The Advisor’s Almanac: A Growth Guide for Advice Practices

There are no gardening mistakes, only experiments. — Janet Kilburn Philips

New digital solutions have harbored a financial advice boom, flooding the market with previously untapped investors. Financial advice clients are at an all time high of over 64 million, but that doesn’t make growth for every RIA a given. Expanding an advice practice in a sustainable way involves years of work to build trust with existing and potential clients to construct a wide network.

To continue feeding your business and supporting new clients, it’s important to have one eye on the present and one eye on the future. In this way, growing an advice practice can be similar to tending an orchard.

There are no shortcuts for sustainable growth of trees or advice businesses, but there are many ways you can optimize your approach to reach more potential investors and improve conversion rates. Making intentional choices that deliver what modern investors value most will fortify your client base for years to come.

At the Envestnet Elevate Summit, Chris Shutler, Head of Strategic Development and Market Intelligence at Envestnet; Craig Iskowitz, founder and CEO of Ezra Group; Alli Jordan, President and COO at LibertyFi; and Andrew Besheer, Research Practice Director of Wealth Management for Aite-Novaice Group divulged their views on best practices and the latest trends for advisory growth practices.

Plots and Pots: Adding Solutions

Different types of trees require unique conditions to grow right, so having a range of spaces and resources available is necessary to grow a wide variety of fruit. Client needs and expectations are wide ranging and expanding over time, which is putting increasing pressure on advisors to add products and services if they want to compete in the modern marketplace.

Shutler has found that for most auxiliary services like estate planning and insurance advice, over 70% of clients want them but less than 30% are receiving those solutions from their advisor. This leaves a large margin of opportunity for advisors to make themselves more attractive to new clients and make themselves more valuable to existing clients, which is increasingly important in the face of growing fee pressure.

The average actively managed equity fund has gone from 106 basis points in 2000 to 68 basis points in 2021, Shutler emphasized. Though there hasn’t been the same compression in wealth management yet, he acknowledged the “concern amongst advisors that there will be increased margin pressure and commoditization.” By offering more services, advisors make themselves more valuable to clients.

Fidelity’s most recent survey found that 40% of investors want their advisor to provide support beyond investment management, Iskowitz noted. While the types of solutions that would most benefit a firm are dependent on the specific needs and niche of the business, one place to start looking for potential solutions and solution categories is the Kitces-Ezra Group Advisor Technology Map. A new category that advice practice should consider implementing products from is Advice Engagement, which covers a range of solutions that help advisors enhance engagement and communication and includes AssetMap, Forward Lane, and Lumiant.

Birds and Bees: The Power of Outsourcing

At LibertyFi, Jordan has found that the firms they provide outsourced services for are able to maintain higher margins. A Schwab study found that the average margin firms achieve is 22%, while LibertyFi’s clients are reaching between 35-45% margins, and up to 51%. By offloading the everyday minutiae, firms can open themselves up to spend more time building and expanding client relationships. “You don’t want to hire a bunch of billing and operations and training people, you want to hire client-facing roles who can talk to clients and grow your business,” Jordan attested.

One of the main areas Jordan recommended outsourcing was building the firm’s tech stack. With so many solutions on the market, it takes too much time to properly research all available products to make well-informed decisions. To fill this gap, Iskowitz offers an outsourced Chief Technology Officer program for advisor software through Ezra Group’s consulting services. He explained that many firms expect the software to be as easy to plug in and run as vendors claim, but it generally isn’t. Without good mapping and research, firms quickly end up with overlapping systems that don’t integrate well and don’t meet their needs.

Iskowitz described his process for helping firms choose software, which starts not with the technology but with people. “The process is mostly just getting people to understand what their needs are,” Iskowitz elaborated. “When you get the five principals of a company into the same room and ask them what their growth plan is, what their pain points are, and what clients want, you end up with five different answers. They’ve usually never discussed it.” Iskowitz’s process starts by getting everyone on the same page regarding the core values and needs of the company, and then focuses on growth from there.

Planting Seeds: Referrals and COIs

When it comes to organic growth and marketing, our panelists have seen a wide range of opinions both among advisory firms and between themselves. Besheer cited a 500-advisor survey that Aite-Novaice ran which found many advisors hadn’t seen much success in marketing and weren’t investing much in it as a result.

He found that the firms who were most successful were forming two-way relationships with centers of influence in their communities, such as accountants and lawyers, who then pointed their clients over to the advisor. Besheer argued that COI relationships were more fruitful for advisors and worth putting more time into than traditional client referrals, which he sees as a “limiting universe, whereas COIs make you a small fish in a much bigger pond.”

Iskowitz contended that client referrals are essential to the growth of many advisor firms, and that harnessing them simply requires management and infrastructure that most firms aren’t employing. By building a process around referrals and using software like Absolute Engagement or other referral management services, advisors can greatly increase their probability of conversion.

While almost all firms utilize traditional organic growth methods, many are now looking towards digital lead generation as a way to encounter new clients. While the technology offers a lot of potential viewership, that digital viewership doesn’t always lead to real-world gains, Shutler emphasized.

Envestnet’s survey of over 300 advisors found that only 18% had used digital lead generation and only a quarter of that group were satisfied with the results. Despite these findings, when advisors were asked to list the main solutions they wanted to incorporate into their practice, digital marketing and lead generation was in the top three, illuminating a large market gap to be filled.

Transplanting Samplings: Engaging Next-Gen Clients

One of the foremost markers of a healthy advice practice is wide-reaching engagement that connects with the whole family, including the client’s children, according to Besheer. In fact, he recommends that advisors start working with a client’s children and providing financial education before they enter college. If the client’s family knows and trusts the advisor, they’re much more likely to also become clients when their finances require management.

Besheer has also seen success in acquiring younger clients by bringing on a few younger team members who can engage them as peers. Multigenerational advisory teams are often more successful at engaging and keeping clients at different stages in their financial lives. In 2020, “next-gen” client made up 24% of wealth management clients, according to McKinsey.

To attract new clients of a younger demographic, Iskowitz noted that people in their 20s have different financial interests and goals than those of most clients. While few 24-year-olds want to think about retirement, most of them want to take a big trip or buy a home and have concerns around budgets and cashflow.

As ESG becomes more well-known and popular amongst younger investors, Iskowitz sees an opening for advisors to use clients’ wider interests to engage them in finance. Even as a small part of their overall investing, the category can provide a valuable gateway for clients to see the value of financial advice.

Waiting for Fruit: Supporting Small Clients

Acquiring younger clients is one hurdle, but turning a profit on those small accounts is another issue entirely. Jordan compared accounts at the beginning of their lifecycle to those of business owners who have all their funds going back into their business. Advisors often solve for this lack of liquidity by using a more holistic approach and offering other services like insurance and business evaluation for clients to buy. There are different products that advisors can offer younger clients that they may be willing to pay for to support their varying goals and needs.

Jordan still conceded how difficult it is to make a profit from these clients and advised that firms employ a turnkey solution which can handle accounts under $80,000 to minimize the time and effort spent on them. “Right now, it isn’t worth your team’s time to even open the account, even though it’s worth it in the long term, so it’s about figuring out a way in between to make it easy and seamless and quick,” Jordan explained.

Many firms have agreed that these smaller accounts are worth investing in based on potential alone, Besheer added, and have built their entire business betting on these ‘Henrys’ (high earners, not rich yet). He held up the digital platforms servicing Henrys that are making their services available to RIAs on a white label basis as a viable route to lose less money in the early stages of that high-risk business model.

One option that’s gaining traction across the industry is charging fee-for-service or subscriptions. Robos like Acorns have employed the model to help support the servicing of their younger clientele and have seen a fair amount of success from it. Millennials are generally receptive to the subscription model, which has become ubiquitous through streaming services and is quickly proliferating into other industries.

While they may have fewer assets, Shutler cited an Envestnet study which identified investors in their 30s as the most likely to be willing to pay for financial advice, and the industry seems to be picking up on that. Besheer pointed to another Aite-Novaice study which found that 50% of smaller RIAs are now doing some portion of their business on a fee for service or subscription basis. Iskowitz mentioned that there are firms who are doing 100% of their business as fee for service, such as XYPN.

Gardening Trends: ESG Data Issues

Like many trends, ESG has caught on due to its strength of concept rather than its execution. Iskowitz explained that while the idea is good, the data behind it isn’t good or consistent. There are no official standards for ESG data, so each company has come up with its own methodology for rating portfolios which are in no way consistent with one another.

When researching ESG portfolios, Iskowitz has found “the exact same company, but with completely opposite valuations because there’s no standards.” Iskowitz called out MSCI as an example, asking how they could use 35 factors to determine a single score and manage all the data down to fractions of a percent. “There definitely is a thematic approach to be taken if you want to focus on social justice or climate change,” Iskowitz concluded, “but ESG itself is more marketing than actual opportunity.”

That’s not to say that there’s no one out there trying to solve for this inconsistency. Iskowitz referred to OWL ESG which aggregates ESG data from multiple providers but argued that the underlying data is so poor that it’s hard to know if the collected data is worthwhile, either. Institutional investors are going a similar route, Shutler observed, by subscribing to all the ESG providers and then attempting to augment and sort out the data in-house to form a blended view.

While the US is unlikely to enforce any kind of data standard, Besheer noted that Europe has started to put rules in place to develop a common standard which is improving the quality of data coming out of companies based there. Firms based in the US can make use of the higher quality European data to make better informed ESG decisions for clients. Besheer predicted that the data picture will evolve over the next couple of years to become much more open and transparent because of the European regulations.

Harvest Season

Digitization has created lots of flashy ways to put products and businesses on people’s screens, but there is still no replacement for the trust and connection that underpins the client-advisor relationship. Recognizing and meeting the changing needs of modern clients, outsourcing middle and back-office services, and investing in referral infrastructure and COIs can revolutionize a firm’s relationship to their current and potential consumer base. To ensure that a firm continues to thrive, executives must understand how to engage and support the next generation of clients. Like a well-tended orchard, a sustainable advice practice can weather difficult conditions remain fruitful for generations to come.



The Wealth Tech Today blog is published by Craig Iskowitz, founder and CEO of Ezra Group, a boutique consulting firm that caters to banks, broker-dealers, RIA’s, asset managers and the leading vendors in the surrounding #fintech space. He can be reached at