The Rebound and the Reckoning: Growth Is Back, but Sustainability Matters

HIGHLIGHTS FROM THE 2025 INVESTMENTNEWS BENCHMARKING STUDY

Trends in Financial Performance

In the recently released 2025 InvestmentNews Benchmarking Study of advisory firms, the editors note that: “After a turbulent stretch in the wake of the pandemic, financial advisory firms in the U.S. are finding renewed momentum – and renewed scrutiny – as they seek to balance growth, profitability, and sustainability” all while new concerns surface around client attrition, overhead costs, and the long-term capacity of advisory teams.

From a business growth and profitability perspective, 2024 was indeed a comeback year. If 2023 was the year advisors caught their breath, last year they started sprinting again. After a few years of turmoil, last year marked a powerful rebound. On average:

• AUM grew 20.6% (up from 15.6% in 2023)
• Revenues surged 30.5% (up sharply from 3.9% in 2023)
• Profit margins hit 27.8% (up from 25.7% in 2023)
• EBOC (earnings before owner compensation) rose to 51.9%

The data offers a clear signal of a shift from recovery to reinvention. These numbers aren’t just indicative of margin expansion – they’re proof that advisory firms are learning how to operationalize profitability through a combination of operational efficiency (automating tasks, streamlining workflows, and outsourcing non-core functions) and strategic revenue growth (attracting higher-net-worth clients, maintaining competitive pricing, and enhancing client service). An increasing number of firms have begun leveraging data and technology more effectively to analyze their profit margins, benchmark performance against industry standards, and make data-driven decisions to improve outcomes.

Another recent study conducted by Philip Palaveev’s The Ensemble Practice produced similar results, warning advisors that “growth is essential to the long-term success of any business. It rewards risk-taking and innovation, drives continuous improvement, and fosters a competitive edge. Perhaps most importantly, growth serves as validation – affirming that the organization is delivering value and meeting the needs of its existing clients.”

Storm clouds on the horizon

Beneath the rosy exterior, however, a number of worrisome cracks are appearing in the foundation:

1. While revenues grew by a healthy 20.6%, the accomplishment loses some luster when you consider that the S&P 500 – backed by a resilient consumer, renewed investment in artificial intelligence and manufacturing, and supportive fiscal policy – grew by 23.3% during the same period and the bond market returned a healthy 7.7%.
2. Of course, client portfolios typically include fixed-income and cash allocations, but the lagging AUM growth relative to market growth remains somewhat concerning. At some point soon, a significant correction is increasingly likely. If and when that occurs, most firms still seem unprepared to offset the potential revenue impact of the resulting market losses.
3. While team productivity experienced notable gains—marking the first time in the study’s history that revenue per professional exceeded $1 million—it was only a relatively small group of firms that seriously invested in CRM, tax planning tools, and digital workflows to capitalize on this productivity boost. Unfortunately, most firms are not investing with a future focus. Although these leaders typically claim to be entrepreneurs, they seem more concerned with managing the business than with growing it.
4. In 2024, the average firm gained 77 new clients through organic growth (i.e., client, professional, and custodian referrals), but it also lost 36 clients, resulting in a net average gain of 41 new client relationships (a 4.3% growth rate). During the same period, firms experienced a 2% decrease in assets from clients who left, along with an additional 3.2% reduction in assets due to withdrawals for retirement income needs, large purchases, or liquidity events. Client attrition has increased to 3.8%, nearly double the rate seen in 2021. 
5. As this wave of boomer clients continues to transition from accumulation to decumulation, and next-generation asset transfers accelerate, advisors should expect even stronger headwinds. As one advisor in the InvestmentNews study noted, clients aren’t leaving because of performance. They’re leaving because, as they face these significant life events, their advisors are talking to them less frequently.
6. Just one in seven firms (14.8%) participated in any M&A activity – either an acquisition or the lift-out of an advisory team that brought clients with them – but those that did saw a meaningful 5.6% increase in AUM solely because of those transactions. Despite a rapidly aging advisor demographic, it seems few firms are making a concerted effort to leverage acquisitive growth strategies to bolster their organic growth.

Looking at the entire study data, it becomes abundantly clear that most firms are not fully maximizing their organic growth opportunities. At ClientWise, we encourage all our clients to begin thinking about setting a 10% growth target for new client acquisition and to conduct the analysis to set their specific organic growth target for existing clients. However, this organic growth can only be accurately measured if all client opportunities are carefully and effectively tracked.

As we often emphasize, if you’re serious about growing your business organically, new client acquisition must be systematic; you can’t rely on luck or chance. Our recent Scaling Growth blog explores some of the key differences that set the most successful organic growth firms apart from their peers, including:

• Ensuring capacity
• Defining your ideal client
• Refining your capabilities presentation
• Identifying your niche(s)
• Systematizing lead generation
• Creating and documenting a comprehensive strategic growth plan

Looking at the overall study data on growth and profitability, it’s clear that most of 2024’s profits were earned by mastering efficiency and client communication, rather than solely focusing on organic growth. The next challenge? Maintaining it. That will require a strong commitment and investment in the ongoing organic growth of your business.

Coaching Questions:

1. What part of your firm’s growth story in 2024 was driven by intention – and what part was driven by market forces?
2. Given the increase in client attrition and asset withdrawals, especially as Boomer clients transition to decumulation, what proactive, high-touch communication and service model changes can you implement to reduce the outflow?
3. Given the strong rebound in profitability and EBOC driven by operational efficiency, what type of strategic investment in both technology (such as CRM, AI, tax planning tools, and digital workflows) and talent do you plan to make over the next year?

About ClientWise LLC

ClientWise is the premier business and executive coaching firm working exclusively with financial professionals. We specialize in helping clients optimize growth and maximize revenue by engaging as a knowledgeable partner in accomplishing specific and significant business results. Our full-service coaching program empowers financial advisors, wholesalers, managers and executives to enhance performance through customized, action-oriented solutions based on each client’s specific vision and situation.

Our certified coaches are members of the International Coach Federation (ICF). They adhere to ICF’s strict code of ethics and have the experience and insight to work with you on the unique challenges and opportunities you face each day.

Drawing from an in-depth knowledge of the financial industry, ClientWise’s mission is to professionally develop industry leaders and consistently raise the bar for industry service, commitment and integrity. Simply put, our singular focus is to help you get clear, get focused, and get results.