8 Steps to Harnessing Organic Growth- Prepare Your RIA for a Tsunami of Wealth Transfer

Earlier this week, I attended the Tiburon CEO Summit and had the opportunity to connect with a sophisticated group of wealth management CEOs—where the best come together to explore new ways of getting even better. A major focal point of discussion throughout the summit was the long-promised tsunami of wealth transfer which has finally begun. How big, you might ask? An estimated $170.7 trillion of money in motion between 2022 and 2045.

According to Tiburon Strategic Advisors and Chip Roame’s research, there are three primary drivers of this money in motion:

• $72.7 trillion in generational wealth transfers (with women inheriting 70% of this wealth)
• $48T of baby boomer asset liquidations (e.g., downsizing their homes)
• $50T in new savings and investments as GenX enters their prime earning years

Not surprisingly, summit attendees are doubling down on their efforts to capture the unprecedented asset opportunity that lies ahead— investing heavily in marketing and revving their organic growth engines. For most RIA firms, however, the same can’t be said.

It’s not the 80/20 rule – it’s worse

If you strip out market growth, most RIAs haven’t shown any ability to grow organically successfully. In fact, just 6% of RIA firms have accounted for more than 70% of the industry’s asset growth. And as you might expect, those high-growth firms are also the industry’s largest—all with AUM in excess of $1 billion. Over the last five years, RIAs with $5B or more in assets under management saw the greatest CAGR at 16% (more than 3x the growth rate of an average $1 billion firm).

The largest firms are getting exponentially larger. Just a little over a decade ago (2011) there were only 10 RIA firms across the country with more than $10 billion in assets. As of the end of 2023, that number now stands at 258 firms and is climbing.

Without serious ongoing organic business growth, how will you remain in a position to help your clients compared to the services and economies of scale that larger firms can offer? This isn’t just an engine warning light on your car’s dashboard…this is the entire dashboard lighting up and smoke coming from under the hood. Yet of the approximately 30,000 RIAs in the U.S., the lion’s share sit on the sidelines, happily running lifestyle practices.

Fueling your organic growth

In this current landscape of stagnant RIA industry growth, cultivating the organic growth of your firm isn’t just a best practice – it’s an imperative.

While trade publications and talking heads tend to focus on the sizzle of major mergers and acquisitions, strong, consistent marketing is the true cornerstone of sustainable success for RIAs. Steady, incremental organic growth fueled by client referrals, reputation, and relationships drive expansion. However, more firms should be focused on nurturing their existing client base and strategically positioning themselves to attract new clients and establish brand specialties that distinguish them from the competition.

Tiburon's research sheds a brighter light on the importance of this organic growth approach. Market saturation, evolving client expectations, and increased competition contributed to this growth stagnation. Yet, amidst these challenges lies the aforementioned silver lining: the impending wealth transfer.

The looming wealth transfer

I refer to this as the ‘tsunami of wealth,’ the trillions of dollars that will change hands as baby boomers pass their wealth to younger generations. This represents a seismic shift in the wealth management landscape. And each of you must devote the time and resources needed to prepare and position your RIA to capitalize on it.

Independent RIAs are perfectly positioned to be the go-to advisors for mass affluent and affluent families navigating wealth transition. One of the largest opportunities in the U.S. market is the 36.6 million mass affluent households controlling $20.8 trillion of investable assets. – followed closely by the additional 2 million affluent households, which control another $19.7 trillion.

But to better position your firm to take advantage of this opportunity, you must start now to focus on strengthening relationships, building and marketing your brand, and growing organically by focusing on the following:

1. Commit to Growth: First and foremost, decide about your growth goals and re-engineer your firm to accommodate that growth. Hire accordingly to ensure you have enough capacity to handle your growth targets and start preparing to serve significantly more women clients in the future.
2. Invest in Your Brand: As Apollo 13 commander Jim Lovell famously said, “There are people who make things happen, there are people who watch things happen, and there are people who wonder what happened. To be successful, you need to be a person who makes things happen.” Do you really want to get known? Then, make it happen by investing the time and resources into marketing and promoting your brand.
3. Elevate Your Service Excellence: Exceptional service is non-negotiable in a competitive market. Going above and beyond for your clients fosters loyalty and generates organic growth through referrals. Satisfied clients are more likely to recommend your services to friends, family, and colleagues, expanding your client base organically. When you build a client service standard that aligns with the unique client needs, your specialty and referability shine.
4. Embrace Technology: Digital access matters. It’s why so many clients flock to firms like Schwab, Fidelity, and Vanguard. Commit to investing in emerging technology to enhance the client experience and streamline operations. From intuitive client portals to AI-driven investment algorithms, technological innovations can set you apart and attract tech-savvy clients seeking more modern and convenient solutions.
5. Focus on Specialization: Identify your niche and become an expert in it. Whether it's building expertise in serving a particular professional niche or audience segment (e.g., Fortune 500 women executives that hold concentrated stock positions), retirement income planning, or sophisticated estate planning strategies, specializing allows you to differentiate yourself and appeal to clients seeking tailored expertise aligned to their specific financial needs.
6. Cultivate Referral Partnerships: Forge strategic alliances with professionals in complementary industries, such as estate attorneys, accountants, business valuation specialists, and business brokers. These partnerships can lead to mutually beneficial referrals, expanding your client network and driving organic growth.
7. Educate and Engage: Position yourself as a thought leader in your field by sharing valuable insights and expertise through content marketing, seminars, and webinars. You must be publishing your points of view and unique insights. Establish yourself as a credible subject matter expert. Get published! By educating your audience and establishing yourself as a trusted authority, you attract clients who value knowledge and expertise.
8. Prioritize Client Relationships: Invest time and effort in building genuine, long-lasting relationships with your clients and teach others in your firm to do the same. Understanding the unique goals, concerns, and aspirations of your clients allows you to provide personalized solutions and earn their trust, laying the foundation for organic growth through referrals and client retention. Remember, more than this will be needed to grow at a competitive organic growth rate. There must be more than this approach to capitalize on the tsunami headed your way. Keep pressing as to how you and your firm can institutionalize your business development approach.

While the road ahead may be challenging, with the right strategy and dedication to organic growth, you have a unique opportunity to navigate any turbulence, position yourself to thrive amidst the impending wealth transfer tsunami, and emerge stronger than ever – ready to seize the opportunities.

Coaching Questions From This Article:

1. What must you do to get your firm ready to grow exponentially?
2. How aligned and in agreement are the owners of your firm about the vision of growth for your firm?
3. What will be your competitive advantage for organic growth?
4. How digital savvy is your firm, and what do you need to do to acquire an accelerated number of prospective clients who meet your ideal client profile?