars on sales, marketing and asset gathering techniques.  Inorganic growth requires significant consideration as well in that there are several very different avenues to explore.

Take the example of Mike and Todd, a wirehouse team on the west coast with $250mm in AUM.  For the past few years, the team had been struggling to grow their business by adding clients and assets.  Mike had an entrepreneurial spirit and wanted to do some outside marketing activities within his community to raise the profile of the team and mine for new clients.  However, getting these activities approved required time to clear the firm’s cumbersome compliance hurdles, and the team was becoming increasingly frustrated because they were not able to move more quickly on initiatives that they found crucial to their growth and business goals.   They ultimately decided to reach out to us because they knew we understood their circumstances and short and long term goals.  After several productive discussions, we laid out a variety of options for them to consider.  Mike and Todd agreed that it was time to do some active due diligence on a few independent options where they could have the freedom and flexibility to run their business as they saw fit.  They also wanted to explore one other wirehouse since the transition package was so significant, but they both knew deep down that it would not ultimately satisfy their desire to run their own business. 

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Taking meetings was an eye-opening experience for Mike and Todd who had not explored their options in a decade.  While they were very surprised at the differences between their firm and the other wirehouse, their original gut feelings were confirmed.  They were looking for a new and different model and found it in the independent space.  They saw in one B-D the opportunity to run their own business, market it as they saw fit, and even recruit 2-3 advisors over the next few years to add assets.  They also became excited about the possibility, over the long run, of acquiring a similar-sized, or somewhat smaller firm, possibly with an expertise in estate planning, in order to offer new services to their clients.  Now, Mike and Todd know they have taken some very positive steps to grow their business and plan on moving in the first quarter of 2012. 

This approach is not one size fits all, yet the idea that growth is essential in order to succeed is universally acknowledged. The following are five key questions to reflect on when thinking about growing your business:

1. Where Am I Today?

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