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:
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.
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.
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.
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:
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.
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